Q1, 2020 Trading statement
INEOS Group Holdings S.A. (‘INEOS’ or the ‘Group’) announces its trading performance for the first quarter of 2020.
Based on unaudited management information INEOS reports that EBITDA for the first quarter of 2020 was €365 million, compared to €521 million for Q1, 2019 and €409 million for Q4, 2019. The first quarter results were adversely impacted by significant non-cash inventory holding losses of approximately €171 million (Q1, 2019: €16 million) as a result of the large decline in crude oil and product prices in the quarter. These non-cash inventory holding losses have been offset by a corresponding reduction in working capital levels as a result of raw material price reductions.
North American markets were solid, taking full benefit from their current feedstock advantage. Market conditions in Europe were generally stable, but markets in Asia saw weakness in the quarter as the current COVID-19 virus pandemic started to have an impact on demand. The chemical industry is deemed as essential, critical infrastructure by governments across the world. All of the Group’s sites have therefore continued to operate fully during the current crisis. On the demand side, medical, food and cleaning applications are offsetting the automotive and construction downturn.
O&P North America reported EBITDA of €116 million compared to €202 million in Q1, 2019. The results were adversely impacted by inventory holding losses of €43 million in the quarter. The business has continued to benefit from its flexibility to be able to utilise cheaper NGL feedstocks to maintain margins. The US cracker business environment was generally solid with good operating rates throughout the quarter. Ethylene markets generally remained long, but margins saw some improvement supported by a heavy industry turnaround schedule in the quarter. Polymer demand was generally solid, but increased supply has adversely impacted margins for both polymers and the pipe business.
O&P Europe reported EBITDA of €97 million compared to €143 million in Q1, 2019. The results were adversely impacted by inventory holding losses of €76 million in the quarter. Core demand in the ethylene market has remained stable in the quarter, although demand for butadiene was weak as a result of the slowdown in the automotive sector. Margins were supported by reduced feedstock prices in the quarter. Olefin volumes were negatively impacted by a scheduled turnaround of one of the Koln crackers towards the end of the quarter. European polymer demand was relatively balanced, but there was some erosion of margins in the quarter.
Chemical Intermediates reported EBITDA of €152 million compared to €176 million in Q1, 2019. The results were adversely impacted by inventory holding losses of €52 million in the quarter, particularly in the Phenol and Oligomers businesses. The overall demand trend in the Oligomers business was good across most product sectors and markets, with particular strength in co-monomers. Demand for the Oxide business was generally flat. Volumes and margins were impacted by weak glycol demand, particularly in Asia. The markets for the Nitriles business were solid, with supply and demand well balanced over the quarter. Volumes were lower in the quarter due to the impact of the closure of the Seal Sands facility in December 2019. Demand for the Phenol business was stable, with improved margins due to higher returns on acetone. Volumes were impacted by an unplanned outage at the Antwerp plant in the quarter.
The Group has implemented a number of measures to conserve cash during this uncertain period. The Group has implemented policies to control all discretionary fixed costs and all non-essential recruitment has been halted. The Group has reviewed all capital projects in each of the businesses and taken decisions to defer or reduce discretionary expenditure where it is safe to do so, and planned site maintenance turnarounds have also been delayed where possible. In addition, the Group has applied for corporate tax refunds and deferrals where available.
The Group has continued to maintain its focus on cash management and liquidity. Net debt was approximately €5.9 billion at the end of March 2020. Cash balances at the end of the quarter were €1,025 million, and availability under undrawn working capital facilities was €179 million. Net debt leverage was approximately 3.3 times historical cost EBITDA as at the end of March 2020.