Indorama Ventures Public Company Limited, a global player in sustainable chemical production, has announced a major evolution in its business strategy. As the chemical industry undergoes significant structural shifts, the company is positioning itself to capitalize on emerging opportunities and strengthen its long-term competitive edge.
Navigating Industry Mega-Trends
Group CEO Aloke Lohia highlighted key industry trends reshaping the global chemical markets. He explained that subdued local demand in China has led to overcapacity and an influx of low-cost exports. Meanwhile, lower feedstock prices in North America have increased supply competitiveness.
At the same time, global economic and geopolitical uncertainties have weakened consumption, affecting Indorama Ventures’ margins and volumes in FY23 and causing a 53% decline in earnings.
Lohia projected that Western feedstock prices would rise as peak oil demand approaches and refineries shut down, while feedstock costs in emerging Asian markets would decline due to increased capacity. The company’s integrated manufacturing model allows it to navigate these shifts efficiently through “make or buy” strategies that optimize working capital and reduce interest costs.
IVL 2.0: A Strategic Transformation
Indorama Ventures will unveil its IVL 2.0 strategy at CMD, detailing its approach to thrive in these challenging industry conditions. The company plans to:
- Reduce debt and optimize operations in response to higher interest rates.
- Enhance competitiveness to improve shareholder returns over the next three years.
- Accelerate its digital transformation, leveraging data-driven tools and intelligent dashboards to predict market trends and respond swiftly.
Lohia emphasized, “Change is constant in our industry. We have faced similar disruptions in our 30-year history and emerged stronger. In 2023, we recognized that past strategies would not work in the new market environment. We had to devise a new approach, leveraging our successful global model. Each of our businesses has undergone a rigorous review, and we now have a clear plan to optimize assets, streamline processes, and enhance earnings over the next three years.”
Strengthening Global Leadership
Indorama Ventures has built an unparalleled global presence, completing nearly 50 acquisitions over two decades. As consumer demand shifts towards sustainable products, the company remains confident in its long-term growth potential.
Under IVL 2.0, the company aims to:
- Optimize its asset footprint to improve operational efficiency.
- Boost cash flow and reduce debt, targeting a $2.5 billion reduction in net debt to $4.3 billion by 2026.
- Generate $800 million from operational improvements and an additional $1.7 billion from divestments, asset actions, and selective business listings.
- Lower its Debt-to-EBITDA ratio to below 3x.
Lohia described the shift as a “significant financial pivot.” He stated, “Now that we have scale, we will leverage our global footprint and strong client relationships to optimize costs and drive long-term sustainable profit growth. By deleveraging our balance sheet, we will restore the company to a more sustainable growth path with disciplined capital management”.
Four Pillars of Transformation
Over the next three years, Indorama Ventures will focus on four strategic objectives:
- Asset Optimization: Increase operating rates from 74% to 89% by moving to lower-cost facilities and right-sizing manufacturing capacity.
- Cost Efficiency – Project Olympus 2.0: Build on the success of Olympus 1.0 to unlock an additional $450 million in efficiency gains by 2026.
- Value Creation from Non-Core Assets: Generate $1.3 billion from asset sales and other value-unlocking initiatives.
- Sustainability Leadership: Drive a $350 million per year value uplift through innovation in sustainable solutions.
Rebranding and Portfolio Optimization
The company is also restructuring its business segments. Integrated Oxides and Derivatives (IOD), the newest of Indorama Ventures’ three segments, will be rebranded as Indovinya. The segment will focus on high-growth markets such as home and personal care, crop solutions, coatings and solutions, and energy and resources. Meanwhile, the intermediate chemicals assets – including integrated PEO, integrated EG, and MTBE – will be moved to the Combined PET (CPET) segment, strengthening its integrated offerings.
Positioning for a Resilient Future
Indorama Ventures is taking bold steps to adapt to a rapidly changing chemical industry. As per the press release, by optimizing assets, improving financial health, and leveraging its sustainability leadership, the company aims to emerge stronger and more resilient in the years ahead.
