INEOS Group Holdings PLC (‘IGH’ or ‘INEOS’) confirms stronger trading conditions in the second quarter compared to the results in the first quarter of 2008.
Based on management information INEOS expects that EBITDA for the second quarter will be in the region of €475 million compared to €420 million reported in the first quarter. Pro forma LTM EBITDA to June 2008 will be in the region of €1,915 million (pro forma for acquisitions made in the year). In addition INEOS estimates that the second quarter results were adversely impacted by approximately €120 million in respect of exceptional and non recurring events. This primarily relates to the consequences of the Grangemouth industrial action, but also includes the impact of a fire in the ARG ethylene pipeline in Koln and operational problems in the chlorine cellrooms at Runcorn.
Refining saw a significant improvement in margins compared to the first quarter. The increase in crude oil prices experienced in the quarter fed through to higher margins on middle distillates such as gasoil, diesel and jet fuel. Demand for middle distillates was very strong with tight supply conditions being experienced in Europe. The segment’s results were adversely impacted by the Grangemouth industrial action, together with an unplanned outage of the HCU at Lavera in the quarter. All of the plants at the two sites are now fully operational again.
O&P Europe’s performance was not as strong as in quarter one, principally because of the lag in passing through the recent rapid price increases in naphtha. Significant price increases have now been agreed for the third quarter. Polyolefins has also encountered weaker market conditions in the second quarter, and has launched ‘olefin plus’ price increases for the third quarter to pass on full monomer cost increases. As the major olefin buyer in Europe, INEOS is pushing for the introduction of monthly contract pricing in Europe in the fourth quarter. The segment’s results were also impacted by the Grangemouth industrial action and the ARG pipeline fire.
The O&P North America segment saw a much improved performance compared to a weak first quarter. Performance was in line with the same period last year in spite of the continued depreciation of the US dollar against the euro, and the Olefins business was able to optimise its advantaged gas feed position to offset rising naphtha prices.
Chemicals Intermediates experienced a satisfactory performance in the second quarter. Oxide, Phenol and Nitriles all delivered acceptable results in the quarter. ChlorVinyls performance was hampered by cellroom problems in Runcorn which arose following a scheduled turnaround in early May, although the plant returned to normal operating levels by mid June. Margins in ChlorVinyls continue to be impacted by high UK gas prices. Oligomers performance in the quarter was reduced as a result of a scheduled turnaround at the Joffre, Canada site. In addition, the continued depreciation of the US dollar against the euro has also had an impact on the segment’s reported results.
During the second quarter Refining also commenced operations under the new sole supply arrangements with Morgan Stanley. This resulted in an immediate improvement in group liquidity, arising from a reduction in the requirement for letters of credit with other suppliers of $130 million. INEOS also announced the successful closing of the INEOS Silicas disposal to PQ Corporation on July 2, 2008, resulting in cash proceeds of approximately €190 million.
Net debt leverage at the end of June 2008 was approximately 4.0 times pro forma LTM EBITDA. The full second quarter report will be available in August 2008. INEOS expects to continue to issue trading statements for future quarters