Update on INEOS Styrolution's actions in response to the current COVID-19 virus pandemic
Safety remains our number one priority. At the start of the COVID-19 pandemic, we introduced strict social distancing and hygiene measures to minimise risks to our employees. All employees who can work from home are doing so. These measures have proved very effective.
Governments around the world, including Europe and the U.S., have recognised that chemicals are an essential industry and that INEOS Styrolution can play a significant part in helping to resolve the pandemic. In particular, INEOS Styrolution’s contributions to the healthcare industry and to food packaging are recognised as “system critical”.
INEOS Styrolution employs approximately 3,600 people and operates 20 production sites in ten countries.
All of our assets and sites, other than India and the plants in regular maintenance turnarounds, remain operational, with measures in place to secure continuing safe operations and with constant reviews towards further improvement where possible.
Our assets in India are shutdown per a government-mandated lockdown of the entire country, including our plastics operations.
Overall, the polymer business in all regions holds up reasonably well in terms of Q1 performance as well as incoming orders. The financial performance of the Global Styrene Monomer business is impacted by non-cash inventory write-downs and negative COSA effects resulting from the fall in oil prices in March.
After the weakness in February, the Chinese domestic market has picked up again. The incoming order level for our polystyrene production in Ningbo and Foshan has come back to the level of late 2019 and early 2020.
India, on the contrary, has implemented and extended a complete lockdown until the beginning of May. This has caused a complete shutdown of production and subsequently almost all business activities have come to a halt in India.
The automotive segment remains weak, as some manufactures have closed down parts of their production. On the other hand, the focus industry healthcare shows a very strong level of demand and incoming orders over the entire product portfolio. INEOS Styrolution provides solutions for addressing needs for the current COVID-19. Examples of INEOS Styrolution’s contribution in healthcare include:
In support of disease identification, K-Resin®and polystyrene from our Yeosu and Ulsan facilities are utilised in different types of COVID-19 detection
For patient treatment, products such as Styrolux®, Terlux®HD, and Novodur® HD made in Antwerp, Ludwigshafen/ Schwarzheide, and Cologne (respectively) are critical for the production of various respiratory and oxygen delivery equipment.
To help frontline healthcare providers with the concern regarding shortages of PPE (Personal Protective Equipment), evaluations are underway using Styrolux produced from Altamira, polystyrene from Channahon, and Lustran® ABS from Addyston for suitability in face shields and
Companies from “non-healthcare” segments (such as automotive, household, extrusion, ) have approached INEOS Styrolution to notify us of their intention to start producing some medical devices.
The packaging segment especially in Asia and EMEA also shows stronger demand than in prior years. Many of our customers have informed us about their role as a supplier of food packaging in the “critical infrastructure” and their demands related to business continuity or prioritised shipments. Our Polystyrene materials, for example, play an important role in the distribution of dairy products.
Turnarounds, CAPEX and Fixed Costs
Currently, Texas City (Styrene) and Ulsan (ABS) are in regular maintenance turnarounds. Ulsan is expected to restart in the coming days.
INEOS Styrolution has adjusted its CAPEX programme to current conditions and will subsequently delay over EUR 100m CAPEX in 2020 with an expected CAPEX spend now of EUR 350m for the year.
Mainly smaller optimisation projects that were about to start have been postponed.
Social distancing measures have been put in place also at the construction site in Bayport, therefore the construction of the new ASA plant can continue with a slightly stretched timetable. The construction plans of the ABS facility in Ningbo China also remain in place.
Fixed costs have always been under close review of management, further measures have been put in place such as a recruitment stop for non-essential positions to preserve cash.
Liquidity remains strong with cash at the end of March of EUR 312m, following the financing activities in January and positive cash generation in Q1. The Securitisation facility is currently undrawn with additional headroom of EUR 272m against the full EUR 450m facility.
Moody’s and Standard & Poor’s have recently issued rating action, with both reconfirming the corporate family rating as Ba2 and BB respectively, but placing a negative outlook due to current COVID-19 uncertainties.
Our next Interim Financial Report will be published on 28th April 2020, together with the Quarter 1 2020 Trading Statement, which will also be issued on 28th April 2020. The Quarter 1, 2020 results call will be held on 30th April 2020 providing an opportunity to receive answers to any questions you may have.
If you have any questions, please do not hesitate to contact us.