Very good afternoon, everyone. Welcome you all to IVL's second quarter results meeting of 2022. I'm Vikash Jalan, Vice President of Investor Relations and Strategic Planning. Joining me today, Mr. DK Agarwal, our CEO and CFO. Mr. Sanjay Ahuja, Executive President for CPET segment, and Mr. Chris Kenneally, Executive President for Fibers segment. A quick disclaimer that this meeting is being recorded and replay of this session will be available on our website after the event. We have made few assumptions and estimates in future industry trends and business, which are based on our analysis and available information at this point in time. With that, let me now invite Mr. Agarwal first to take us through the prepared presentation.
Very good afternoon. Welcome to this second quarter results. If we can move to the next slide. IVL has posted a very strong second quarter results, achieving a record core EBITDA up by 17% quarter-on-quarter, and production volume up 1% quarter-on-quarter. Our total sales revenue in quarter two has increased by 11% quarter-on-quarter on same store basis, with the CPET portfolio seeing an increase of 13% quarter-on-quarter. As you know, this quarter we incorporated two new businesses into the portfolio very successfully, Oxiteno and Vietnam Packaging, being an additional 12% in revenue growth. This result shows IVL's differentiated model and well-positioned portfolio has resulted in a platform that cannot be imitated.
IVL has market leadership in each of our key business areas in industries that are organically growing at approximately 3%-4% per annum, and that's why you see these results. Again, 75% of IVL's portfolio serve consumer-linked daily necessities that have proven minimum interruption due to GDP fluctuation. Underlying demand for the majority of IVL's portfolio has remained rock solid, and second quarter results have been driven by improved margin, more than compensating for the increased energy and utility cost in Europe and United States. I know you are worried about that, and these are after that additional cost. Supply chain disruption, of course, has been a major theme for the past 24 months, and IVL has been a beneficiary.
As a domestic producer in the Western markets, the heightened freight rates and longer lead times for imported goods have allowed IVL to reprice our domestic sales at attractive margins. Looking to the shipping industry for guidance, a major shipping company has increased its 2022 earnings forecast due to continuation of the current market situation. They expect gradual normalization from quarter two to quarter four 2022, but freights will remain significantly higher versus pre-pandemic level, as you can see, because of the increased cost. Providing integrated options, operations, geographical diversity and shorter supply chain, IVL has demonstrated itself to be a reliable supplier to customers, and we believe that industry will fundamentally shift towards higher appreciation for domestic supply chains. I mean, when we talk to the customers, they want all domestic supply.
The second quarter saw Brent crude oil levels rise to a peak of $114 per barrel and the corresponding significant arbitrage between Western and Asian octane prices, resulting in an inflated raw material cost. We are pleased with our management's ability to successfully navigate these cost increases along with the rising energy prices, demonstrating our market leadership and the reliability of supply we bring to our customers. Management believes Brent crude oil's course, of course, will begin to normalize going forward and has thus taken the necessary prudent action to reduce operating rates in order to minimize the inventory losses. The normalization of octane cost arbitrage over the next coming months will bring down feedstock inflation in the Western markets. We saw very high prices of octane in June and in the mixed xylene. IVL has always placed utmost focus on maintaining operational excellence, notably on cost management.
Project Olympus, as you are aware, has allowed a structured and disciplined approach to continuous cost and commercial innovation that is crucial for our business in order to remain in the first quartile position. The last 12 months had seen an unparalleled increase in energy cost with further increase anticipated in next six months before the situation gradually normalizes. Project Olympus, along with our agility in managing cost increases, has allowed the company to not only absorb these levels, but improve on our overall performance. These results of second quarter are the testimony of the portfolio which we have. Let's move to the next slide. This slide shows you the key trends, you know, the four key trends that are impacting IVL's performance that I mentioned earlier. During quarter two, we saw robust demand fueled by post-pandemic opening of economies. You see the economic activity index.
We expect reopening of China to bring considerable demand growth and counter some of the contraction happening elsewhere. Actually, we are sitting on a very tight inventory, and with the China opening up, it can even become tighter. Brent crude oil, another factor which drives our performance as it supports our North American MTBE and MEG business, as well as giving the PET business support import parity advantage in the Western market was $13 per barrel higher versus the last quarter. We expect crude oil prices to begin to normalize but remain elevated over the next coming months. You might have noticed OPEC's recent decision to increase production by 100,000 bpd last week, highlighting that severely limited availability of excess capacity necessitates utilizing it with great caution in response to severe supply disruption.
So far, we have seen limited impact on crude oil prices, suggesting that the market does not expect any material additional supply. You know, it's geopolitics that plays a very important role. The third element is the freight rates, which is another factor giving us advantage. Being a local supplier in our key markets, we are seeing some normalization from quarter four, but there should be some offset from the strong integrated PET spreads. You will see that July integrated PET spreads and August are higher than second quarter. A strengthening dollar, which helps with our conversion cost. You will remember that our spreads globally are in U.S. dollar terms, while conversion costs are in local currency. A stronger dollar against euro, against many currencies, helps us in those geographies. These four themes remain rock solid for us, going forward also.
Let's move to the next slide. Now let's go into the second quarter business and financial results. Next, please. This gives you second quarter results. IVL has posted a very strong second quarter results, achieving a record core EBITDA of $758 million, 17% up quarter-on-quarter, and sales volume up by 4% quarter-on-quarter. Our revenue in quarter two has increased to $5.5 billion, so this is a company which is in excess of $20 billion annualized by approximately 11% quarter-on-quarter same-store basis, with the CPET portfolio seeing an increase of 13% quarter-on-quarter. As I mentioned, this quarter, we consolidated two new businesses into the portfolio of Oxiteno and Vietnam Packaging.
Record revenue of $5.451 billion, an increase of 23% quarter-on-quarter, 53% year-on-year. As I mentioned, our company today is over $20 billion annual revenue company, which puts us in a very high ranking among other global chemical companies. It is important to understand the reported EBITDA. Reported EBITDA is $1 billion in excess, a growth of 29% quarter-on-quarter and 83% year-on-year. Record core EBITDA of $758 million, a growth of 17% and year-on-year growth of 59%. The core EBITDA margin is at 14% and core ROCE straddling 20.2%. We have been putting a lot of focus on the working capital.
You can see the operating cash flow of $900 million, which is a cash conversion of 120% of core EBITDA, and how it has been achieved, reducing the two days in the new working capital cycle. All this translated into a reported net profit of THB 20.3 billion, a quarter-on-quarter growth of 44% and year-on-year growth of 143%. Reported EPS for this quarter is THB 3.58. If you look at the LTM basis is 8.11 and core EPS of 2.32, LTM is 6.14. As I mentioned, Oxiteno and Vietnam were the two major acquisition. All of you are worried about the energy spent.
Total energy spent this quarter increased by $27 million quarter on quarter and $155 million year on year, but was offset by enhanced margin. We will explain you that in the bridge as we will show you. Let's move to the next slide. So let's look at the stock of first half. What did we do in first half? Revenue of $9.9 billion, increase of 4% year on year. Reported EBITDA nearly $1.8 billion, a growth of 74%. Core EBITDA of $1.4 billion, a year on year growth of 67%. Core ROCE of 19.8% in first half shows our strength in the business and our ability to navigate through this macro geopolitical volatilities.
Operating cash flow, as I mentioned, has been very strong, $1.449 billion, more than 100% cash conversion of core EBITDA, deleveraging the company. Reported EBITDA, reported net profit for first half is THB 34.3 billion, a year-on-year growth of 139%. Reported EPS of THB 6.05 and core EPS of 4.17, which is a significant increase over last year. Total energy spent, now this is interesting number. First half increased by $303 million year-on-year, but was offset by enhanced margin. You can imagine that in first half we spent on energy and with that spend, we reported these results, which is across in United States, Europe, high coal prices, et cetera. Let's move to the next slide.
Now let's look at the volume. Overall sales volumes were slightly higher than last quarter, as you can see. Higher volumes came from Oxiteno and Vietnam acquisition. However, we lost 100,000 volume. In combined PET because there was FM for acetic acid and hydrogen suppliers in Americas and plant PTA maintenance turnaround lost about 40,000 tons. In IOD, we had two ethylene oxide units turnaround, which was a plant turnaround, led to a volume loss of 60,000. It impacted our downstream business also, 50,000 in MEG and 10,000 tons in downstream because, you know, we didn't have enough ethylene oxide. All these supply disruption and plant maintenance are now normalized. Fibers, of course, Lifestyle Fibers demand were under pressure from China lockdown. You will see that the Fibers did not perform as expected. What do we see the outlook?
We see upside in volumes in second half 2022 with normalization of lost volume in first half 2022 and a very strong demand, which will provide us a growth of around 5% in second half 2022 versus first half 2022. Looking at the immediately next quarter, we see a growth of around 4%, which comes in all three segments. Our global and well-diversified portfolio provides us as a natural hedge against inflation or recession, which are due to our product application majority in day-to-day necessities. I will show you one slide how our major customers like Coke Pepsi have shown fantastic results, which shows the resiliency of this necessity. Let's move to the next slide. Now let's look at the IVL score, EBITDA was $758 million, has grown 59% year-on-year, 17% quarter-on-quarter.
If you look at by segment, CPET was pretty flat, where higher margins were negated by lower volumes, as I mentioned, due to plant maintenance and FM by acetic acid and hydrogen suppliers in Americas. Higher margins, of course, due to reset of contracts in the West and demand growth. As I speak, for 2023, we have already signed up 33% of the contracts, in United States and Mexico, at better than or nearly close to 2022 margin, and we'll talk about this later. IOD segment improved with Oxiteno to face headwinds with very weak crack and MEG spreads. I think IOD segment had suffered a very strong headwind of crack margin and MEG spreads, and also due to volume loss from EO, two EO units, which were maintenance at IVOL in Port Neches, but got the support of MTBE's strong margin.
Fibers weakened with China lockdown. We still had a lag loss from higher polypropylene prices and poor mobility Fibers demand because of the semiconductor shortage. Total lag loss for this quarter was $11 million compared to last quarter, so you can imagine that that impacted. As I mentioned, high energy cost of $27 million quarter on quarter and $155 million year on year. What do we see looking ahead? Looking ahead, we see upside from higher volumes in second half 2022, which could be in the range of around 5% over first half. We see some upside coming from very weak cracker and MEG spread as they are clearly very below the reinvestment level margin. I mean, cracker margins in second quarter was $0.03 per pound, which is below variable cost.
We also expect upside from higher demand in Fibers as China economy opens up, and upside from the synergies of Oxiteno. I think we haven't unlocked the synergy yet. On the contrary, we will see softness in MTBE as the octane value declines, and we will discuss more details in the segment. One of the very important yardstick here, you can see that core EBITDA per ton moved to $198 per ton versus first quarter $171 and $132 per ton in second quarter 2021, which shows you the strength of the business. Next slide, please. Now we have to also see regionally how the regional looks like. As you can see, Americas is the star with $451 million versus $330. Western market continues to show very strong earnings in spite of high energy cost.
We have demonstrated this continuously for three quarters to you that high energy cost is passed through directly or indirectly through margins. Americas naturally had the benefit of Oxiteno. Oxiteno contributed about $85 million in this quarter. The rest came from the other businesses. We see softness in Asia due to Lifestyle Fibers. As you can see, the Fibers. That is the result in Asia. Looking ahead, we see Western market continue to benefit from reset of PET, PTA contracts. We'll talk about PTA contract. PTA contracts are actually in U.S. linked to energy and PPI, and they have significantly improved and which will continue in 2023. Higher energy cost continues in second half 2022, but mostly recovered from enhanced margin. Asia upside from improvement in Lifestyle Fibers as economies open up.
We see some upside, but at the same time, MTBE will be weaker in the second, in third quarter. Let's go to the next slide. This bridge is very important, which shows you quarter one from $650 million to $758 million. We'll compare core to core. Of course, we saw a $252 million of inventory gain. Oxiteno in Vietnam, as you can see, as a separate line item, is $88 million contributed. In 1985, I said Oxiteno. Margin improvement is seen across the portfolio, mainly driven by reset of Western PTA, PET contracts, strong MTBE and integrated downstream margins, particularly in the surfactants, negating the weaker cracker and MEG. We had a headwind on the cracker and MEG spreads, but the strength in the other areas.
Lower volumes, as you can see, $26 million loss due to plant maintenance in IOD, those two EO units and CPET segment because of the FM. Variable cost in this quarter was $27 million energy impact. Most of that is recovered, more than that is recovered in the margin. Fixed cost is higher with inflation, partly negated by efficiency gain in Project Olympus. This gives you the bridge of quarter-to-quarter. Let's look at year-on-year. Next slide. What has happened from second quarter 2021 to second quarter 2022? We made 477 Core, $758 million. Of course, again, Oxiteno in Vietnam contributed $88 million. Margin improvement of $337 million, mainly driven by Western PTA, PET contracts, strong MTBE and downstream spreads, but negating weak cracker and MEG spreads.
There is MEG and cracker. Just to give you an indication of cracker did not contribute anything in this quarter. If in a normal case, it would have contributed at least $45 million-$50 million a quarter. These sort of tailwinds are headwinds. Lower volumes, as you can see, $15 million lost due to plant maintenance in IOD and CPET segment, as we talked about the FM. Variable cost of $155 million. You can see here, $173 million total. Energy is $155 million. $18 million is others, was fully recovered by margin. Fixed cost, yes, inflation there, but negated by efficiency gain in Olympus project, which has nearly contributed $63 million. This gives you a bridge on quarter to quarter. Let's move to the next slide. Let's now go to the business segment-wise.
CPET continues to deliver a very strong performance, achieving a core EBITDA of $431 million, a growth of 35% year-on-year, and slight decrease, 1% decrease. As I mentioned, volume improved with the high demand, supply constraint and low inventory environment. Though got offset with volume loss due to plant maintenance of PTA in Thailand at TPT site and FM by suppliers for acetic acid. We lost some volumes, which is now normalized. Integrated PET Asia margins have normalized since fourth quarter 2021, but remains at a high level as compared to historical average due to market tightness and higher operating costs. The successful reset of PTA, PET contracts completed the end of 2021 has favored our Western businesses and will continue to benefit. Rising energy prices have been mitigated by hedging efficiency and passing on the prices.
PX business actually suffered in second quarter because the octane value, the mixed xylene prices went up skyrocketing due to high gasoline blend value, especially in June. Packaging performance increased with the Vietnam Packaging and specialty chemicals, especially PIA got a hit because of again, high mixed xylene prices, which are now getting normal. PIA did not perform better because of the high feedstock prices. Looking ahead, integrated PET Asia spreads continued to be strong in July 2022. As I mentioned, it is in excess of 300. As I speak in August, that is also higher than 300. Why? Because there is a low pipeline inventory. China is sitting on six days inventory and robust demand.
Upside from volumes in second half 2022 and upside from high octane values of PX and PIA spreads, which are improving as the octane value in United States has collapsed. We will see that PX settlement will be much lower in August. Let's move to the next slide. This is an important slide which gives you a historical PET spread. The blue line shows you what is the industry spread, which also shows you that it is pretty stable and we are getting the premium. Why do we get the premium? We have recently seen an upward trend in the market in July. You can see that, arrow going up because the July spreads are up. As shown in the graph here, Asia spreads has been trending upwards due to very tight inventory and a strong demand globally. Actually, Chinese are offering today material only for October.
Structurally, market and Europe are much more consolidated. You can see that top two players in Americas control 80%. Top five players in Europe control 70%. Very consolidated market allows us to command a sizable premium in the market. IVOL has demonstrated itself to be a reliable supplier to the customers during this supply chain disruption period, and we believe that industry will fundamentally shift towards higher appreciation for domestic supply chain. You can see that gap of the premium enhancing. These are all the factors, including the PTA, which I said to you in the U.S. is linked to the formula price. Being a commodity product, PET will see some volatility driven by market disruption, but through the cycle continues to deliver healthy earnings, and that's why we are different than other petchem companies.
Due to its affordability, sustainability and favorable properties vis-à-vis other packaging material, PET demand continues to consistently grow globally, and that is our key driving force. In addition to PET's healthy organic growth, the CPET segment has been enhanced through the downstream recycling and packaging verticals, and that is the result of the fantastic earning in CPET business. Let's move to the next slide. This is an important slide to show you the world PET trade flows. You can see that in North America, the imports increased to 1.17. South and Central America is 1 million ton, and even Europe has 1.4. What does it show and how the demand was met by China because there was no material available rest of the world? That's why Chinese are sitting on six days inventory.
You saw the 3.8 million tons got exported from China. This shows the growth of the business. You know the very major decision was taken by us. We had given a pause to the Corpus Christi earlier. As we looked at the post-pandemic demand growth and the deficit in North America, 1.2 million is nearly 30% of the demand of the Americas, North America. Along with our other partners, announced that construction of the integrated PTA PET plant in Corpus Christi will resume this August. You might have seen news article about the contractor. Corpus Christi Polymers is expected to begin operation in early 2025 and ensure cost competitive production to support the growth of IVL's global PET operation to the next decade. As you know, we have already spent $450 million.
That is sitting on our table, on our balance sheet. The total cost will be $700 million-$725 million. I have to spend only $275 million. The decision to resume construction comes amid continuous robust demand for packaging, bolstered by continued improvement in recycling infrastructure and the need for shorter supply chain. As you see, the global trade flow explains that the deficit market will continue to grow. Only China, there is not much capacity getting built. In America, there is no capacity built. There is a need for a state-of-the-art, world-scale, integrated production site such as Corpus Christi to cater to the growing demand in this region. This is a state-of-the-art, very cost-competitive plant, very closely located with the paraxylene and MEG reserve. Let's move to the next slide. Now let's go to the IOD.
IOD achieved a core EBITDA of $259 million versus $126 million, a growth of 106% and 162% year-on-year. The integrated intermediates business, which is basically MTBE, MEG and the portion of the crack margin, achieved $109 million in core EBITDA, up from $38 million. This was primarily driven by strong MTBE margins due to high gasoline prices and lower costs driven by decreasing butane prices and additional income from selling technology license for MTBE. That's $9 million appearing in our other incomes. However, this got negated by very low integrated MEG spreads, which has been under pressure because of zero-COVID policy and lockdown-dampened China. As you know, the majority of it goes into polyester.
Volume loss from plant turnaround of two EO units in IVOL at Port Neches in Americas, which is regularized now. The star is downstream. You can see integrated downstream. The addition of Oxiteno into our portfolio has brought an upliftment of $85 million into the integrated downstream portfolio, driven by robust end market demand. With this strong demand, Oxiteno has actually demonstrated its ability to successfully navigate inflated raw material costs. You know, in the European raw material cost went up to nearly EUR 1,580, so they could pass on everything. With integration successfully underway, we are confident that we'll deliver $30 million in synergies by 2023 and $100 million by 2025. Oxiteno has been a great acquisition.
However, excluding Oxiteno, you can see that integrated downstream was impacted in North America because of the crack margins. The crack margins, ethylene crack margins dropped $570 per ton to $360 per ton due to and also due to the turnaround of the two EO units, restricting supplies of ethylene oxide to downstream. Although we try to mitigate that by bringing ethylene oxide from Clear Lake. The downstream demand in the home personal care and ag chemical market remains strong, resulting in strong margins for surfactants and LAB, while housing and construction markets have seen some softness. Activity did pick up on drilling with rig counts up in North America, supported the oil and gas market for surfactant. Looking ahead, we see an upside in this business from Oxiteno, from very weak cracker and MEG margin.
However, MTBE margins will get normalized at historical or at better than historical levels. This is, I mean, the IOD business has really strongly performed. Let's go to the next slide. This is an important slide which we have shown you earlier. There are two ends of spectrum for the surfactant industry. On the one end, which is left-hand side, there are integrated high volume players such as Shell and Sasol. When we first acquired Huntsman, they were also one of the large scale integrated platform players. At the other end of the spectrum, if you see the right-hand side, there are players who are highly specialty players who have limited integration, but are highly specialized with a strong innovation and they're naturally, their profitability percentage is quite high.
You can see COMA is about 25%-45% because they spend good money on strong innovation and high R&D. Like Croda falls into this. With this Oxiteno acquisition, we have moved right-hand side, which of course made us the largest player in Americas, and enhancing proximity to attractive end application with higher and more stable margin. Proximity to end market is linked with higher contribution margin, and you saw the results of Oxiteno, but we also spend on R&D. What we have done here that we have developed a hybrid model between integration and a specialty model to capture the best of two worlds. Our intermediate business provides scale for upstream integration into ethylene and EO to support the highly profitable downstream verticals. You have benefit of integration and you have downstream also.
This result is a combined IOD portfolio with an elevated sustainable quality of earnings. You know, the Oxiteno, as you saw the results, with new products in the pipeline, will continue to move further to the right with sustainable solution while maintaining our integration. This gives you an idea where IOD has headed after acquisition of Oxiteno. Let's move to the next slide. I think we want to explain to you a little bit what is the surfactants. IOD is a leader in the production of surfactant and specialty chemicals, offering comprehensive product portfolio for a variety of applications, and these are two examples here of personal care and crop solutions. On the personal care side, our surfactants are ingredients that are again used in the formulation of daily necessities, like liquid soaps, shampoos, and bath foams, which you use daily.
They promote mildness and prevent irritation. Conditioners are also made with our surfactants, and it makes hair stronger, reduces split ends, and protects hair from future damage. Our surfactants comprise the key 30% of the content of a typical bottle of product with the remaining content being water. What importance it plays in home and personal care. Through a dedicated expert team across the regions, innovation platforms, and international quality standard, we develop ever more sustainable agriculture solution. Crop solution, where Oxiteno is very strong, is they specialize in the developments of additives that maximize the performance of active ingredients in the field. While crop enhancement solutions contribute to increasing crop yield by enhancing nutrient for better plant developments. I mean, you need better properties in the crop solution so that your yield improves.
In addition to these, our surfactants also go for oil and gas drilling, coatings, architectural paint and industrial coatings. You can see how we have now built a system that is capable of supplying very wide range of solutions in the market and gives a strong growth opportunities for this business. Go to the next slide, please. Again, the slide gives an overview of current IOD downstream business. It's a significant business today, $3 billion business, more than 20% of the EBITDA. It's a highly specialized business with over 2,000 products in its portfolio, supported by 18 industrial units to cater to both volume and specialty business, 11 R&D centers.
The IOD segment profile has enhanced by more dominant and stable integrated downstream, which you saw the vertical, that 66% of IOD is contributed by that, which is further strengthened by improved product mix into high value-added products from Oxiteno, reducing the impact of more volatile. You saw that intermediates are more volatile. This is a very strong earning resilient business. As you can see, IVL is a industry consolidator. We have done this in PET, consolidating many PET businesses. We see an opportunity here to expand this business in a similar way to both geographical expansion and product mix enhancements. I think the beauty of this is that you have common customers and then you can use the solutions in different parts of the world. There are a lot of growth opportunities into this business. Let's move to the next slide.
This shows you quarterly earnings of Oxiteno. You can see we have plotted our third quarter, fourth quarter, first quarter, second quarter. The addition of Oxiteno brought $85 million in this quarter. Now what is the magic thing which is happening? Of course, you know the Pasadena, this is a plant next door located to Clear Lake. We have continuously improved with better asset utilization, product mix, lower feedstock prices and fixed cost optimization. Still, we have not unlocked the synergy of supplying our own EO because we have contracts with third supplier, which will get rolled off by end of the year. That's what you saw the synergy benefits coming quickly in 2023 and then moving to $100 million. Stronger than expected organic growth in Brazilian market as COVID pandemic boosted surfactant sales in home personal care and agriculture market.
Very important is a good performance from new product development. We call it NPD and new sales development. Means basically you do a value pricing across the region. Efficiency improvements coming from the digital technology in the plant and internal processes, which is very strong in Oxiteno. As I always say, we learn from every acquisition. With this stronger performance bolstered by their unique formulation and customer intimacy, Oxiteno has demonstrated its ability to pass on very high ethylene cost increases. This inclusion of Oxiteno has brought high value-added downstream surfactant products and also very differentiated bio-based products. Bioethylene is available, and we are very excited with this acquisition. Management is very confident of delivering $30 million synergy by 2023 and in excess of $100 million by 2025. Next slide, please.
Now let's talk a little bit about the MTBE. The bright spot, as you can see, this graph has been MTBE. Currently at historical high margins due to strong gasoline demand and octane value, as well as lower U.S. butane and methanol prices. You see from the chart on the left-hand side that we had a sequential improvement in the gasoline. You see the dark blue, that's the premium of MTBE over gasoline. Although the gasoline has dropped in July, you can see that the premium remains. This premium of MTBE remains strong. We expect MTBE spreads to normalize, but not to go over the next months to remain robust during this tight oil market environment. You can see in July it has gone to $780. As we speak in August, it is pretty close to that level.
I just want to mention, though, that the polyethylene market, as you might have seen, is recession-driven softness. There is some demand impact of propylene oxide. We are optimizing the MTBE, but as of yesterday, the MTBE is running at 95% asset utilization. We continue to optimize to maximize because MTBE is highly profitable today. This gives you some feel of MTBE margin. Let's go to the next slide. I think this is an important slide for you to understand what is MTBE. You know the MEG business. MEG is majority produced from naphtha-based. See on the left-hand side, 2011 to 2018, the average spread of MEG is $500 per ton. I'm talking of Asia integrated MEG, which has dropped to $122. What the heck is happening here?
What has happened, there was lot of capacity got built up, and the problem was poor demand on the polyester staple fiber in China lockdown. This is the problem which we are facing right now. We have said low cracker spreads and low MEG spreads. But they cannot be, the reinvestment level is very high. As you can see, historically, it has been 500. We are at the bottom of the cycle spread. COVID in 2020 had some further impact, but margin this year, however, with the extended China lockdown and over 70% of the MEG going into Fibers dropped, as I said, to $122. On the top, you see the North American margin. We have higher spreads versus Asia due to the shale gas advantage.
Again, on the right-hand side, you can see the shale gas advantage reduced because of the high ethane cost, which dropped to $190. The integrated spreads dropped to $468 in America. Although, you know, the naphtha-based crackers in Asia are not making any money, negative EBITDA on MEG, we can still. We have also not a positive EBITDA, but less impact. Today, MEG is not a sustainable level. The current levels are totally unsustainable with even the lowest cost players. I'm sure you must be tracking the results of the players struggling to break even, and we therefore see an upside because this cannot remain like this from both improved MEG and ethylene crack margin. Both are rock bottom right now. Let's move to the next slide.
Now let's go to the Fibers, which is not great news. The Fibers segment achieved EBITDA of $55 million in second quarter, a decrease of 35% quarter-on-quarter and 15% year-on-year. You see the major impact coming in Lifestyle Fibers due to slowdowns in the economy, core EBITDA, mainly from Asia due to market weakness from China lockdowns and the export freights were high, so restricted exports from high freight, as well as the high energy cost in Europe, which we could not pass on completely. What you saw the bridge major was passed on in the combined PET business, but in Fibers, we could not price completely.
Hygiene verticals was impacted at Avgol, Russia, because of the Russian operations were operating lower and the lag loss, which I mentioned to you about the polypropylene THB 10 million quarter-on-quarter. In mobility also, there were lower volumes in Europe, but we see a favorable product mix and despite high energy costs, here we could pass on. You can see that mobility was 17%, quite flat. Here we could pass on the energy cost. Looking ahead, what do we see in this business? As Lifestyle Fibers, China opens up, the festival season comes in India. We see the Lifestyle picking up, continues to face but in Europe, we continue to face the headwinds due to high energy cost and semiconductor shortage will result into mobility under pressure.
We are not right now in the third quarter, we don't see a very big upside in the Fibers business. As we see the fourth quarter, certainly we see an improvement coming into the Fibers business and Olympus is a continuous focus on that. Let's go to the next slide. I think this is an important slide on Olympus. We continue to have very strong delivery of Project Olympus cost-saving excellence program. We exceeded our target set out last year, as you can see, $291 million. Today, this year, we are already at $462 million run rate. We expect to achieve $500 million or more better than that. As you said that we only did up to 2023, but now this is an embedded program.
In 2024, we have a $ 650 million-$ 690 million run rate on this. This cuts across all the profit drivers across all regions and segments with similar intensity. It is crucial to our success to remain in the first quartile cost position, especially in a commodity business. We are continuously investing in improving our cost structure with our renewed focus towards indirect spend, involving top consultants, procurement team, along with the category managers, which are confident to unlock more value. The Olympus program is right on the track, and we see this creating, unlocking a significant value. Let's move to the next slide. As you saw the 2030 vision, we have been investing in the sustainability of our people, processes.
I'm very pleased that yesterday we rolled out release two of SAP S/4HANA, which is successful, very good rollout as compared to Release 1. This is basically moving the organization towards a digitally agile organization, enabling operational excellence, making smart decisions on selling, value pricing, and the six enabling function continues to focus on, you know, improving the company's future readiness program. Let's move to the next slide. As we continue our journey of industry leadership in sustainability, this quarter saw some notable developments. IVL became a founding steering committee member of the Recycling Partnership Coalition made of industry-leading companies. IVL also announced its commitments to science-based targets. By 2030, the company intends to reduce their GHG emission by 30% and to increase renewable electricity consumption to 25%.
Along with this commitment, IVL has a seat on the Chemical Expert Advisory Group to develop a sectoral decarbonization approach. We continue to focus on our sustainability drives. As you can see, we raised about $1.3 billion of a loan from diversified ESG financing. Very strong focus on sustainability. Next slide, please. Important deleveraging. Our net debt to equity, as you know, increased from 1.03x in first quarter to 1.25 when we acquired Oxiteno, and now has reduced to 1.12 with higher EBITDA, and you saw the $900 million of operating cash flow.
Although you may know that our highest working capital outflow is there because of very high prices, but we could reduce our net working capital by two days with our continuous focus on working capital. Post-acquisition of Oxiteno, our net debt equity has peaked for this year, and we are expecting, of course, as you know, we are at 1.13. We expect to be nearly 1 or below 1 by end of the year with free cash flow, and that's the goal. I talked to you about very strong operating cash flow of $900 million, which is nearly 122% conversion and reduction in the working capital cycle. Liquidity is very important. We have a very strong liquidity position of $2.73 billion.
Risk against the FIC, floating interest rate, 62% of gross debt is fixed maturity rate, minimizing the impact of higher interest rates in future. That has been a continuous focus. As I told you earlier, sustainable finance represents a significant opportunity for IVL. Today, close to 20% of our total debt is sustainability linked. Of course, it gives a diversified borrowing base and also slightly lower cost. Very strong balance sheet position company has. Next slide. What is the 2022 second half outlook? There are headwinds, there are tailwinds. I think everybody, you saw that what we could pass on the energy cost. Today, the energy cost remains record high. You know, the TTF will keep going up and going down. We have been able to pass on the increases.
Even if today's TTF remains and today's the U.S. high gas prices, our impact is only $40 million-$60 million, which as you can see, that we have passed on earlier. As you have seen, we have demonstrated in our last twelve months through Project Olympus and other risk management, we have been able to absorb this high cost. Second aspect is normalization of freight. Will it normalize? I mean, nobody knows right now because what China, you saw the export, 50% went into bulk vessels, not on containers, which only went in the reduced freight. That's another. There may be normalization. There can be reduced consumer spending. 75% of our portfolio is not prone to that. Durable goods, there may be, like, propylene oxides that can be impacted.
There's a recent duty reduction in Brazil, import duty, which may have some impact, but we will mitigate that impact by reducing the discount. Of course, as I mentioned, MTBE spreads to normalize from the current peak over the next month, but still remain robust during this tight oil market. As you saw, butane is at lower and methanol is lower. Ethylene and MEG spreads are low, so we see a better spreads coming. What are the tailwinds? I think the biggest is the strong integrated PET margins due to high demand and low pipeline inventory. As I mentioned to you, that's the biggest. Right now, the integrated margins are above $300. Normalization of mixed xylene prices, which basically impacted our PET and PTA business, which has got normalized now in August.
China reopening will certainly help in the Lifestyle business. You saw the ethylene and MEG spreads, which are at very low margins. Dollar should remain strong, which basically benefits us in terms of lower conversion cost. Finally, Oxiteno synergy, as I said that in spite of a very good performance, as you saw, $85 million, we are very excited with Oxiteno on unlocking the synergy values of $30 million by 2023 and $100 million by 2025. There are many, many initiatives across this. That's the tailwind and headwinds. Next slide. What do we summarize? IVL's differentiated model and well-positioned portfolio has resulted in a platform that cannot be imitated. We don't want. We are a different company than the petchem companies.
As a majority of our products serve daily necessities and market, the strong predictability of our cash flows, ample liquidity and ratios well within the investment grade rating give IVL the financial capacity through a cycle to make strategic investments. We are well-positioned to make investments. We are always, as we tell you, that we want to double our EBITDA in five years. We successfully integrated Oxiteno, and the balance sheet is pretty strong. Today, IVL has built a resilient portfolio that is able to withstand and deliver superior value in volatile priorities. With a purpose-led vision driving us towards our 2030 aspiration, IVL stands out in the industry for our leadership as a sustainable chemical company positioned for long-term growth and returns. That completes the presentation.
Vikash, I would like you to bring that slide on Coke, Pepsi, because just to resiliency, and then we can take questions. If you can bring that slide just to show you what. Then we can take the questions. We can take questions now. This slide I wanted to show you. This is the second quarter result of Coca-Cola, Pepsi and Procter & Gamble. Their global unit case has gone up 8% and prices have increased 16% and their operating income. What does it show? That price increase have happened, passed on to the customers and still volumes goes up. That shows the resiliency of the business of these people. You know, Pepsi also 13% with 6% beverage volumes.
Procter & Gamble, who's my customer for Hygiene Fibers and also for PET, gone up by 7% organic revenue. Necessities basically is required, and when even the inflation is there, we see a very strong results by these companies. Thank you. We can take questions now. Yeah.
Thank you, Mr. Agarwal. We'll now take your questions. You can either type your questions in the chat box or you can raise your hand. We'll invite you to ask the questions. I can see Khun Komsun , you've raised your hand. Can you please unmute and ask your question?
Yes.
Thank you for the detailed presentation. I didn't realize until now that, you know, surfactants can cure my or fix my split end of my hair. Got to shout about it more. I have two questions for DK. Number one is, what is your CPET margin visibility? Do you see margin going up to October or September? How does that compare to July number? Are we seeing seasonality factor kicking in yet? Or this time it should be different from the others? Second question is that, on your MEG theory, what could go wrong, you know, on this one? Anyone in the industry on the MEG has started cutting production yet to? If it is below cash costs or breakeven point, they should have been announcing by now.
Thank you, Khun Komsun. Let's take the CPET. This is a slide which shows you CPET margin from 2020. You asked about the seasonality. You can see in October, November, December last year was a peak earning, and what exactly resulted because of very, very tight material situation. As I speak today, I can tell you about July, August. Chinese are sitting on very low inventory. You can see in July is $317. August is also hovering around same. This is the number of days inventory which is lying in China, which is very, very low. Actually, if you see 25 days and 6.9 days. If you want to buy any product of PET in China today, you can't get before October.
Now, remember, China hasn't opened up, so the demand, Chinese domestic demand. I can only tell you that, the situation is quite tight and worldwide. If you go back to that slide, the margin slide, fourth quarter, well, this is just a growth which we are explaining you, that how the growth in the industry has happened. Anyway, we can remain in the slide. Yeah. This is the October, November, December, you can see. Seasonally, normally it is weak, but, because the market was very tight, we may see a surprise. Very difficult to say, Khun Komsun, right now. But trend, I can tell you that inventories are low and the situation is quite tight. We are seeing supply chain issues right now. The second question was on your MEG theory. Yes.
Can we bring the crack margin spread slide? MEG margins are terribly bad. Crack margins in United States in second quarter was $0.03 a pound, which is very, very low. Now, this is a MEG slide, which you can see that the integrated margin is $1.22 and $3.15 for United States producer. So are people cutting production? Yes, there are some people who have already started cutting production. I will not like to name those players, but they are large players, integrated players, and we are seeing that cut. Second is coal-based MEG in China is very expensive and they are operating at 35%. This slide I wanted to show you that what is the ethylene operating rate in United States.
You know, it takes five years to build a cracker, so six years before you conceive a project. What happened in last few years, a lot of capacity got added in United States. In 2021, 84% was the operating rate, but because of polar vortex, effective rate became 90%. You can see on the right-hand side, absolute right-hand side, what was the crack margin. The crack margins on spot basis were $750 a ton or NTP basis $600. Look at now, second quarter 2022, we didn't make any EBITDA in cracker, 0 EBITDA. Rather, like Charles said, a negative EBITDA. Re-economics level is $550. You see a slowdown in investments, then as the ethylene demand goes up, you will see cracker rebounding back. Today, any integrated player is having significant losses.
You can see this is results of many companies who have and they are trying to cut the production. I think this has never happened in the history of MEG, that such low margins are there. Hopefully with China opening up, polyester demand coming back, I mean, look at $122 versus $511-$18. I think there should be some improvement. When it's difficult to say, Komsun Suksumrun. I hope I answered your question.
Yes. Thank you. My last question is that you mentioned about the resiliency of E.U. operation versus TTF. Any risk on volume, gas volume in case of gas rationing in Europe? Thank you.
If you can bring that slide on the gas. I think, you know, we have operations in Portugal and Spain. Naturally, they get their gas. We are getting that slide on the deck soon. Vikash. There it comes from Africa and LNG, so there is no impact. This is what exactly we are saying, that E.U . constitutes about 12.7% of our EBITDA. You can see that Spain and Portugal, which is 4% of IVL, is gas from North Africa, so there is no risk there. There is a price cap on the power supplies. You see, Lithuania and Poland has actually gone a lot on LNG imports, so we see very limited risk. The risk is in Germany, which is 3%.
Again, in Germany, again, because of necessities, we are defined as food and beverages necessities, we should be able to get those gas supplies. Germany, I would say a risk, little bit. Netherlands, there can be some risk. Rest of the world is not a risk. We can always supply from Egypt and Turkey if such situation arises. On the right-hand side, you have seen that what is the additional cost which we have incurred quarter by quarter, and we showed you $155 million. We have actually one more slide that impact you want to show, that if the present TTF remains, I think this is the forward curve of European natural gas. You can see the bar on the green shows what we have hedged.
Third quarter, we have hedged 38%, fourth quarter 21%, and our hedge price is that dotted line. Natural gas, we are also hedging for 2023. U.S. natural gas also you can see that we have been continuously hedging, which is much lower. On the right-hand side, you saw that in second quarter we had year-on-year impact of $155 million, and you saw the bridge which was already passed on much more than that. Q3 cumulative is lower. It's in the range of $140-$160. Even if Q3 at 200 TTF and high prices, our additional impact will be only $40-$70, but quarter-on-quarter is only $140, year-on-year is only $140-$160.
It shows you that if today's TTF remains, then we may have additional impact, but you have seen historically how we have been able to pass on, and we'll continuously work on this. That gives you some answer on the gas side.
Thank you.
Thank you, Khun Komsun .
Thank you, Khun Komsun . I can see, Khun Pum from Credit Suisse. Can you ask your question?
Hi. Thank you for your presentation. I have two questions. First one is on the supply chain issue that Khun DK mentioned for PET. Can you please elaborate on that issue, like supply chain, and I'm not sure whether you're specifically talking about Europe. The second question is on ability to pass on the energy cost for PET. Like, you mentioned it a bit already that you can do that so far, but I'm just wondering whether the situation has changed in the second half, like given that you might see more imports coming through and cost of production in Europe will be a lot higher than in the first half.
Would that mean that there will be more competition, coming in? Thank you.
Thank you, Khun Pum. Supply chain disruption which I was talking is that still, the lead time to get the product is very, very high from China. Although as you saw that China exported a significant quantity, and that is because there was no product available. There was only one product available from one country, which was China. China basically moved this by bulk vessels. Bulk vessels means container shortage was there, so you put on the bulk vessels. The lead time for those bulk vessels were very high. That supply chain disruption still continues. As you can see that 3.8 million ton got exported from China, which is a very significant quantity across different region. In North America, whatever imports you see primarily comes from Egypt because China has anti-dumping duty and Trump duty.
It comes from Egypt, Turkey, Vietnam and all that. The supply chain disruption still continues. Customers, the last thing they want is a shortage of products. We are seeing a regular trend in consumers to tie up domestically, and that we see in coming year also. As I said, we have already contracted 33% in North America, in Mexico, contracts at a better or same margins. I would like to show you one PTA slide also. The second is ability to pass on costs. This is the PTA formula price. In North America, the PTA, there are only two producers, INEOS and us, and DAK does not participate into the merchant trade. You can see that PTA formula is linked to North America inflation and fuel oil and labor.
You can see month by month how this margin has increased from $380 to $540 per ton. That there was a $0.04 formula price increase in first quarter, which was successfully passed on. In America, in U.S., it's not easy to import PTA. One is because everything moves by rail car. People don't have container unloading capacity, and market is very balanced and tight market. Ability to pass on, we have demonstrated in the past, if you see that bridge, yes, it depends how the energy cost will happen in the second half. As we are continuously hedging, we feel that we should be able to pass on. But maximum impact, I'm just saying if it doesn't pass on, is $40 million-$50 million.
We don't see that situation happening as our management agility, because we are making sure that some of our contracts are linked, that we say that the energy surcharge we're gonna charge on it. It's a very situation, but the downside risk, even if you see, is not more than $40 million-$50 million.
Thank you.
Thank you, Khun Pum.
Thank you. I can see you Yupapan. You have a question from Thanachart. Can you ask your question?
Hi. Thank you for your presentation. The first question is regarding gas cost. Actually, I'm not sure that I hear it correctly that the maximum downside is at $50 million, the answer that you answer.
If you can go to that slide. Maximum at 200 TTF, and today this price is, if we are not able to pass, $40 million-$60 million. Can you go to the next slide? You have seen that we have passed on $155 million, much more than in second quarter. The cumulative impact is only $140 million-$160 million versus third quarter. If I'm not able to pass anything, then that is my worst scenario. I think we will be able to pass on. Management is very focused on passing on the cost. If you can go to that bridge, because that bridge is important, that first quarter 2021 to first quarter 2022 again. Can you go to the slide?
I mean, that is the worst scenario I'm saying.
I'm not sure whether how much of your, like, total gas contract that you did in the second quarter because, like, gas costs start to spike in the third quarter. Does it mean that the gas contract that you locked in the second quarter you will have some hedging gain in the third quarter?
Yes. We first look at this slide, that $155 million was the impact from quarter one, same quarter last year, and our margin improvement is $337. We have been able to pass on much more than that, as you can see, because of the. Of course, it's a blend of MTBE margins and everything, but that shows the ability to pass on. The second. Can you bring that slide back? Hedging. We have been systematically hedging, and our hedges are at lower cost. You can see that green chart there. Third quarter we are hedged 38%, fourth quarter is 31%, and even 2023 we are hedged at 21%. Those red dots is the price at which it is hedged, so they are at significant advantage.
Like for example, in Europe we have hedged at EUR 80, 38% of the gas. Similarly down you can see in United States it's at $5.15, but it is very much backwardated in America. But we have made a policy to continuously hedge in layers, because things can be very volatile. It can suddenly drop also. That's what gives you that our cost will be a blend of what is hedged and not hedged, you know. That is the impact which we are showing you. Okay?
Thank you.
Okay.
Very clear. My last question is regarding Oxiteno. I see that the contribution is quite good. Came in at $85 million in this quarter compared to like normal like contribution around $50 million. That almost like double the normal rate. I would like to know which is the like key contribution to like very strong profit from Oxiteno, and is that gonna be sustainable?
Okay. Very good. Good question. Pasadena, I don't know, I just have to get you recollected that Pasadena is a newly built plant by Oxiteno in United States. The replacement cost of that asset is $250 million. Now you can see this was negative because it was operating at lower capacity. You can see in last 12 months, this is $9 million Pasadena has earned. This is LTM, huh? In second quarter itself, it has earned $6 million and we are seeing continuous improvement. What we have done? One is we turned around, we have the product mix, and it doesn't include yet the synergy benefit of EO supply, which will start from first quarter 2023, when we'll supply our own EO from Clear Lake, Texas.
Which will unlock another $20 million annual because of the difference between glycol margin and EO margin. That would be another one. The other major driver is the product portfolio which they have, which is. You know, they had a lot of pipelines of the product, particularly in the crop solution and home personal care. Their oleochemical margins have been very strong. So that's why you see that is one of the factors of. We see that it should continuously keep improving. Mind it, that second quarter in Oxiteno, they buy ethylene based on North Europe, and which was one of the highest. Which shows the capability of passing on the cost. It's product mix, it's value pricing, it's the type of products which they have in the pipeline.
This is not a standard commodity products where the margins are contribution margins are very, very high, and that is what is getting reflected in their earnings. That's why you see turnaround in Pasadena as well as the product mix and the cost efficiencies which we are bringing in there. Slowly, this is a regular process as we go into the different. Next year we'll continue to unlock more synergy values. There are hundreds of initiatives which has been identified, like common procurement, natural alcohols buying, the indirect procurements, the offices, SG&A cost reduction. These are all. There are many, many initiatives, that's why $100 million will come. The second quarter, which you saw, is a combination of all these factors. Remember, Oxiteno also produces glycol.
Glycol was negative in this, so that was a laggard in Oxiteno. They produce very small glycol. Hopefully that answered your question.
Thank you.
Yeah, do you have any follow-ups?
No, no. Thank you so much.
Thank you. In the meantime, Sumedh, before we come to you, one question which has come from a fund in Thailand. What's the breakdown of $85 million Oxiteno into downstream and intermediates? And, how much MEG contribution? Is it loss-making and how much so?
Oxiteno is like.
It's predominantly totally $85 million is downstream.
Yep.
The MEG must be a breakeven EBITDA because they sell MEG only for a very specialized applications. They don't sell in commodity market. If MEG margin improves, yes, that can be an upside for Oxiteno. Yes, that is totally downstream.
Okay. Sumedh from JP Morgan, can you ask a question?
Yeah. Hi. Thank you, Vikash, and thank you, DK, for detailed presentation. I have a few questions, actually. Firstly, let me kick start one by one. Specific to your PET margins in the U.S. on contracted basis, I'm not sure, but do you start to see any impact because Corpus Christi is where you have started to see some construction activities? The other corollary to this is just housekeeping exercises. How do we consolidate, or how do we show Corpus Christi in financial statements? Is it gonna be proportionate consolidation or associates? That's my first part. Thank you.
Corpus Christi is coming in first quarter 2025. You saw the significant imports in United States. Of course, there is no bearing at all on the current negotiations of the contracts which we had. As I mentioned, 33% of the contracts have been locked in U.S. and Mexico at prices same as 2022 or slightly better as integrated PTA/PET. The Corpus Christi, it is a capacity reservation, so it will be sort of an equity accounting. Of course, that will sit on our balance sheet, but it will be equity accounting. Am I right?
You will mine the-
It will be basically a tooling agreement, so you basically get the product on a tooled basis. There will be a sales and EBITDA will get consolidated as a 33%. One is 33% equity accounting on the profits which made by the Corpus Christi, and then you buy on a cost-plus basis, that profit will come in the IVL as a 100%.
In that you can say proportionate consolidation.
Yes, proportionate consolidation, you can say.
Right. Yeah. It's proportionate consolidation. Got it. Can you also give us the CapEx guidance for this year and next two, three years that you may have?
CapEx. Can we bring the slide? CapEx primarily is on the recycling and the Olympus Project and the Corpus Christi. Can we bring the slide? This year they're just bringing the slide up. Yeah. Okay. This year is expected to be about $1.8 billion-$1.9 billion, which you see 2022, which includes Oxiteno acquisition, includes Vietnam acquisition and the Project Olympus and S/4HANA, of course. Next we are talking of $500 million. 2024 is $400 million, which includes $150 million deferred consideration, which we have to pay. This is on a cash flow basis. The maintenance CapEx on top of it will be about. This is growth CapEx, will be about $400 million, roughly. This does not include.
Got it.
This is including the total recycling capacity, which we are bringing it up to 600,000 tons. I just want to remind you that recycling hasn't created that return which we are targeting. As we are expanding our flake capacity, we are integrating, you will see the results coming into the coming quarters.
Right. Thanks. My last question is on the rising gas prices in ethane. Rising gas prices in the U.S., and I'm talking specific to ethane, the feedstock. Is there any way you can hedge that as well? Second, when you have your downstream business in the U.S., does it get impacted in any way through higher ethane prices? Thank you.
Sumedh, let me first ask you the last part. We pass on the entire cost of ethylene to our customers, and you saw that into IOD downstream results as well as Oxiteno downstream results. Oxiteno buys based on European-linked ethylene price, and you could see that $85 million came in spite of very high ethylene cost. There's a total pass-on mechanism of ethylene. Your question was, can we hedge? Of course, I can go and hedge, but then I'm taking a speculative risk because if the ethylene drops and then I'm caught with the high cost ethane. We normally don't hedge such positions, because we only hedge the gas to the extent of conversion cost because we know that this conversion cost is going to play an important role in our overall profitability.
Ethane, yes, you can hedge, but then you take a speculative risk because it can always drop. Gas situation in United States, we did some study that is a backwardation, if you can bring that graph. The gas supplies are increasing. Of course, there is a lot of LNG terminals getting built in United States, so there is an export boom happening. We don't want to take that speculative risk on ethane. As you can see how volatile is the margin, and you can see the backwardation that today in 2023 if I buy, I can buy at $4.70-$5 per million BTU. But we are continuously hedging for our conversion, but we don't hedge ethane. If you go to the previous slide, that crack margin.
You saw that crack margin slide that shows how much crack margins have dropped in the second quarter because of surplus ethylene in the United States.
Yeah.
Okay?
Yeah, this slide shows you that used to make $700 per ton is now $100. $600 dollars per ton gone for my 650,000 ton capacity. That's the impact of the second quarter.
Yeah. Thank you.
Thank you, Sumedh . There's a question online from Khun Amornrat from CIMB. What is the average hedge price for TTF and Henry Hub?
You have the number?
Yeah.
Vikash will answer that question on that.
If you go to slide number 37.
They wanted the average hedge price.
On the next slide.
Go to the next slide.
In the third quarter, fourth quarter, you can see our hedge cost is about EUR 70, in that range. Even for the next year is very similar to that cost. Henry Hub, for third and fourth quarter is in the range of about $7, and next year is about $5.
You can see that today is EUR 200. Our hedge price for Q3, Q4 is EUR 70, EUR 80, so it's quite well hedged. That's only 38 portion, 31 portion. The United States Henry Hub, we are at $6+.
Thank you. There are no more questions at the moment. Maybe if anyone has any more questions, you can ask it now. Yeah. There are no more questions.
Hi, Vikash.
Yeah.
Can I ask anything?
Yeah, sure.
Hi, Vikash. Can I have one quick question on Fibers business? Should we expect that the situation of the margins squeeze will continue or it pretty much depend on China? If it reopens then things will improve.
Khun Pum, you're talking about the Fibers margin or
Yeah.
Fibers margin.
Correct. Yeah, Fibers.
Yeah. Fibers margins are terribly bad right now because the polyester operating load in China is quite low because of the lockdowns. Pipeline inventories are tight, so as soon as they open up, and I think even in India as the festival season comes, we think the margins will start improving in Filament as well as staple Fibers both. Chris, you want to add something?
No, I think that's a fair reflection. You know, I think it's cautious optimism. We're not out of the woods yet. We know why we're in the position we are. DK's already mentioned a number of those external headwinds. So I won't focus on them, but I'll focus on what we're doing within a business of which I think the team are doing an excellent job. You know, we're focusing on getting our operating efficiencies as robust as we can. You saw in Olympus we well over index the savings generated by the segment. We are being very speedy in terms of our decisions in regards to our portfolio range and optimizing that range. If you look at the external market, yes, we're confident that China opening up will have a positive impact relative to H1.
India, particularly quarter four relative to H1, looks positive. You know, what are we cycling from H1? You know, we're cycling not just the COVID, but the negative lag, and we're seeing polypropylene prices coming down. That's a positive cycle versus H1. It's cautious optimism. We flagged there that we're not out of the woods yet. Some of the external factors that we're experiencing right now are not gonna go away overnight, but we're taking immediate swift actions in terms of what we're in control of. Thanks for the question.
Thank you. I can see, Mayank from Morgan Stanley. Do you want to ask your question now?
Yes, Mayank.
Yeah. Vikash, can you hear me well?
Yes.
Yes.
Okay. I think couple of things from my end. First, can we just talk a bit about the balance sheet management side now going forward? Can you just give us a bit around your CapEx guidance for 2023 as well?
Okay, very good. On the balance sheet side you saw that the debt, net debt has been lower at around $6.8 billion. Of course, you want to bring that, debt slide? Can we bring the debt slide up? Net debt slide. No, the other one. The movement. Yeah. I think naturally there will be a strong operating cash flow coming in. Remember that this working capital is higher because of the high prices which we have right now encountered in the SEM. You can see that this is the bridge, you know. That $5.9 billion was the net quarter in the first quarter 2022. We had this core EBITDA and the net working capital result. We net that after OCF should have been $5 billion.
Maintenance CapEx is $137 million, and we paid $1.5 billion for Oxiteno and Packaging acquisition, interest, dividends, and of course FX movements. We are at $6.7 billion. We think that we will deleverage further. Just to show you the CapEx guidance on the CapEx side, and of course we'll be keep improving on our working capital cycle. This is $1.9 billion, which actually we reviewed. It should be lower than that, $1.8 billion-$1.9 billion. Corpus Christi will start kicking in, so $500 million and $400 million for 2023, 2024. This includes recycling investments, includes debottlenecking of PET capacity in. I mean, we are making one PET plant in India, which will be operational by end of this year.
We are debottlenecking some of the plants and Olympus. All this includes all those CapExes, growth CapExes. Maintenance CapEx will be about $400 million. Mayank, hopefully that answered you.
Yeah. Yes. I think so, is it fair to say that, next year, if you kind of think about your net debt number, it will be significantly lower than what it is today?
Of course, that's why we are predicting that if we go to 2024 net debt slide, we should strongly deleverage with the operating cash flows which are getting thrown out. You can see in the fourth quarter 2023 we are showing and actually fourth quarter 2024 further deleveraging. You know, remember, we are a growth company. We see a lot of opportunities, but of course, based on this, it will strongly deleverage.
Got it. Sir, can you just talk about the opportunities you're looking at in terms of growth as well, from the inorganic side for the next few years? Anything targeted that you're already seeing around?
Mayank, I think that's a good question. What we did in PET, we bought so many assets around the world. We consolidated, we emerged as the largest player in the world with 20% market share, and which certainly cannot be imitated by anybody, because of the strong position which we have. Actually, today, except Corpus Christi and a small plant being built in Turkey, there's not much capacity getting. This gives you a very strong position. We think in integrated oxides derivatives in this downstream business, post Oxiteno, now we have created highest play in Americas. This is a very, very value-added business. You're talking of R&D, customers like Syngenta, you know, for solutions, Procter & Gamble, all these companies whom we give solutions.
There's a good opportunity to expand this business into Europe and Asia with an upstream integration. We are big buyers of natural alcohols. Our shift will be to move right-hand side of the curve more to get more specialties into our platform. We have just completed four months of acquisition, mind it, and you saw the results of Oxiteno. The journey has just begun. The team is very, very talented, which we got, and I think there are a lot of opportunities to grow this business. We don't have antitrust hurdles. We do have hurdles in Combined PET because we have a leading position in U.S. and Europe. Fibers, we are still taking stock, as you can see, that we want to first improve the existing position.
Anything acquisition which will look probably or growing will be in IoT field, and there are a lot of areas which we can. You might have recently seen a announcement about tying up Capchem on this, electrolyte batteries, you know. This is another value-added project which is for CO2 and ethylene oxide you capture. Which is not only improves the sustainability but create a value-added projects. We'll continue to work on this.
Got it, sir. I think this last question I had was in terms of you know I think the U.S. overall portfolio correct? Once you have the entire Oxiteno plant in the U.S. coming through what kind of upsides you kind of think to this $85 odd million EBITDA that you have kind of got from Oxiteno?
The $85 million is a quarter, you know.
Yeah.
Naturally, if you make say this is, this is without synergy of $100 million, which we are looking at unlocking between the two. Now, you may ask, what is this $100 million coming from where? One of the big basket is they buy ethylene oxide from another supplier because they had a contract which is finishing by end of this year. 2023 we'll supply our own EO. That unlocks a significant value, as I said, $20 million. Then there is lot of cross-selling because they sell products in Europe, we sell product in Brazil. Those cross-selling, how do we optimize that SG&A? How do we roll out the products? They are very good in crop solutions. They are good in coatings. How do we do that in Asia?
There are a large number of initiatives. As you can see, the 100-day plan on track on the right-hand side, there are 160+ initiatives that have been identified. We have rolled out the new organization, indirect procurement, establishing the operating cadence. We still have a TSA with Ultrapar, which we want to come out of it. These are all synergy. Actually, if I tell you this $100 million number has gone increased, but I don't want to say that, but we are very confident of this $100 million. Then you add up as a total value of the company. If IOD makes an EBITDA of $800 million+ , then you add up another $100 million on top of it. It's a very important vertical which is emerging in IVL.
That's what my point was, you know.
Got it. Thank you, sir.
Thank you.
Thank you, Mayank. I don't see any more questions here, so we can.
Thank you very much for participating and taking out your precious time for the second quarter results. We do look forward to see you in third quarter, and please don't hesitate to contact our investor relations department. If you have any questions, on anything, please don't hesitate. Thank you very much. Appreciate and have a good evening.
Thank you.