AGM 2023

Apr 25, 2023

Slides

Good morning. Good morning. The meeting has been set. Thank you. To begin with myself, I am Viprokad Gustaf, Chairman of the Board. Then, Mr Alok Lohia, vice chairman of the board, chairman of the sustainability and risk management committee and group CEO, Mrs. Suchitra Lohia, Executive Director and Gifty Group CEO, Mr. Amit Lohia, Non Executive Director, risk management company. Mr. Dilip Kumar Agarwal, Executive Director, Member of Sustainability and Risk Management Committee, Diviti Group CEO, Executive President, Combined PET, Admuthi and Chief Financial Officer, Admuthi. Mr. Udaypal Singh Gill, executive director and member of the Sustainability and Risk Management Committee. Mr. Sanjay Ahuja, executive director and chief strategy and transformation officer. Mister Ratheeen Sree Mongkal, NEET Independent Director, Vice Chairman of the Board, Chairman of Budget Committee, and Member of the Sustainability and Risk Management Committee. Mr. Russell Lighten Kekuru, independent director, chairman of the Nomination Compensation and Corporate Governance Committee, a member of the Sustainability and Risk Management Committee. Doctor Siri Ganjaran, the independent director, Member of the Audit Committee and Member of the Senate Compensation and Corporate Governance Committee. Mr. Karip Sze, Independent Director, member of the Nomination Compensation and Corporate Governance Committee and member of Sustainability and Risk Management Committee. Mister Kevin Wong Vanich, independent director, member of the audit committee, and member of Sustainability and Risk Management Committee. Sir, we have Sir, missus Kaysri Ngoansingh Pyan, independent active and member of the nomination compensation and corporate governance committee. Doctor Aral Ling, independent director, showed the management team attending this meeting. Now I would like to introduce the auditors from KPMG, Homchai Audit Limited, mister Bob Ellis, mister David Liver, and mister Yutapong, Sumta Linka. Moreover, I would like to introduce our legal counsel from the Capital Law Office Limited, Miss Vipada Saksri, who will monitor the meeting in order to ensure that the meeting was conducted in accordance with the law and articles of the company. Now I would like to assign mister Ratyan Sirimankol, lead independent director, vice chairman of the board, chairman of the audit committee and member of the Sustainability and Risk Management Committee to conduct the meeting in Thai hereafter. To you, Mr. Ratjen. Thank you, Mr. Chairman. I will share my perspective on our company and discuss our strategy. Mr. B. K. Asarwal, my Deputy Group CEO, will take you through the presentation in more detail. The table on the screen speaks for itself and allows me to highlight your company's performance during the last 4 years. During these 4 years since the pandemic in 2020, the whole world experienced the effects and the impact of the pandemic. As it even shows, our company also experienced in 2020 a drop in revenue, a rare occurrence for us having our growth mindset. But we have quickly recovered to a whopping US18.7 billion dollars revenue in 2022, over 60% increase in 3 years. In 2021 2022, we are seeing strong rebound with record earnings and dividends. Our results are a testament to our strategy and the strong business your company has built in the short tenure of 30 years since the spring. Your management team operates globally and is a leader in huge focused end markets serving consumer necessity. The strategy adopted in 2019 to grow our integrated outsides portfolio to match and to rival over time our PET business yielded desired outcomes and delivered €4,000,000,000 of revenue at 13% return on capital employed. Our fiber business has started to show improvements in 2021 under our new leadership and strategic work to improve capital efficiency by deep dive into our manufacturing footprint, especially in Europe, by leveraging on our footprint in Asian sites, especially in Thailand, to dramatically improve the ROACE. I'm confident that the team is motivated to deliver return in double digits as I had approved in the current 2023 to 2025 timeframe. Your company's legacy PET business continues to align with our stakeholders and is leading from the front on climate and recycling and has enhanced the community's CSR effort, including education on the unique PET advantage as a fully recyclable plastic, which keeps our food and beverages safe and affordable. I'm confident on our company's ability to manage its debt, where we maintain a healthy dividend policy and declared back 1.60 percent in 2022. Our leverage grew to 1.1x from 1x in 2019. Our sales in this period grew by 64%. Finally, I'm proud of the management and our employees for their full support and tireless dedication as witnessed during these stressful 3 years of the pandemic, led disruptions and the uncertainty created by the Russian Ukraine war. This deal has spout a good and attractive business during all this turmoil. I now request Mr. Likke Arrawal, Thank you, Mr. Lohia and Koonratyan. Your company saw an operating environment which became more complex in last 3 years, in particular disruption caused by Russia Ukraine conflict had a mixed impact on IVL operation. IVL has been a beneficiary from supply chain disruptions. As a domestic producer in Western markets, the heightened freight rates and longer lead time for imported goods allowed IVL to achieve attractive margins. Rising energy prices negatively impacted our variable cost, particularly in Europe. However, IBL benefited from high crude oil prices, especially in MTB business. Persistent COVID lockdown in China slowed down economic growth, brought down the benchmark prices and margins for petrochemical products, including MEG and polyester. In addition, higher interest rate and inflation affected demand and operating cost. Despite these big disruptions, demand for our products as Mr. Lohia mentioned, continue to grow driven by positive megatrends including sustainability, wellness and urbanization. With our strong and resilient business model, IBL navigated through the challenge and delivered exceptional performance in 2022 as Elludale. Next slide. As you can see your company had a record year with financial performance. We made 2 successful and high quality acquisitions, Oxteno in the IoT segment and Vietnam Packaging and CPET. These have contributed an additional $227,000,000 to our overall EBITDA. We conducted a strategic review of our footprint and impaired certain assets in Europe and Asia to improve the capital efficiency. This is expected to result in 30 basis points improvement in our ROCE as well as $38,000,000 upliftment in our core EBITDA. During the year, we attained a robust operating cash flow of $2,200,000,000 which represents a core EBITDA conversion of 98%. The Project Olympus continued to provide sustainable efficiency gain. We unlocked cumulative savings of $449,000,000 at the end of the last year driven by operational excellence, procurement and supply chain initiative. As mentioned, our dividend reached a record high of about 1.6 per share reflecting the strength of our business. Despite enduring 3 years of significant disruptions in the world, we emerged from 2022 as a stronger company than ever before. Our resilience was due to our agility, confident and strategic management and value creative mindset, which have equipped us to navigate an increasingly volatile environment. As we move into the next period of growth, we are well prepared to seize the opportunities and continue to thrive. Next slide. Since this assumption, your company has experienced significant growth owing to our growth mindset. Through M and A, we have evolved from a pure play PET company into a global chemical company. Over the past 20 years, Iwell has acquired more than 60 businesses. Alongside our organic initiatives, this acquisition showed us to continuously strengthen our platform, people and systems. We have developed customer intimacy by providing global solutions to them, consolidated the business and established clear market leadership in key segment and geographies, integrated the seasoned and valuable talents and management team to strengthen our global teams, and most importantly, we have accumulated key technologies, intellectual properties and R and D capabilities to drive the next phase of innovation at IVL. Integrating acquisition is not easy and we are proud of our integration track record. When we acquire businesses, we improve their cost structure by debottlenecking and embedding operational excellence. Today, we have successfully built a global team of 26,000 people of 80 different nationalities spread across 35 countries. We have a proven track record of double digit growth over the past decade with a compound annual growth rate of 11% from 2012 to 2022. IVL today is a world class leading chemical company with a global footprint, and we are excited to take the next steps on this journey. Our robust business model has generated very strong cash flows, enabling us to consistently pay out dividends on a quarterly basis. Our dividend yield has been higher than benchmark across the cycle as shown in this graph. The Board has recommended a final dividend of Fortis Tang bring the total annual dividend to record amount of 1.6 Baht per year. This dividend payout is a reflection of our exceptional performance throughout the year. Today, your company has a diversified portfolio across the globe. We have strategically positioned ourselves in critical market as a global business with local production to be the preferred suppliers for our customers, which was tested in the last 2 years. We have seen this strategy pay off especially during these last 2 years of supply chain disruption as I will greatly benefited from our global footprint and local supply. Our scale has created barrier to entry and cemented our leadership position. This scale has allowed us to invest in innovation and customer satisfaction. By having an integrated and diversified portfolio across geographies, segments and end markets, we can deliver resilient earnings for our shareholders. Our key business units are interconnected allowing them to maximize synergy and leverage economy of scale across raw material, customer networks and R and D initiatives. We are focused on attractive and growing the end markets and are leader across the sectors in which we operate. We also have an integrated value chain across our global footprint which benefits the company. Our 3 businesses are interconnected through shared raw material, shared customers and shared R and D. Having shared raw materials helps to insulate the business against supply chain disruption and other external factors. It also gives us a cost advantage by having shared raw material across business units. We can leverage our scale and reduce procurement cost allowing us to capture more margin along the value chain. We also have shared customers, which allows us to maximize the value generated per customer and be a holistic solution provider in helping these customers to source what they need to continue providing us all with the staples of our everyday life. Doctor. Gamble is a good example. Across all our businesses and end markets, we hold leadership position as largest or second largest producer. As you can see we are the largest global PET producer in the world. In the Americas we are the largest non ionic surfactant producer as well as the largest ethylene oxide producer. We also have a leading position in the Tacon, airbag gowns and premium hygiene fiber. We are catering to the end markets which have substantial growth opportunities supported by a mega train of growing populations, increasing quality of living and urbanization. All of this translates into growth in multiple of GDP giving us immense future growth opportunities. Our diverse Board of Directors bring industry experience from multiple disciplines enabling informed decision making and supporting our mission of sustained growth. Our strong governance framework ensures that we adhere to the highest ethical and legal standards and continuously strive to improve our corporate governance practices. As a result, IBL has been consistently recognized with awards that demonstrate our strong governance. We would like to take this opportunity to express our sincere gratitude to 3 esteemed Board members, Doctor. Siri, Pankanit and Mr. Day Gil who will be retiring this year for their invaluable contribution to our organizations over the years. Our commitment to our core values is reflected in our approach to people development and leadership, which enables us to drive sustainable business growth. At IVL, we value the impact of our people. We believe that developing strong leadership and empowering our people is key to achieving our business outcomes as a growth company. We inspire our next generation of leaders to adopt a growth mindset by encouraging them to prioritize ownership and accountability, decisiveness and competitiveness, efficiency and customer centricity. This leads to agile, fast, precise and innovative business outcomes ensuring we keep winning in this volatile world. In the volatile and complex context we are operating in, the only way for your company to successfully achieve our goal is to enhance continuously our competitiveness and accelerate growth sustainably. To be even more competitive we need to focus on being efficient in the way we use our capital. This means constantly assessing our portfolio to ensure we are operating at maximum efficiency, remain adaptable and move with the market. This means capturing new innovative businesses as they arise and taking decisive actions on operations where we do not see long term future. To be more competitive, we need to continue being dedicated to cost management and driving a lean P and L through balance sheet management and efficiency drive like Project Olympus. We need to use digital tool across our businesses and processes to enable us to make agile decisions and maximize productivity. Digital tools will give us sharp and granular insights which is a requirement today. We spoke about our capital efficiency and making sure Iwell has the right mix in our portfolio. We demonstrated this recently in our decision to discontinue and take an impairment on some uncompetitive assets in the fibers and CPED business. The decision shows IBL's relentless focus on efficiency. We want our capital to make good returns and we want our management to focus their time and energy on the right opportunities. Being agile also means that I will quickly and decisively capture opportunities created by the volatile environment to maintain and enlarge our leadership position. On the cost management, it is the Ivel DNA to be cost competitive and we are continuing in this path through Project Olympus. Project Olympus is not just about technical cost saving, but it is a broader push for operational excellence and continuous improvement across the business. By the end of 2022, we delivered annual run rate efficiency gain of $449,000,000 and we feel confident that this program will continue to unlock further value. Most importantly, through Project Olympus, the business is learning how to be more efficient and effective in anything we do. Iwheel is enhancing competitiveness through digitalization committed to long term value creation. The global platform of digitalization through SAP HANA 4 will provide insight and improve visibility, allowing leaders to make faster decision in IBL's complex operation. Digitalization also provides full supply chain visibility, intimately understands customers and environmental changes and distills signals from the organization in real time. Additionally, at the plant level, going digital leads to better work environment, downtime reduction and preventive maintenance decisions, enabling smart factories at scale. Over the year, your company has grown from being a pure play PET producer into diversified well integrated downstream company. Constant assessment and reassessment of our dias portfolio is how we remain on the front foot of moving markets. Our growth has not only been the strength, it is the overall quality of products and service that we provide to the customers in our journey to become the single reliable solution. We have a clear strategy to capitalize on opportunities and we think of growth in 3 ways, growing the core of our business, portfolio moves and increasing our focus on sustainability. This will be disciplined growth, all our key projects, acquisitions or major actions should be guided by this criteria and these criteria are enhance our core EBITDA margin, have a return on capital employed of more than 15% and contribute to the quality of earning and allow IVL to maintain balance sheet disciplines. We have a commitment to sustainability and have created measurable and ambitious goals to reinforce this. Our short, mid and long term sustainability goals are in place to ensure value creation and value protection. Value protection against potential policy changes, changing sentiments towards sustainability and a growing environment that accounts for corporate responsibility. We have mitigated this risk and have established ESG framework which is detailed in our region 2,030. Value creation is through the new avenues of growth and revenue that will open up to sustainability, for example, advanced recycling and ethylene carbonate. Based on our existing CapEx commitment, we expect to create a cumulative EBITDA of $7,100,000,000 over next 3 years, 'twenty 3 to 'twenty 5 and our operating cash flow of $6,400,000,000 which is a conversion rate of 90%. These plans are underpinned by a business that is visible, strong and growing cash flow. We have always had great predictability in our cash flow due to resiliency of our business and geographical footprint we have created over the years. Based on the projected operating cash flow and committed CapEx of $2,400,000,000 we expect to deleverage further and bring our net debt to equity down to $0.6 by a net of $25,000,000 This projection does not include any new M and As which will further enhance our earning potential in line with the strategic growth targets. It should be noted that we have the capacity to further pursue the growth projects with having an additional headroom of $3,500,000,000 while adding to the disciplined net debt to equity of 1. We will always strive to return value to our shareholder in the form of constant dividend as per the policy. To summarize, I will today has proven to be a resilient business that has constantly delivering returns through the cycles as demonstrated. We are one of the largest sustainable chemical company with 70% of our portfolio catering to consumer daily necessities. This provides us with more earnings stability. We have a proven track record of double digit growth over the past decade with a compound annual growth rate of 11% for 2012 to 2022. Our diverse and integrated global business portfolio with leading position in attractive and growing end markets enable us to capitalize on emerging opportunities and create long term value for our shareholders. We have constantly generated strong cash flows and achieved attractive returns on our investment which has translated into healthy returns for our shareholders. Our strong balance sheet demonstrates disciplined financial management and capital allocation. Lastly, I would like to express my sincere gratitude to all the shareholders for their unwavering support and trust in our companies. Despite the challenges posed by the global pandemic, we have remained steadfast in our commitment to delivering sustainable growth and creating long term value for all our stakeholders. As we look ahead, we are confident in our ability to navigate evolving business landscape and capitalize on the opportunities that lie ahead. We remain fully committed to our mission of driving innovation and sustainability in our industry and contributing to a better world. Thank you once again to all the people for your continued support and we look forward for another successful year ahead. Thank you. There is a question that hope you can read. Due to the trend of electric vehicle, petroleum business start to shift their business to downstream. How this will impact the demand and supply, our business cost, raw material, selling prices and downstream products? Any chance of oversupply? How do we manage this risk? Kuna Loke, can you answer this question? Yes, in our business over our entire 30 years in PET, we are being faced with overcapacity. Most of this overcapacity we have seen has emerged in China and in Asia. The reason why our company went global is because in the Western Hemisphere, we believe there is more balance and there is a good supply demand rush flow where new capacities are getting built. Therefore, in turn for the PT business, I'm very confident that we have a good market leadership position and competitive assets to operate in an accretive way, creating good shareholder value. On the 5 years, I did mention that our operating costs in Europe are way too high. And therefore, it is right now the good time that we have created market leadership in our tires business, in our airbag business, in our Hygiene business and to move some of these production facilities to Asia, which is much more competitive in terms of Middle East. Therefore, what you can just from my answer is that we have created the market, we have created alignment with our customers and now it's an ever growing journey where we create competitive supply chain. The new business that we have built in the last few years is integrated Ox Pipe and Generators. This business has now a market leadership position in North America and South America. We are targeting none in this business in the terms of competitiveness, since we have the core advantage of the sufficient change of supply in North America. And we one of the leaders in South America with a very stable cost and a growing economy in terms of emerging market in Brazil. Therefore, I think your company is well positioned to capture the growth that is coming, as Mr. Agarwal mentioned, through the publishing growth to the emergence of B plus income and 70% of our portfolio being serving consumer needs of consumer necessities. And the rest of the 30% are unique and specialization products that we have a market leader specifically. So yes, there is a growing trend for people to move away from Cross HQ and therefore miss the time leads are getting built in the way. But our company is relying more on downstream expenses and serving the customers through the branded tool. Thank you. The question is the chance that U. S. And Europe going to have a recession is pretty high. How could we mitigate the impact to IVL should there be a recession in the U. S. And Europe? Yes. Most of all those, as 70% of IVL products are downstream serving daily necessities and we have seen this impact in 2020 to 2022 over the last few years, where the overall demand for our products did not shrink. It actually expanded at the same rate of about 4% annually. That is what we believe that the daily consumables our company is focused on daily consumables. Only 30% of our businesses are in durable products. And these durable products will face some recessionary trends as it happened. But the sizable part of Indorama Ventures is in readiness strategy, which is more or less recessionary. And I think to add, the question is linked to both the demand as well as to the capacity increase. So my earlier answer was on the capacity increase and whether that will have a major impact on the margins. I don't believe the way we strategize our business is we look at the margins over a 3, 4 year period. So our next business plan that Mr. Ruchi has always told in his presentation is based not on the 2022 margins, which were positively impacted because of the supply chain disruptions. So these margins were 2023 to 2025 business plan is based on the full year margins that my initial chart told you from 2019 to 2022. The way IVR thinks of itself to grow is that we look at our market share. We take our margins based on the last 4 year average. Therefore, we are able to balance the portfolios and the PPOs. For instance, take PET. I think the PET margins in 2022 were over €200 per metric ton, whereas for the business plan of 2023 to 2025, we have taken our PEP margin of RMB135, which is the Solana The first question is the compensation, yearly compensation has increased. He wants to know the reason. Okay, that's the first one. And the second one, Okay. Well, thank you for your question. And it's a good question, something we would have expected from the shareholders. The increase, I think the numbers you're referring to is the total increase in director compensation from 2022 of roughly $27,000,000 to 2023 of roughly 33 point $5,000,000 And I think it's important, first of all, to understand that the compensation is to a director is broken down into 2 parts. One is the monthly retainer, and that is a monthly retainer for being on the Board as well as a monthly retainer for being on a subcommittee. Executive directors do not get this monthly retainer. It's just independent directors and non executive directors. And that amount for the monthly retainer has actually will actually go down from 2022 to 2023 by roughly 300,000 baht. Where the increase is showing, that increase you referred to, is actually in the bonus. The bonus to the directors whereby in 2022, a total bonus amount of $15,000,000 was paid. And for 2023, which is for the performance in 2022, the proposal is $22,000,000 First of all, if we go back to 2021, it was 22,000,000 baht in 2021 because the Company had a good year. In 2022, the performance was not as good, so the bonus amount dropped from 22 to 15. As you've seen from the financial performance, in 2022, it was a very good performance. And as a result, it was determined that the bonus to be paid to the directors for year 2022 in the year 2023 shall be $22,000,000 So, that jump from last year, dollars 15,000,000 to this year, dollars 22,000,000 is really where that increase is. Now many factors go into determining the bonus. 1, of course, is also what we pay our shareholders in terms of dividends. And as you saw earlier, the dividend payout increased from 2022 to or increased year on year by 60%, six-zero. The bonus paid to the directors is increasing by 46.7%. Overall, the overall compensation is increasing by roughly 27%. So that's how the numbers have been arrived at. And so while it does show an increase, we did show a significant increase, significant decrease the year before. So we're actually back to where we were in 2021. Thank you. Let me just elaborate one step further. Also, a review was undertaken of the retainer fee for directors, quite a comprehensive review. And, you know, part of the research data came from Thai IOD for benchmarking purposes. But we also examined 11 other companies, some of which we have benchmarked against in the past and some other companies which are associated with some of our current directors. And from this research, we found that our retainer fees being paid were actually quite a bit below what the benchmarked data showed. However, for our subcommittee members, the committees are paid relatively on par with other companies. So again, some facts, hard facts were looked into in determining the director compensation. Thank you.