Welcome everyone, and thank you for taking time to join us for the Indorama Ventures first quarter 2026 results briefing. My name is Kumar Ladha, Chief Strategy Officer at IVL, and joining me today we have Ms. Aradhana Lohia Sharma, Vice President, Ashok Jain, the Group CFO, Muthukumar Paramasivam, the President of CPET, Sunil Marwah, President of Indovida, Alastair Port, Executive President, Indovinya, and Diego Boeri, Executive President, Fibers. A quick disclaimer that this meeting is being recorded, and a replay of the session will be available on our website after the meeting. We have made few assumptions, and future estimates are based on industry and business views and available information at this point in time. I now invite Ms. Aradhana to first share the business and financial highlights. After the prepared presentation, we will open up the floor for Q&A. Over to you please, Ms. Aradhana.
Thank you, Kumar. This quarter's presentation marks a deliberate shift in our reporting philosophy, embracing what we call radical culture clarity by moving to reported Thai baht financials. This change is foundational to how we explain our performance, particularly concerning inventory gain loss. We firmly believe these are not exceptional items, but are a part and parcel of operating in a commodity business. We will no longer seek to explain away these fluctuations, but will instead own them as a feature of our operational reality. The first quarter of 2026 marked a decisive inflection point for Indorama Ventures, demonstrating a strong operational and financial recovery from the cyclical trough of 2023- 2025. Amid a volatile global petrochemical landscape, the company delivered clear sequential momentum driven by the disciplined execution of our IVL 2.0 strategy and a fundamentally altered market environment following geopolitical disruptions in the Middle East.
Management has conducted extensive analyses of historical cycles data across our businesses and industries during the quarter, and that work reinforces a consistent conclusion. The underlying indicators are characteristic of an early to mid upcycle, and the sequential recovery observed in the first quarter of 2026 is consistent with that trajectory. We enter the remainder of 2026 with conviction. The operational and financial recovery has been supported not only by improving external conditions, but also by deliberate internal actions that place the business in a position to better capture the upcycle. In line with our new reporting philosophy, we analyze our performance across three dimensions: volume, margin and portfolio mix, and currency.
Consolidated revenue in the first quarter of 2026 rose 7% to THB 109 billion, reflecting a broad-based sequential improvement across volume, mix, and pricing, partially offset by 2% currency headwind from the appreciation of the Thai baht against the U.S. dollar. On a volume basis, the normalization of our turnaround cycle in 2025 restored capacity across key assets and contributed to sequential revenue growth supported by resilient offtake across our demand in elastic end markets. Margin and portfolio mix together with a higher crude oil environment was a major contributor, reflecting both the pass-through of feedstock cost movements and improved commercial positioning within the portfolio. EBITDA for the quarter increased significantly by 89% quarter- on- quarter to THB 8 billion, with positive contribution along each of these three dimensions. Volume improvement stems from the completion of our turnaround cycle in 2025 and improved operating rates.
The dominant driver of sequential performance has been the improvement in margin and portfolio mix, driven by a combination of higher industry spreads in our core products and improved operating leverage across the business. The appreciation of the Thai baht has impacted a transitional loss of 3% to the earnings. Management expects 2026 performance to remain supported across all three dimensions as the year progresses. Our North American operations navigated a winter freeze event during this quarter and exceptional weather disruption. Rapid response by our operations team contained damage effectively, keeping unplanned maintenance CapEx to a minimum and preserving asset integrity. The primary financial impacts were twofold: A temporary reduction in operating rates while the associated surge in natural gas prices added energy cost headwinds. Our sequential improvement is largely driven by proactive self-help measures centered on the five enterprise pillars, delivering measurable results.
The institutionalization of our sales and operations execution as our core operating rhythm has provided real-time visibility, enabling tighter inventory management and accelerating our cash conversion cycle. In first quarter 2026, the company generated operating cash flow of THB 8.7 billion, reflecting an EBITDA conversion rate of 109%. A key feature of the quarter was a THB 3.2 billion reduction in net working capital, particularly notable given that sales volume grew 3% quarter-on-quarter and average crude prices rose 23%. The improvement was driven by tighter inventory management and our enhanced S&OE discipline, enabling a more responsive positioning against evolving demand signals and price movements. Balance sheet momentum continued in the quarter. Net debt to equity improved to 1.73x from 1.83x, supported by working capital discipline and favorable currency translation from the Thai baht weakness.
This improving leverage profile provides financial flexibility to support our strategic priorities while maintaining our commitment to deleveraging. The proposed merger of our Indovida Packaging business with EPL, in which IVL will retain a controlling 51.8% stake, is a key strategic milestone that will create a formidable packaging federation and enhance our long-term earnings quality. Looking ahead, the combination of external tailwinds and our embedded self-help programs supports our confidence in sustaining performance momentum into Q2 2026. We expect continued favorable pricing, higher utilization of our advantage assets, and further margin expansion. These factors position IVL to deliver additional sequential earnings improvement, accelerating deleveraging toward our target of 3x net debt to EBITDA, and make solid progress toward our 2028 ambitions. IVL reported EBITDA of THB 8 billion in first quarter 2026, representing a 10% decline year-on-year, while increasing significantly by 89% quarter-on-quarter.
The Combined PET business was a standout performer, with EBITDA surging 134% quarter-on-quarter and 38% year-on-year to THB 5.5 billion. The strong rebound was driven by volume normalization following planned turnarounds and improved industry spreads starting since January. The segment's shale to PET integration in the Americas provided a widening structural cost advantage as crude linked feedstock costs for competitors rose. Indovida improved both quarter-on-quarter and year-on-year, posting EBITDA of THB 743 million. As the segment continued to demonstrate resilience, maintaining stable high teen EBITDA margins supported by a broad recovery in key growth markets. Indovinya EBITDA declined 7% quarter-on-quarter and 44% year-on-year to THB 1.7 billion, while the North America portfolio remained largely resilient, South America portfolio faced supply demand pressure, impacting volumes and margins in the region.
The segment is poised for a structural turnaround as ongoing supply chain disruptions neutralize cheap Asian imports into key markets like Brazil, enabling our local assets to reprice to elevated import parity levels. Fibers EBITDA improved 70% quarter-on-quarter to TBH879 million , but fell 48% year-on-year, reflecting continued demand softness in mobility and lifestyle applications. In line with our culture of radical clarity, management deliberately reduced production rates to align supply with demand, prioritizing cash flow and inventory discipline over chasing underutilized volume. Year-on-year on a regional basis, you can see that both Asia and EMEA contributed a larger portion to overall earnings this quarter, coming from both management actions as well as improved industry spreads and demand. While the Americas remains the primary contributor, it has declined, largely coming from Indovinya and more specifically from the pressures in South America, as mentioned.
In this evolving landscape, IVL's four powerful competitive modes are being validated and amplified. The global local for local operating model ensures supply chain resilience for our customers and suppliers alike, while positioning us to capture higher import parity pricing in Western markets. We today have four business engines serving attractive, diversified markets. All four are served from one global core platform, leveraging global scale, customer access, management know-how, and feedstock integration. Our unmatched shale to PET integration in the Americas continues to deliver a widening structural cost advantage through low cost ethane linked to U.S. shale gas versus volatile crude linked naphtha for competitors. Finally, our operating rhythm. IVL manages a complex global footprint. To manage the risks, we are refining our sales and operation execution discipline, allowing us to steer in real time, adjusting production and stock levels on a weekly basis to match actual market demand.
The consequent improvement in inventory turns will free up vital cash flow, contributing to our target of reducing net debt to EBITDA to less than 3x by 2028. Now, moving on to industry. If we look at the PET industry, this is where we are seeing a lot of structural improvement in the industry environment, not just a temporary spike driven by geopolitical events. Yes, Hormuz has clearly accelerated the recent margin uplift, but the more important point is that the PET industry itself is becoming healthier and more disciplined. For several years, the industry suffered from excessive capacity additions, particularly in China. That phase is now slowing materially. Between 2022 and 2025, global PET capacity grew very aggressively. Going forward, growth drops to almost 1% CAGR, which is completely different supply environment.
At the same time, weak industry returns over the past three years have forced players to be more rational. Nearly 4 million tons of China PET capacity is currently offline, and producers today are prioritizing profitability over chasing volume. This is a major behavioral shift for the industry. You can already see the impact on operating rates and inventories. Operating rates remain controlled while inventory days continue to decline. That tells us discipline is improving across the value chain. Importantly, PET margins had already started recovering before the Hormuz situation. The disruption simply tightened the market further and pushed spreads above $200 per ton. Now, we do not assume these very elevated margins are permanent. Naturally, margins will normalize from current peak levels. But structurally, we believe the floor is now much higher than what we experienced in 2024 and in 2025. For IVL, this is very important.
It means PET can once again become a more stable and resilient earnings contributor, supported not by short-term shortages, but by a healthier industry structure and much better supply discipline. If we move on to the ethylene chain, what we're seeing now is not simply, again, a short-term geopolitical reaction. The underlying market structure has already been changing over the past 12 - 18 months. Globally, the ethylene chain is undergoing rationalization. In Europe, we are already seeing permanent shutdowns and additional high-cost capacity at risk. In Korea and Japan, producers are openly discussing material cracker reductions and industry consolidation. China is also moving towards stricter discipline around older and less competitive assets. We are also beginning to see this trend in Southeast Asia.
In Thailand, our two major industry peers are pursuing collaboration in the olefins and polyolefins value chain to improve operating efficiency, optimize assets, and strengthen long-term competitiveness. This is another sign that the industry is moving toward a more disciplined supply environment. The first point is global supply growth is no longer unconstrained. The industry is becoming more disciplined after several years of oversupply and weak returns. Against this backdrop, the recent Hormuz disruptions have further accelerated tightening in the market. More than 15% of global petrochemical capacity is exposed to the region, so naturally, customers are becoming more cautious around supply security and availability. The U.S. remains structurally advantaged because of its cost position. However, many downstream ethylene derivatives are export-oriented products. As global markets tighten, that means higher international realizations translate directly into stronger U.S. ethylene economics and higher spot adders.
You can see on the right-hand side that the U.S. ethylene margins had been under pressure during the period of aggressive global capacity additions and elevated natural gas costs. But as rationalization progresses and global balances improve, margins are now recovering quite meaningfully. Our view is that this is not only a cyclical rebound. We believe the industry is entering a healthier and more disciplined phase, where supply rationalization and export parity dynamics can support a more sustainable margin environment going forward. What we'd like to illustrate to you on this slide is how we think about the different building blocks of our PET earnings profile, and more importantly, where we believe we can structurally improve the quality and consistency of our earnings going forward. At the bottom, the gray area is the Asia PET melt cost. Naturally, that moves with Brent and raw material prices.
We don't control that. On top of that, the blue layer is the Asia PET spread, which is fundamentally driven by industry supply-demand. As I discussed earlier, we believe the industry is now going through a reset, and we are already seeing improvement beginning to come through. Then the light blue portion on top is what we call the IVL PET net premium. This is very important because this reflects our local for local advantage, our commercial positioning, our operating rhythm, and ultimately the quality of our sales and operation execution. Now, if you look carefully, you will see two periods where the premium got squeezed quite sharply. The first was in late 2022. That period was during the rapid destocking cycle, when prices were falling very aggressively across the chain. We had inventory liquidation happening during a declining market.
Naturally, that compressed the premium, so that was a falling price destocking environment. Then you see another squeeze in the first quarter of 2026. But the dynamics there were actually different. In this case, we had already taken the strategic decision, which we told you about back in November of 2025, to aggressively reduce inventory and improve inventory turns. So commercially, we became very aggressive in securing orders and building the order book. At the same time, feedstock prices moved up sharply in March, which we could not have anticipated. So the premium temporarily got squeezed. What is important here is that both these situations are operational in nature. They are not structural issues with the competitiveness of the business.
This is exactly why since Capital Markets Day, we have been putting so much focus on a disciplined S&OE rhythm, tighter inventory management, and improving inventory turns across the organization. If you normalize for these temporary dislocations, the underlying premium profile is actually much steadier, and that is what the green overlay that you see circled in red is intended to illustrate. The key message is, we don't control the external factors of Brent and industry spreads, but we can absolutely try and improve our premium through better execution, better inventory discipline, and a stronger operating rhythm. The objective is to reduce volatility and deliver a healthier, more consistent premium profile through the cycle. To add a little bit more color to this, let me explain an important dynamic in our business model that becomes particularly relevant during periods of market volatility.
In CPET and several of our downstream businesses, there's naturally a timing difference between when raw materials are procured and when finished products are sold to customers. Procurement cargos may arrive in one pricing month, while sales deliveries occur across subsequent months. In stable markets, this timing effect is manageable. However, in volatile markets, it creates P&L exposure. What the slide illustrates is the mismatch between the procurement timing and sales realization across several representative markets. This timing mismatch can create earnings variability depending on the market and volatility environment. To proactively manage this exposure, IVL's S&OE discipline gives us weekly visibility into procurement positions, sales commitments, inventory exposure, and pricing movements.
With that visibility, management can take concrete actions, adjust inventory positions ahead of anticipated supply/demand imbalances, better align procurement arrivals with customer commitments, provide forward cost visibility to commercial teams to support pricing discussions, optimize product flows across plans and geographies during disruptions, and increasingly structure long-term contracts to create more natural hedges between sourcing and sales pricing. We are institutionalizing processes and data visibility to actively manage and reduce that variance over time. Now, I would like to hand it over to our President to take us through the segment performance. Over to you, Muthu. Thank you.
Good afternoon, everyone. Thank you, Aradhana. I would like to cover Combined PET, the performance. Combined PET EBITDA for first quarter 2026 was THB 5.5 billion, representing a 38% increase year-over-year and 134% improvement quarter-over-quarter. Integrated PET was the primary contributor to the segment's performance. While asset optimization actions reduced PTA volumes, the improvement in PET volumes, especially from favorable demand trends in the Americas and the expanded spreads, were key drivers of our performance. The quarter benefited from higher China integrated PET benchmark spreads from average of $116 per ton during the fourth quarter of 2025 to an average of $176 per ton during the first quarter. Importantly, the improvement in the benchmark spreads this quarter started before the ongoing Middle East conflict, driven by supply side discipline that Aradhana also highlighted.
The conflict, of course, then accelerated the trend sharply, with spreads reaching as high as $219 per ton during March. As high export demand, combined with tightened raw material availability across Asian markets, created short market conditions. The year-over-year improvement was also supported by lower fixed costs, primarily from our recycling sites as well as from the PTA capacity rationalization that we did. Talking about specialty chemicals, the EBITDA was sequentially lower, mainly due to reduced NDC volumes. However, partially negated by higher NDC margins. Performance was also further impacted by lower PTA margins in Europe. For intermediate chemical vertical, earnings improved sequentially due to the normalization of volumes post the MTBE turnaround during the last quarter. Stronger MTBE and U.S. integrated EG spreads, but partially offset by the winter freeze impact and certain reliability issues in ethylene and EG sites during the first quarter.
Overall, first quarter for Combined PET marked strong earnings rebound, driven by improved margins and enhanced operating leverage across the value chain. Thank you. I will hand it over to Sunil.
Thank you, Muthu.[Non-English content] , and good afternoon, everybody. Indovida, the converting and packaging segment of Indorama Ventures Limited, delivered EBITDA of THB 743 million in quarter one, 2026, increasing both year-on-year and quarter-on-quarter, while maintaining EBITDA margin at high teens level. The 8% year-on-year increase was primarily driven by a broad recovery in demand across various markets, but particularly in Egypt, Philippines, and Ghana. Performance was further supported by improved portfolio mix and margins in Nigeria and Egypt, and by improved demand environment in Thailand, which is seeing warmer weather compared with past years. The continued ramp-up in Tanzania operations following the March 2025 startup of the greenfield facility enabled further full quarter contribution, leading to incremental volumes and enhanced EBITDA performance.
EBITDA increased 10% quarter-on-quarter, reflecting strong volume growth across all regions, particularly in Asia. Driven by strengthened domestic demands, which were supported by seasonal uplift due to hot weather and inventory restocking ahead of the peak summer season during quarter two. Margin improvements also compared with previous quarter in Nigeria and Egypt, further supported our profitability in this segment. Thank you. I pass it on to Alastair, please.
Thanks, Sunil, and good evening. Indovinya posted EBITDA of THB 1.7 billion in quarter one of 2026, with an overall EBITDA margin of 9.1% and HVA margins of 12%. HVA specialty products generated about 78% of the net revenue and accounted for all of Indovinya's EBITDA. This quarter was negatively impacted by the strengthening of the Brazilian real, accounting for a THB 253 million variance year-on-year. However, there has been a much higher positive year-on-year translation gain of approximately $1.4 billion in equity for IVL due to the net long Brazilian real investments. In North America, year-on-year sales volumes rose 5%, despite the winter freeze event and related outages. The primary sales volume increase came from normalization post the quarter four propylene oxide turnaround and the start of implementation of the new propylene oxide sales contracts.
This quarter was also impacted by higher feedstock costs, both on ethane and oleochemical chain, compressing the integrated margins. Meanwhile, volume and revenue for the HVA market saw resilience and growing support from tighter supply chain in certain products. Higher cost of catalyst also impacted earnings. In South America, HVA year-on-year sales grew 2%, whereas the essentials business sales fell 20%, primarily due to a weaker solvents business, pressured by supply/demand dynamics and tariff frameworks. HVA margins were affected by a higher raw material, and lower byproduct credits on the oleochemical chain, whereas the essentials business margins were primarily a function of the solvents business. Higher cost of catalyst further impacted these results. Quarter-on-quarter impacts were primarily due to aforementioned solvent supply/demand dynamics and the oleochemical chains pricing. Pricing actions are underway, and the seasonal demand will support higher volumes into half two.
Improvements in the Brazilian industry support through REIQ, antidumping duties, and the reduction of their IEEPA tariffs towards the end of quarter one have been well-received and adding to forward-looking structural tailwinds. With operational normalization, pricing recovery, and improving demand, we expect performance to strengthen through Q2. As you know, we are focused on the four key end markets, and let me talk about each one. Home and personal care, we continued to protect market share in the first quarter of 2026, with quarter-on-quarter volume growth led by both North America and South America. Margins contracted versus the prior quarter, mainly due to the ethylene and alcohol margins, and the transition to a diversified customer portfolio. Industry demand remained cautious during the quarter as customers controlled inventories amid continued uncertainty tied to geopolitical developments and the additional impact of the winter freeze.
We continue to make progress in diversifying our sales mix, expanding penetration into tier two and tier three customers. For crop solutions, crop volumes improved year-on-year, primarily due to the beginning of the crop season in North America, strong herbicide demand, and expected soya exports to China post the trade deal with the U.S. Generally, within the supply chain, we're seeing delayed customer purchasing reflecting the challenging economic environment faced by farmers in both North America and South America. With the majority of seeds and fertilizer on the ground in the Americas, we may see a significant ramp-up in the next two quarters. We continue to see strong engagement across tier one, tier two, and tier three customers supporting underlying demand despite near-term timing headwinds. Our APAC margins remain strong, supported by a higher surfactant sales in both India and Australia.
On Energy & Resources, volumes declined in quarter one and from year- on- year, reflecting a combination of weaker end market demand, oil pricing, and timing effects across the regions. In North America, softer volumes were driven by delayed customer activity and cautious purchasing behavior amid macro uncertainty. In APAC, lower volumes were partly offset by margin improvement, pricing discipline, and a more favorable mix alongside continued strength in the mining-related applications in Australia. Despite these near-term volume decline, demand for our KEMELIX and FLOWSOLVE brands and technologies in demulsifiers and Flow Assurance remain strong, particularly in the Middle East and Europe. We remain on track with the internalization of production of select products, and it is expected to support margins and supply reliability going forward. In Coatings and Performance Solutions in quarter one, we experienced higher order activity in North America, specifically within the Coatings and Performance Solutions part.
Despite continuous weakness in the architectural coatings demand, a prolonged high interest rate environment persisted. While the architectural demand remains muted in the near term, improving macroeconomic conditions point to a potential continued recovery in 2026. In South America, volumes declined approximately 10%, reflecting continued softness in the Brazilian automotive and industrial sectors, alongside customer de-stocking and delayed project activity. From an outlook point of view and a macro perspective, the recent supply chain disruptions have been closely managed with the expectations of many of our geographically advantaged products are seeing a higher demand for volume and supply security, and we're navigating the cost implications by raising prices. Our local for local supply capabilities, along with our integration model, are creating margin expansion. These actions will position Indovinya through the current period of disruption. I'll hand over to Diego now.
Thank you, Alastair, and good afternoon, everybody. The fiber segment reported an EBITDA of THB 879 million in first quarter 2026, reflecting a 70% sequential increase by a 48% decline year on year. The year on year decline was primarily driven by weaker margin and reduced demand in the lifestyle segment, our textile business basically, compared to a strong first quarter 2025, where demand was bolstered by pre-tariff restocking. The mobility segment was impacted by the continued weakness in the automotive market, resulting lower demand for tires and airbags materials across Europe and the Americas. Also, the replacement tire market was down 7% in North America and 3% in Europe in first quarter 2026. Hygiene market, which is basically our diaper business, material for the diaper business, demonstrated a stable performance, especially in the Americas. Sequentially, EBITDA improved as expected, supported by seasonal recovery in volumes, particularly in mobility.
Lifestyle demand was impacted by the ongoing conflict, as customers remained cautious in buying higher cost products amid the ongoing conflict uncertainties. This was offset by strong inventory gains. Additionally, operational improvements in the Americas and a better product mix helped uplift earnings in the aging segment. From a management action perspective, we continue to execute on our portfolio optimization strategy with the divestiture of our IVFB business in Brazil, completed at the end of April. The rationalization of our tire cord fabric facility in France, which we announced on March 2nd, is also on track. These actions are aimed at structurally improving margins and overall portfolio quality going forward. Ashok.
Diego. IVL delivered solid operating cash flow and maintained strict financial discipline. Operating cash flow after maintenance CapEx reached THB 8.8 billion, supported by EBITDA of approximately THB 8 billion. Together with working capital and other operating improvements, this enabled us to fully cover growth CapEx, interest expenses, and other payments during the quarter. Importantly, after all these items, net debt still decreased by THB 0.4 billion quarter-on-quarter to THB 235.6 billion, after absorbing a translation Forex loss of THB 3.9 billion on the debt. Excluding Forex translation effects, the underlying deleveraging trend would have been even stronger. On the equity, shareholders increased by THB 7.1 billion to THB 136 billion. The primary driver was the positive translation reserve impact of THB 9.6 billion on weakening of Thai baht vis-a-vis U.S. dollar, primarily.
Although the quarter still reflected a reported accounting loss, the balance sheet continued to strengthen structurally. As a result, our net debt to equity ratio improved further from 1.83 x at the end of 2025 to 1.73x at the end of first quarter. This reflects the continued focus of management on cash conversion, disciplined CapEx allocation, and balance sheet optimization under our IVL 2.0 framework. To conclude our presentation today with key takeaways for the quarter. During January and February, PET industry margins began to recover modestly, reflecting improving demand conditions and more balanced supply dynamics. More recently, the Strait of Hormuz disruption has resulted in a sharp spike in spreads, further supporting profitability across parts of the value chain. What is important is that our recovery is not simply a function of external market movements.
At IVL, resilience is built on what we call our four moats, which were presented earlier. Firstly, our global local for local integrated platform continues to provide supply chain flexibility and customer proximity across regions. Second, our diversified business model allows us to balance cyclically across different product segments and end markets. Thirdly, our America's feedstock advantage remains structurally supportive in a volatile energy environment. Lastly, our sales and operation execution has become a core operating rhythm within the company, enabling faster decision making, stronger cost discipline, and better working capital management. Another important milestone during the quarter is the strategically significant merger with EPL. This transaction strengthens our packaging platform, expands our presence in attractive high growth markets, and creates opportunities for meaningful commercial and operational synergies over time.
We believe this further enhances IVL's long-term growth profile and supports our strategy of moving closer to downstream consumer-oriented businesses. The strong sequential performance we delivered this quarter is also the result of disciplined execution across the organization, tighter operational management, and continued progress on our self-help initiatives. These actions have improved our agility, strengthened cash flow generation, and positioned us to navigate the market with greater confidence going forward. Overall, while the external environment remains challenging, we believe IVL is becoming operationally stronger, financially more disciplined, and structurally better positioned for the next upcycle. Thank you.
Thank you, Ashok. I think we can open up the floor to questions. Please raise your hand and we'll unmute you for the Q&A, and you can, of course, put in questions in the chat.
Hi, good evening. Firstly, thank you for the presentation. A couple of quick questions. Firstly, what you're seeing in the market today, what have May looking like for you? How were you thinking about sourcing of feedstock for June? Have you seen any issues anywhere, especially in Asia, in terms of feedstock sourcing, premiums that you have to pay for feedstock, et cetera? Can you just give us a bit of a lay of the land of what you're seeing today, especially in Asia? I'm assuming U.S. is not as big a problem. Can you talk a bit about that?
Yeah. Muthu, I hand it over to you.
Hi, Mayank. Good afternoon. In terms of feedstock sourcing, as you know, the strait is still closed. The situation of force majeure or allocations by different feedstock suppliers, that is continuing. Of course, right from the beginning of the war, we have been actively using our global network to source feedstock to minimize any type of operational impact. I am glad to say that our teams have done quite well in terms of sourcing across markets. We have avoided any type of disruption that can impact our customers. As time progressed, we have been able to look at more and more sources, how we adjust flows across our system between the origins and the destinations.
While there is going to be continuing incremental cost and the premiums on the raw materials that we are sourcing, we believe we will still be able to source the required material in May as well as going into June.
Muthu, on that question on the premium side specifically, especially on PET and paraxylene, I think the premiums have been going higher as well.
Right.
Have you been able to pass it through your customers which are under contract or that is something that is not happening?
Good question. Yes, as all of us know that this is a very unprecedented situation, war situation. We have been able to discuss with our customer, explain the situation, and we have been able to pass through the incremental costs that we are incurring. I definitely appreciate the understanding and the cooperation from our customers. That has happened across markets, because the impact has been across multiple markets, higher or lower. Different markets are having the impact and the customers have been supportive on that front.
Okay. Muthu, just on PET, just considering it is such a big business. One more question around that was, in terms of the entire logistics cost and in markets, can you just tell us where are the real challenges that you are facing and you could see further issues in the next few months if this was to continue, the situation?
Can you please repeat, in terms of logistics?
No, logistics as well as in terms of other challenges which we may not be aware of, that you are seeing in markets where you have to go to a war room and say, "Okay, we have a problem. We need to address it." Is there any markets you can think about where you are seeing some of this happening?
The situation is emerging. Of course, you are right that we have a war room that is actively collaborating across functions on a daily, weekly, monthly basis. Along with the S&OE rhythm that we have now established, it is really helping us quite a bit in terms of how we are managing our raw material requirements, the needs from our customers, how much in advance we can get visibility, as well as what are the requirements in terms of logistic arrangements. Some of the factors, as you know, that when the number of force majeures increase and countries putting controls on export of upstream. That is creating a situation for us where sometimes we have to adjust our supply chains.
Some of the recent sanctions that have been issued on the refineries in China, that is bringing another dimension to how we need to take actions in an agile manner. In terms of North America, there is more material now flowing. For example, if you look at glycol, there is more material flowing from North America to other parts of the world. Which again, we have to make certain adjustments in our mix. But we are actively, as I said, that the war room, through that, we are actively looking at it, all the emerging trends, and making sure that we are taking immediate action.
Okay. I think the next question was more, I think, to Aradhana and the CFO. I think if you can talk about on the inventory side, which you have been in the presentation quite a bit about. Can we think about the inventory days that we have been able to reduce? I think it was a great achievement to see that your working capital came down despite the increase in feedstock costs. How sticky will this be if you look at going forward into the rest of the year?
Ashok?
Yeah.
Would you like to address that?
Okay. On the inventory days, we were at 73 days at the end of fourth quarter. Now, at the end of first quarter, we are at 64 days. There has been and also, which can be seen from the production volumes and the sales volume in the current quarter. The sales volume are higher than the production volumes, which was also the case in Q4 2025. Yes, as stated through our S&OE, there is a rhythm across the business segments to reduce inventory. We have been able to successfully do that over the past two quarters.
Yeah, I think.
We will continue to do that in the coming quarters, as stated in our Capital Markets Day.
Yeah, I think, Mayank, thanks. Your question on stickiness, I think, is something that the businesses can add some color on how exactly they are planning to improve the inventory turnover. Let me hand it over to Alastair to give some color on that.
Yeah, thanks, Aradhana. I think if you look at our inventory systems, we've come down, I guess, in the middle of 2025, from about 60 days down to about 45 days. What's driving that? A number of actions. One is we've put in a new supply chain organization that's got a very close grip on this. In fact, supply chain, we've created an organization that we've got a Chief Delivery Officer who looks after procurement and supply chain at the same time. He's got the end-to-end view of it. That's helped. We've also had a number of specific projects. We've recently won awards for what's called our SMUG project, which was basically taking slow-moving stock and recycling it and making it move. That's helped our supply chain days. Also, a lot of the PKO that used to come from Asia to South America.
We used to have a 60-day supply chain where we pre-buy and then have all of that inventory on the water. We actually only buy it a couple of days out from port. That's had a meaningful effect of about $45 million to our supply chain inventory. There's a lot of actions going on. One is around the people, and one is around the processes, and one is around specific projects that actually take cost out of the supply chain. I think what you're seeing is quite structural and meaningful.
Okay. If I can ask Muthu if we can go to 45 days as well on PET.
Mayank, as you know that we had CPET when we looked at the 2024 results. End of that, you remember that we did have high inventory in the system. Since then, we've been actively working on reducing it in a focused manner, and we have been able to do that. Now, especially since we are looking at it through the lens of inventory turns, we were below six actually end of 2025, and the first quarter we've been able to improve it to about 6.4x. The next quarter, we are looking at going to about 6.7x- 6.8x. Overall, these efforts, the focused approach across the verticals, that has certainly helped in reducing physical inventory levels for sure. Of course, when we are looking at inventory, we are looking at altogether, right? Sometimes some of our locations have longer supply chain for raw materials.
But there also, we are looking at creative ways to reduce that number of days and the quantity.
Got it. And I think the last question I had was, Ashok, to you. I think in terms of CapEx for full year now, where do you think you will end up for the year considering the conflict and what all is going on?
Okay. So on the CapEx, we will be on what we had stated. We will be slightly lower than what we had stated at our Capital Markets Day, because there is a review of each CapEx, as stated at that time. So we are expecting that amount to be lower than what was at the CMD 2026.
Yeah. You are running at around $80 million, so is that fair to say you will be below $400 for the full year?
Below.
On maintenance CapEx.
Yes. We will be below $400 million. The number will be somewhere between $300 million- $350 million.
Got it. Very clear. Thank you.
Thanks, Mayank. We have a question online, and this is directed to Indovinya. Why does HVA segment face more intense competition and heavier profit pressures quarter-on-quarter than the essential segment, which should have even more competitors? Excluding stock gain and hedging factors, what would be EBITDA of Okay, this is for Muthu then. What would be the EBITDA of PET Indovinya and Fibers B? Would it show growth or decline quarter-on-quarter? Could you please provide information on stock gains and hedging in first quarter 2026? Would it be possible to report stock gain, loss, and hedging gain loss as before? I think the first part of the question, Alastair, you might take that up on HVA.
Yeah. Great. Thanks for the question. There's a number of ways to look at it. Firstly, why do people want to move into HVA is because the margins are good. A lot of competitors out there that were very commoditized would love to move into the EO derivative space. I think that's what we saw maybe over the course of the last 18 months, that a lot of not just global competitors, but also U.S. competitors, wanted to maximize their cracker capacities and therefore try to move downstream and expand their plants. So that was one element. Brazil and Argentina and South America, very attractive places for pricing. There was a lot of Asian competition and Indian competition coming into Brazil to compete.
Look, that's the macro environment we live in that we have good markets, we have good customers, and we have good products, and everybody would like to compete with that environment. From a HVA point of view, what do we see now? I think if you look at North America, I think volumes are increasing in the market and nobody else is expanding. In fact, we might see some rationalization of capacity in the North American space. We're also seeing very high ethylene and polyethylene margins and, as was said, ethylene glycol margins. So those competitive pressures to move into our market space have been replaced by competitive pressures to maximize cracker margins and other types of products. I'm tempted to say we're going to see less competition while those environments sit. What else is going on? A lot of innovation.
Our tier one customers are very important to us. But also tier two and tier three customers are important. I think you'll find, as you'll see over the next number of quarters, a more specialty footprint starting to arise. We're seeing a lot of good momentum. There's some several basis points of improvement in our customers that makes us more sticky than maybe the more commoditized or high volume surfactants. I think you'll see that. On the South American side, I think you've seen, probably starting in the end of February, products still on the water heading towards South America, but not much product getting onto the water heading there. I think what we're starting to find is a sort of a dry up of that competition that was coming in.
Then what you will see over the next couple of quarters an increase in import pricing parity. I think you will see that. What we have also seen is some good work around antidumping duties in South America, and that is going to have a meaningful effect. We have seen duties coming on ethanolamine products from China ranging from about 40% up to nearly 100%. I think you will see some of that competition starting to dry up. I think you have also seen a lot of our customers starting to realize, there is a lot of supply chain disruptions that we have seen over the years, and it is constantly coming back.
Either you are going to run a stable business or you are not. I think a lot of customers are coming back to us asking for more stable products and more stable supply. I think that is all good news.
What else can you see in the market? I think local for local is going to come through on the HVA. I think 95% of our products are made with local products and supplied to local products. So you are going to see that more and more in the future. I think you are going to see some industry support coming through in the future on the HVAs, where people can see these are essential products for the markets. I think we have seen a lot of good reaction from the Brazilian government to support the chemical industry and also the U.S. government is seriously looking at how to support it. I think you are going to see HVA coming back into its own right.
On the essentials business, slightly different, because the essentials business is made up of propylene oxide, and there is only two producers of propylene oxide in the U.S., and 20% of the supply has now disappeared from the U.S. So propylene oxide is very tight, and you will see an expansion in margins and volume on that business. Solvents is an interesting business in that we are the only producer in South America. The reason it was down in quarter one was really a supply issue by our supplier because they were on a turnaround. So you will see that starting to come through, and it is a good export product for Brazil. LAB is the other one. There is only two producers in the U.S., there is three in North America. I think LAB is in huge demand.
I think it is not looking at commodity versus HVA, I think it is looking at what specific products are in the essentials business that are going to really expand their margins because of lack of supply. What is in the overall 2,000 products that are in the HVA business that are going to start tightening and start improving margins. I think it is two ways to look at it. I think it is going to be an interesting second quarter and the rest of the year.
Okay. I will take the second part of the question. At IVL, we did not have any outstanding commodity hedges, so there is no gain or loss from commodity hedging in the quarter. The other part is on the inventory gain or loss. If you could bring slide nine on. As we stated that it is part of our reported financials and it is an ongoing rhythm for us. There is always a quantity which is pre-sold, so those get offsetted. We do not see any material inventory gains or losses net of our pre-sales during a quarter or a month across our business segment.
We have one more question, and I think this is for Muthu. Following the explosion in the Middle East, has the company assessed the impact on the demand and supply of products, particular PET and PTA? This is the first part of the question. The second part is, what is the latest PET spread and what is the outlook going forward? Is the company planning to revise its guidance upwards?
In terms of demand because of the Middle East crisis, you know the nature of PET, it is sort of essential type of product. We have seen that the demand has continued to remain resilient, PET and PTA. We also have to remember that we are in the peak season. The seasonality is a factor. Of course, the customers would like to cover their requirements, especially given the current uncertainty. So fundamental demand at the retail as well as in terms of customers covering their requirements. So that has been resilient. If you talk about CPET, there are a couple of areas where we have seen some softness in demand. One is PIA, but for non-PET applications, say in the resins and the Coatings applications, we have seen some softness. There is some type of softness we are also seeing in NDC.
They are more related to the current environment and the inflationary situation. But they should be temporary. As far as PET, PTA, we have seen it resilient. The other question is on integrated margins. As you can see, maybe we can go to that slide number six, I think. So you will see here on the bottom right-hand side on the spread, as we said, even before the war, due to supply side discipline, it started improving. Then now it is considerably better. Q1 versus Q1, we have seen further improvement in April and May, both in terms of PET spreads as well as integrated PET spreads. As we also mentioned earlier, after normalization, we still expect the spreads to remain considerably at higher level than what it was in the previous two years.
In terms of guidance, as you know, we do not provide guidance, but we do expect the second quarter directionally improving.
Okay. Thanks, Muthu. I do not see any more questions or hands raised at this time. If you have any further questions, please raise your hand or put it in the chat box. I think no more questions, so we can go ahead and close the session. Thank you everyone for joining.