Q2 2016 Preliminary trading statement
Based on unaudited management information, INOVYN Limited reports that EBITDA for the second quarter of 2016 was €119 million, compared to €116 million for the previous quarter.
On a proforma basis, and excluding any contribution from the Remedy Assets (which were sold to International Chemical Investors Group on 1st August 2015), this compares to €135 million for the second quarter of 2015.
On a proforma basis and after adjusting for the impact of the divestment of the Remedy Assets, unaudited LTM EBITDA at Q2 2016 is €449 million, compared to LTM EBITDA at Q1 2016 of €465 million.
Capital expenditure was €66 million for 2016 year to date, €42 million of which was spent in the second quarter.
The second quarter performance
Sales volumes were lower in the second quarter of 2016, compared to both the previous quarter and the second quarter of 2015. The impact of the French industrial unrest had a significant negative effect on our sales volumes, with limited availability of ethylene forcing the Tavaux site to run at minimum rates for much of May and June. Average sales prices for SPVC were slighty lower than the second quarter of 2015 but were higher than the previous quarter. Ethylene contract prices averaged €905/te for the quarter, compared to €847/te for the fist quarter of 2016 and €1,038/te for the second quarter of 2015. Margins over ethylene were higher than the previous quarter and second quarter of 2015.
Average European contract caustic soda prices increased by €30/te compared to the previous quarter and were also €10/te higher than the second quarter of 2015. Sales volumes were in line with the previous quarter but were lower than the the second quarter of 2015. Implied European caustic soda demand was higher than in the first quarter of 2016. Margins over energy, being helped by low energy costs, were higher than the previous quarter and the second quarter of 2015.
The negative EBITDA impact of the French industrial action is estimated to be in the region of €10 million.
We have delivered approximately €35 million of synergy and cost savings year to date, €22 million of which is in the second quarter of 2016, mainly relating to energy initiatives, transport optimization, fixed cost reductions, production variable cost efficiencies, and other procurement benefits.
Net cash flow from operating activities was an inflow of €73 million for the quarter, (and €155 million for the year to date), with working capital outflows on receivables and payables being partially offset by inventory decreases. There were tax payments of €14 million in the quarter. Outstanding accrued interest on the 10.625% Senior Secure Notes of €26 million was paid on May 25, 2016 following the redemption of the Notes on the same day. The amount of cash and cash equivalents as at June 30, 2016 was €382 million (including €335 million held in escrow pending the Solvay exit), compared to €63 million as at March 31, 2016. As at June 30, 2016, €97 million has been drawn down against the Group's €300 million Receivable Securitization Facility. Net debt was approximately €1,138 million at June 30, 2016, (after adjusting for €335 million Solvay exit payment) compared to €792 million at March 31, 2016. Net debt leverage (after adjusting for €335m Solvay exit payment) was approximately 2.5 times as at June 30, 2016.
On May 25, 2016 a refinancing of the Group was completed with sufficient funds being raised to pay and discharge the redemption price and accrued interest on its outstanding 10.625% Senior Secured Notes due 2017. The funds raised were in the form of a €240 million Senior Secured Term loan A, due 2021, a €535 million Senior Secured Term loan B, due 2021, and €300 million of 6.250% Senior Secured Notes due 2021. Of the funds raised, €335.0 million was used by INOVYN Limited on July 7, 2016 to redeem the Class B ordinary shares held by Solvay.