IVL sees larger footprint in Turkey
Firm says referendum helps ease concerns
CORLU, TURKEY: SET-listed Indorama Ventures Plc (IVL), one of the world’s leading producers of polyethylene terephthalate (PET), anticipates its operations in Turkey will continue to flourish after a recent referendum helped ease concerns about potential political conflicts, says a senior executive.
“There has been no impact on our operations from politics. On the contrary, the referendum has made it clear how things will shape up in the future,” chief financial officer Amit Maheshwari said during a recent visit to the company’s plant in Turkey.
IVL is one of the largest Thai investors in Turkey, along with Charoen Pokphand Group and Polyplex Thailand Plc.
There were many concerns about the future of investment opportunities in Turkey, whose aspirations to join the European Union have faltered in recent years.
In mid-April, Turkey underwent a referendum that gave sweeping powers to incumbent President Recep Tayyip Erdogan, providing foreign investors a clearer picture of the country’s trajectory and potentially opening up the doors for increased investment.
Many foreign investors had been awaiting the outcome of the referendum before expanding their operations or increasing their capacity via inorganic means such as mergers and acquisitions (M&As).
IVL itself has said that it wants to expand through M&As, although immediate plans entail ramping up production at its barely two-year-old plant in Corlu by debottlenecking and other means.
IVL, which acquired the plant in March 2015 from Polyplex Thailand, has gradually ramped up production to 292,000 tonnes per annum, up from initial capacity of 216,000 tonnes.
The production increase at Corlu follows IVL’s closure of its plant in Adana, which it had acquired from La Seda de Barcelona, which had gone bankrupt. Located in southern Turkey, the Adana plant had nameplate capacity of 130,000 tonnes per annum.
IVL initially used the ageing La Seda plant to penetrate the Turkish market. But as the new plant proved more efficient, the decision was ultimately made to shift all production to one site and ramp up capacity utilisation.
“We are very confident in the future of Turkey and IVL should play a larger role as opportunities emerge,” said chief executive Aloke Lohia.
He said IVL does not have an M&A target in Turkey at the moment.
However, he added: “Our strategy in every part of the world is to grow businesses that are related to our core, so it is always possible that a high value-added (HVA) business opportunity may come up in Turkey that interests us,” he said.
The HVA segment has been a key driver of growth for IVl in recent years. However, for the immediate future Mr Aloke reiterated the company’s commitment to optimising capacity utilisation at the Corlu plant.
“We will undertake debottlenecking soon to raise capacity,” said Mr Maheshwari, adding that the plant’s proximity to Bulgaria, Croatia, Romania and Greece gives the company greater access to growing markets.
While located in a free-trade zone, the plant does not only serve export demand. Current demand for bottle-grade PET in Turkey is such that 60% of the plant’s capacity is used to supply the domestic market. IVL has captured around 48% of the bottle-grade PET market in Turkey, he said.
“Demand continues to rise by 5% or more annually,” said Mr Maheshwari, adding that new HVA business was also on its radar moving forward.
IVL shares closed Friday on the Stock Exchange of Thailand at 36.25 baht, unchanged, in trade worth 550 million baht.