IVL : Annual Report 2009
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Transcript of IVL : Annual Report 2009
2 Indorama Ventures PCL
Vision To be one of the leading global producers with key focus on people and processes thus making INDORAMA one of the most admired companies in the world.
MissionContinuously upgrade quality of products and services through people involvement and world class processes to attain customer delight thus becoming a preferred supplier and institutionalise people learning as a key factor for business growth.
Values
People FirstWe believe that people are our core strength, be it our employees, suppliers, customers, shareholders and stakeholders. Their involvement and satisfaction are the key drivers for our success and growth.
Customer DelightWe believe we exist because of our customers. We focus our activities to achieve customer delight and loyalty for a long lasting relationship.
Social ResponsibilityWe believe in being responsible and caring for society; maintaining as well as enhancing the environment around us.
Corporate GovernanceWe believe i n transparency, accountability and e thics. We aim to achieve the h ighest degree o f governance in accordance with best practice.
Performance Highlights
Chairman’s Message
Group Chief Executive Officer’s Message
Company and Subsidiaries Information
Organization Structure
Board of Directors
Major Shareholders
Dividend PolicyCore Business
Business Operations
Risk Factors and Risk Management
Related Party Transactions
Management Discussion and Analysis
Corporate Governance Report
Human Resources &
Corporate Social Responsibilities
Report of Audit Committee
The Board of Directors’ Report
Financial Statements
4
6
8
12
18
19
24
25
26
27
39
45
49
57
67
74
75
76
Contents
Performance Highlights
(Baht Million)
CONSOLIDATED INCOME STATEMENTNet salesCost of salesGross profitSelling and adminsitration and others expensesOperating profitOther (income) expenseProfit before tax and minorityIncome taxProfit before minorityMinority interestNet profit after tax and minority interestEBITDA
CONSOLIDATED BALANCE SHEETTotal Current AssetsProperty, plant and equipmentOther AssetsTotal AssetsTotal Current LiabilitiesLong term loans - net of current portionOther liabilitiesTotal LiabilitiesIssued and paid-up capitalShare premiumRetained earnings and reservesMinority interestTotal shareholders equity
FINANCIAL RATIOS
Gross marginEBITDA marginNet margin before minorityEarnings per ShareReturn on equityReturn on capital employedNet gearingNet debt - equity
2009
79,99467,66612,3284,8527,476
9036,573
5546,0191,1954,824
10,636
23,56649,5051,189
74,26025,78525,331
67851,7943,3524,4439,3845,287
22,466
15.4%13.3%7.5% 1.44
30.0%13.8%62.6%
1.7
2008
53,33248,1785,1542,8832,271(905)3,176
533,123
4672,6563,838
18,83549,6421,291
69,76823,77927,981
30152,0613,3524,4435,0004,912
17,707
9.7%7.2%5.9% 0.79
26.0%6.7%
69.7% 2.3
Growth
50%40%
139%68%
229%n.a.
107%945%93%
156%82%
177%
25%0%
-8%6%8%
-9%125%
-1%0%0%
88%8%
27%
4 Indorama Ventures PCL
80,000
60,000
40,000
20,000
0
7,000
5,250
3,500
1,750
0
1.50
1.25
0.75
0.37
0
30
25
20
15
10
16.0
12.0
8.0
2.0
0
11,000
8,250
5,500
2,750
0
2008 2009 2008 2009
2008 20092008 2009
2008 20092008 2009
Growth Continues
SALES (Baht Million)
Profit before Minority (Baht Million)
Earnings per Share (Baht)
EBITDA (Baht Million)
Gross Margin (% )
Return on Equity (%)
Annual Report 2009 5 Annual Report 2009 5
Chairman’s Message
Every time a prospect comes up in the IVL domain, we frame the right questions and contemplate a smart business move
The firmest strides of growth and progress have often stemmed from a readiness to adapt and evolve. Such firm strides have been the cornerstone of Indorama Ventures Limited (IVL Pcl) since it came into being. Demonstrating its readiness, is the company’s most prolific step of restructuring IVL, and subse-quently making it public in 2009. This move is both astute and timely.
Organizational momentum usually encourages the continua-tion of thriving practices and habits, particularly in successful organizations. Our principles at IVL have guided us through triumphs in every conceivable market condition. Today, as we work to enact well conceived, balanced business reforms for our business, these principles are as important as ever.
Through every business cycle, IVL has always been about responsiveness to our customers and providing the highest level of business to satisfy needs. The IVL way is synonymous with stability, which we believe gives us our competitive advantage. We continue to experience strong global demand across our product groups. This demand reflects the underlying indispensability of our products, which has proved robust across the economic cycle. The PET plant in Lithuania, UAB Orion Global PET received a gold medal with an embedded plaque conferring our product ‘Ramapet N1’ as “Lithuanian Product of the Year”, signed by the President of the Confederation of Lithuanian Industrialists. Such awards are symbolic of the rigorous operational excellence and that enhances the performance of our business.
IVL is working on an incredible range of activities in business articulation with mutually reinforcing performance goals organized around our focus areas: our people, our business model, and our Governance. Speaking of Corporate Governance, the IVL Board continues its responsibility with the goal of sustainably increasing the company’s intrinsic value and achieving defined corporate objectives. We are in an era where we need to be more and more aware of our Board Governance and we at IVL are very glad to see more interest in setting high standards of transparency. Indorama Polymers Pcl (IRP), a subsidiary of the Company that was listed in the SET up until February 2010, received a Corporate Governance Scoring of ‘Excellent’ last year, a step up from “Very Good” the previous year. This early effort to promote and develop good corporate governance practiceswill be continued by IVL.
On the organizational side, there has been a major enrichment with the infusion of quality manpower. Despite this year’s revolving-economic door, we saw no layoffs of our employees but actually employed an additional 370 people (approx.). We have witnessed huge recruitments and had fruitful training sessions for our employees. I believe this stability speaks well for our company and only makes us feel more empowered. At IVL we have been working with leadership teams and employees that transition from strength to strength.
Our industry focus is the predicate to everything we know. We have broadened our horizon and are keeping in sight the indica-tors poignant for our core businesses and industry. The world of petrochemicals is not instantaneous. The challenge is to make successful headway into new domains and extract the best out of the traditional domains. Our strategy remains to focus on large, low cost methods capable of delivering superior returns across all economic cycles. We are fortunate to have a geographi-cal portfolio weighted towards large, mature as well as growing economies. Neverthless, our quest does not end at the current portfolio. We want to be in alignment with our ethos- Grow Profitably! With this sponsoring thought, we are towards ambitious ventures. This year will have IVL expanding into hitherto unexplored plants.
6 Indorama Ventures PCL
Annual Report 2009 7
The set of ambitious and important endeavors that the management is planning should more than keep me busy as IVL’s chair-man for the foreseeable future. In fact, this is the path I wish to walk to much advantage. This is the opening Annual Report for IVL and the Chairman’s message should traditionally convey all the reasons why one should invest in the company. But I feel the company’s rich history, a dynamic present, and a promising future speaks for itself. Today we are a bigger family and just as strong.
We have had a great year, and we owe thanks to many people for their dedication, confidence, trust and conviction. It is the un-flagging support and belief of our shareholders, customers and equally important, the loyalty of our employees that has ensured a successful and gratifying year for us. I thank my colleagues and Board members for their able advice and direction. We extend our deepest gratitude to all of you. This year the Directors and I, hope to build on the momentum we have worked to establish. Our ability and your conviction will together create value that gradually rises to a crescendo.
S.P.LohiaChairman of the Board
Annual Report 2009 7
Group Chief Executive Officer’s Message
One question for all of you – What do you think of mega changes in business structuring, brought about with good strategy and thought?
The World isn’t changing, it is exchanging. That’s what is said by some and that’s what I believe. Our intention to go public with Indorama Ventures reiterates this belief. Indorama is a metaphorical story that’s evolving all the time. At IVL we all want to believe that we are a piece of something bigger. Companies that manifest that sensibility in their employees and shareholders invoke immense passion. But passion alone is not good if there is no sense of direction and flexibility. We at Indorama know that passion needs to dovetail with a clear grasp of operational needs.I am writing this message today at a significant turning point in the history of Indorama Ventures, Public Company Limited (IVL), with a foreshadowing of such operational needs and singularity of purpose.
2009, leading into 2010 has been a pivotal year for the company against the then poor economic backdrop. It was quite eventful and contributive in making growth more synchronous with our vision, mission and goals. Our entrepreneurial momentum is going strong and we see greater vibrancy in our business environment today. The stage is set for us to be the Google of polyester value chain sector. Indorama Ventures Limited is constantly in a forward motion mapping a world of PET, Polyester and PTA produc-tion and has a unique name for itself in these industries. And I deem nothing triggers a more receptive attitude among potential stakeholders than visibly strong growth.
One team, one brand, one strategy
IVL is now a ubiquitous brand. Today our business is a lot different from what people knew of us. The difference comes from the business strides we have taken over the years. A significant stride was bringing each of our businesses under the flagship of Indorama Ventures as a single operating structure. Effectively integrating all the individual operations is now better differentiat-ing us in the marketplace and also enabling us to deliver returns, under one brand, defined by a common strategy. The integra-tion improves our economies of scale, combines the talent and creates various common platforms that can be used to improve overall efficiency and costs such as IT, logistics, and raw material. Convergence has been the buzzword and IVL is now strongly positioned to leverage this convergence.
Given the size of Indorama Ventures, it is more challenging to be entrepreneurial and also be a Public Limited Company. What we try to do is balance a corporate thought process with a strategic approach but embed it with an entrepreneurial spirit. One of the most critical components is the innate understanding of the industry we bring on. Our operational excellence has been able to balance the corporate view with the entrepreneurial spirit and ensure it doesn’t get diluted.
Buoyed by a searing growth, IVL pedaled its way into a plan of being the biggest company to be listed in the Stock Exchange of Thailand in the last three years. We see this move as one that can help propel IVL’s profile to a level yet unseen. From talking the talk, 2009 saw us being on the fast track to operationalize.
In Today’s marketplace there are many opportunities but you have to be bold. Our challenge is to make the most of this oppor-tunity by doing what we do, but doing it better by capitalizing on our traditional strengths. The establishment of a comprehensive business restructuring plan by consolidation of Indorama Polymers into IVL through a share swap offer and a tender offer to delist Indorama Polyester Industries Plc. is an interesting and important step that we have taken. IVL became pcl on 25th Sep-tember 2009 and got listed on 5th February 2010.What distinguishes this restructuring is not only its scale and acuteness, but the size and speed of the business and people response. While it was a challenging decision, the opportunity we see is breathing room to further refine our core business strategy across a triple bottom line of economic, environmental and people performance.
8 Indorama Ventures PCL
From the period since IVL became a public listed company we have been able to further broaden our strategic and commercial relationship and we look forward to developing this going forward. Development is only meaningful if it is inclusive and sustain-able. Going public with IVL, maintains and reaffirms our focus and commitment to the future of the Polyester segment.
Strong performance in 2008 bode well for 2009
The ecosystem of any company, any strategy and thought needs to shift from perpetuating the status quo to being a catalyst of change. To me, the greatest sign of hope is that this is beginning to happen for IVL.
We have seen significant investments each year through expansions that help us stay more relevant to the marketplace. By tapping into challenging moves in our business stream and leveraging the thought leadership coming out of our internal think tanks—we bring to our stakeholders the most beneficial and boldest business returns from across our global organization.
This year marked the fortification of our business in the main business segments of PTA, Pet Resins and Polyester after a num-ber of acquisitions in Thailand and Europe in year 2008. We entered into the PTA business in 2008 for integration and it has been a major successful move with record production, sales, profits and cash flow in 2009. It has provided us an excellent platform to enable more growth and provide superior value. The acquisitions we had done in 2008 demonstrate the full gambit of how we communicate the big picture in a global context. As a company we have always had a proven track record of successfully implementing intensive projects as well as selecting attractive acquisition opportunities and successfully improving the opera-tions and profitability of acquired businesses. The successes of 2009 are evident of this. All the major capex and investment projects undertaken in year 2008-9 completed successfully. AlphaPet, our state-of-the-art plant with latest technology in USA, successfully commenced Line 1 operations in 2009 and is all set to begin Line 2 in the first half of 2010.
During the past year, the organization’s dialogue on moving forward intensified, driven by strategies for expansion and change. We added a new paradigm when IVL made an initial public offering of its new shares; made a tender offer for all shares of In-dorama Polymers (IRP Pcl) held by other shareholders by swapping them with its new shares and subsequently delisted IRP. At the heart of the delisting is the recognition that it’s not enough to continue to do the same thing. Businesses become more productive by standing apart and serving the market place and investors with a truly unique offering. That’s exactly what IRP depicts through its delisting and continues to remain one of the most exciting members of the IVL family.
IVL’s endeavor towards the IPO, shows the kind of force, resilience, and drive that stretches and pushes a business to all pos-sible limits even after seemingly having seen and done most of it all. The idea of IVL going public was a strategic decision with a double aim: to allow the shares to be freely exchanged on the organized market and to give flexibility to the Group to enable it to manage its own funds and to access capital markets with a view to future growth. The quest for value accretive expansion has always been part of the IVL ethos.
The industry rationalization has accelerated in the current environment as the high cost; non-focused players have begun to exit the market. This is expected to continue over the coming years creating additional growth potential for focused players such as IVL that continue to invest in the industry. Because our products are resilient to recession and IVL has a global distribution plat-form, increase in volumes and utilization rate was experienced. We achieved higher returns on a larger equity and capital base in year 2009 and saw margin improvement from upward integration with PTA.
Certitude that our Business Warrants
We have remained true to our growth strategy and maintained a steadfast focus on our sector. Value is the very essence of our “Monozukuri” – combination of technology and operations to include development and production. Our seven strategic impera-tives, in place, continue to guide our actions.
• Raw Material Security & Captive Consumption- Security of PTA supply for our PET and Polyester operations• Common Buying Platform for MEG- Our PET and Polyester divisions leverage their buying bargaining power for MEG procurement• Partnering, acquiring and investing to accelerate the implementation of our strategy and focus our resources on core business• Focusing relentlessly on growth markets
Annual Report 2009 9
• Cost Savings Through Synergistic Asset Positioning & Integration - Cost savings through co-locations due to reduction of logistics costs and the sharing of common services• Going to market as one team, under a common brand, executing a single strategy• Investing in internal capabilities to build a high-performance culture and efficient operation, best practices and benchmarking
Our focus in this industry is not only for passion for this sector but also because of better understanding of the key success factors for individual businesses. We also thrive on more efficient allocation of capital and human talent, ability to make quick management and commercial decisions. Reduction in overheads needed to manage a diverse set of operations and addition of more value due to the similarity of the businesses is yet another factor.
The pursuit of reinforcing brand presence in the market place, is, keeping in mind, its overarching relevance to the industry. This year we designed our new Indorama logo which unequivocally defines the strong foundation on which the company is built upon. It depicts our dependability, dynamism, sustainability and encapsulates all activities by the company. The rationale behind the design and choice of colors is that we want our shareholders, new and old, to associate with.
Financials The notable financial performance of IVL, in the face of fluctuating economic environment reflects the full strength of our signifi-cant consolidation of business units.
Financial highlights (Baht million):
Net salesEBITDAEBITDA marginProfit before tax and minorityNet profit after tax and minorityIssued and paid-up capital*Earnings per Share
Year 200979,99410,63613.3%6,5734,8243,3521.44
Year 200853,3323,8387.2%3,1762,6563,3520.79
Growth50%
117%
107%82%
*Based on issued and paid-up capital at end of year and par value Baht 1 per share
People and Practices Augur Well for us
I attribute the company’s momentum to the dexterity with which our people have worked. Even in unsettled global marketplaces, trust, not uncertainty dominated our conversations at IVL. I have always believed that the role of a leader is often not to force the outcome, but to command execution. Managing that command falls largely to seasoned management that we have. 2009 was an intense but very productive year. Yet again our people have demonstrated their solidarity and dedication to the company. Our employees continue to devote their energies to confirming whether our business really is going the way it should. Their persever-ance animates my being and instructs our energies. Indorama’s development, in my humble opinion, is the sine-qua-non of our people. Not many executives have a better vantage point on the industry we operate in like ours.
After winning national accolades, IVL’s Quality Circles (QC) initiatives soared international in 2009. One of our QC Groups was awarded “Best QC Group” by the QC head quarter of Thailand. Furthermore the group also was selected for International Con-vention on Quality Control Circle for the International Exposition for Team Excellence (IETEX) 2009 at Singapore. Another group was selected for the International competition in China.
In 2009 we also received the Environment Good Governance Reward named “Green Star on White Flag”. One of our PTA plants received this excellent reward on environment good governance from the Industrial Estate Authority of Thailand Governor.
10 Indorama Ventures PCL
Businesses are an instrument of society and governance. IVL’s demonstration of transparent, fair and equitable corporate gover-nance practices depicts its responsibility towards the same. IRP, a subsidiary of IVL receiving an “Excellent” CG Scoring from the Institute of Directors, “IOD” survey for listed companies is an empirical proof of our good practices.
As we take steps today, we know, these are steps towards tomorrow
IVL is uniquely positioned to take advantage of the industry, thanks to its strong portfolio, larger market cap and liquidity, high growth industry, secured PTA feedstock through integration, favorable raw material (PX and MEG) supply scenario, human capital and conversion costs. We are prepared to enter next phase of growth through acquisitions and Brownfield /Greenfield expansions.
With this in mind, our way forward has always been very clear. Our ability to retain effective margins is our measure for our success. Also, whatever measures we take in the short –term, we never sacrifice our ability in the long term. Excess is not my scene. I like the play of clear vision. And that’s what I think IVL and its subsidiaries are going to be all about. Today we see ourselves at the front line of the World Polyester Producers. We want to grow faster than the market. We want to be, as in the world, recognized as the leader in the polyester value chain industry. I’m excited today about the opportunities that exist out there for IVL.
Thank you for your belief in Indorama and my sincerest gratitude to all our suppliers, customers, employees and stakeholders.
Coming back to my question of Mega changes in business – I believe these Mega changes will bring us Giga returns.
Mr. Aloke LohiaGroup CEO
Annual Report 2009 11
Company Information
Listed Company Information
Subsidiary Companies Information
1. Indorama Polymers Public Company Limited (Direct Subsidiary)PET Business
Name Type of businessHead Office
Company’s Registration NumberTel.Fax.Web siteRegistered Share Capital
Issued and paid-up Capital
Type of businessHead Office
Tel.Fax.Plant
Tel.Fax.Web siteRegistered Share Capital
Issued and paid-up Capital
Percentage of Investment
Type of businessHead Office
Tel.Fax.Plant
Tel.Fax.Registered CapitalPaid-Up Capital Percentage of Investment
: Indorama Ventures Public Company Limited (IVL): Holding Company: 75/102 Ocean Tower 2, 37th Floor, Soi Sukhumvit 19 (Wattana), Asoke Road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand: 0107552000201: +66-2-661-6661: +66-2-661-6649, 02-661-6664 www.indoramaventures.com Baht 5,082,000,000 divided into 5,082,000,000 ordinary shares each of Baht 1 par value Baht 4,334,271,047 divided into 4,334,271,047 ordinary shares each of Baht 1 par value
: PET Polymers Production : 75/102,103 Ocean Tower 2, 37th Floor, Soi Sukhumvit 19 (Wattana), Asoke road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand: 02-661-6661: 02-661-6649, 02-661-6664: 72 Moo 11, Bang-Nga Tha-Klong Road, Khaosamorkhon Sub-District, Thawung District, Lopburi 15180, Thailand : 036-489164-5: 036-489115 www.indoramapolymers.com Baht 1,450,000,000 divided into 1,450,000,000 ordinary shares each of Baht 1 par value Baht 1,382,197,870 divided into 1,382,197,870 ordinary shares each of Baht 1 par value: 99.08%
: Preforms, Bottles and Caps Production : 85 Moo 11, Bang-Nga Tha-Klong Road, Khaosamorkhon Sub-District, Thawung District, Lopburi 15180, Thailand: 036-489164-5: 036-489115: 85 Moo 11, Bang-Nga Tha-Klong Road, Khaosamorkhon Sub-District, Thawung District, Lopburi 15180, Thailand: 036-489164-5: 036-489115: Baht 75 Million : Baht 75 Million : 60.00% (Indirect)
2. Petform (Thailand) Limited (Indirect Subsidiary)
12 Indorama Ventures PCL
3. Asia Pet (Thailand) Limited (Indirect Subsidiary)
4. StarPet Inc. (Indirect Subsidiary)
5. AlphaPet Inc.(Indirect Subsidiary)
6. Indorama Polymers (USA) Inc. (Indirect Subsidiary)
Type of businessHead Office
Tel.Fax.Plant
Tel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment
Type of businessHead Office
Plant
Tel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment
Type of businessHead Office
Plant
Tel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment
Type of businessHead Office
Tel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment
: Amorphous Chips Production : 75/102, Ocean Tower 2, 37th Floor, Soi Sukhumvit 19 (Wattana), Klongtoey Nuer Sub-District, Wattana District, Bangkok 10110, Thailand: 02-661-6661: 02-661-6649, 02-661-6664: 61/1 Moo 11, Khaosamorkhon Sub-District, Thawung District, Lopburi 15180, Thailand: 036-489164-5: 036-489115: Baht 450 Million : Baht 450 Million : 99.99% (Indirect)
: PET Polymers Production : 801 Pineview Road, Asheboro, North Carolina 27203, USA: 801 Pineview Road, Asheboro, North Carolina 27203, USA: +1-336-6720101: +1-336-6721904: USD 25 Million: USD 12 Million: 100.00% (Indirect)
: PET Polymers Production : 1301 Finley Island Road, Decatur, Alabama, AL35601, USA: 1301 Finley Island Road, Decatur, Alabama, AL35601, USA: +1-256-3081180: +1-256-3405722: USD 50 Million: USD 44 Million: 100.00% (Indirect)
: Holding Company for AlphaPet Inc.: 1301 Finley Island Road, Decatur, Alabama, AL35601, USA: +1-256-3081180: +1-256-3405722: USD 50 Million: USD 44 Million: 100.00% (Indirect)
Annual Report 2009 13
7. UAB Orion Global Pet (Indirect Subsidiary)
8. Indorama Polymers Rotterdam B.V. (Indirect Subsidiary)
9. Indorama Polymers Workington Limited (Indirect Subsidiary)
10. UAB Indorama Polymers Europe (Indirect Subsidiary)
Type of businessHead OfficePlant Tel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment
Type of businessHead Office
Plant
Tel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment
Type of businessHead Office
Plant
Tel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment
Type of business
Head OfficeTel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment
: PET Polymers Production : Metalo g.16, LT-94102, Klaipeda, Republic of Lithuania: Metalo g.16, LT-94102, Klaipeda, Republic of Lithuania: +370-46-300815: +370-46-314323: Litas 77,688,000 : Litas 77,688,000 : 100.00% (Indirect)
: PET Polymers Production : Markweg 201, 3198 NB Europoort, Harbour Number 6347, Rotterdam, the Netherlands: Markweg 201, 3198 NB Europoort, Harbour Number 6347, Rotterdam, the Netherlands: +311-81-285438: +311-81-285596: EUR 90,000: EUR 18,000: 100.00% (Indirect)
: PET Polymers Production : Siddick, Workington, Cumbria, CA14 1LG, United Kingdom: Siddick, Workington, Cumbria, CA14 1LG, United Kingdom: +44-1900-609300: +44-1900-609341: GBP 100: GBP 1: 100.00% (Indirect)
: Holding Company for Indorama Polymers Rotterdam B.V. and Indorama Polymers Workington Limited: Metalo g.16, LT-94102, Klaipeda, Republic of Lithuania: +370-46-300815: +370-46-314323: Litas 72,508,800: Litas 72,508,800: 100.00% (Indirect)
14 Indorama Ventures PCL
1. Indorama Petrochem Limited (Direct Subsidiary)
2. TPT Petrochemicals Public Company Limited (Direct Subsidiary)
3. Indorama Holdings Rotterdam B.V. (Indirect Subsidiary)
4. UAB Indorama Holdings Europe (Indirect Subsidiary)
PTA Business
Type of businessHead Office
Tel.Fax.Plant
Tel.Fax.Registered CapitalPaid-Up Capital Percentage of Investment
Type of businessHead Office
Tel.Fax.Plant
Tel.Fax.Registered CapitalPaid-Up Capital Percentage of Investment
Type of businessHead Office
Plant
Tel.Fax.Registered CapitalPaid-Up Capital Percentage of Investment
Type of businessHead OfficeTel.Fax.Registered CapitalPaid-Up CapitalPercentage of Investment
: PTA Production : 75/93 Ocean Tower, 35th Floor, Soi Sukhumvit 19, Sukhumvit Road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand : 02-661-6661: 02-661-6649, 02-661-6664: 4 Moo 2, Asia Industrial Estate, Tambon Banchang, Amphur Banchang, Rayong, 21130 Thailand : 038-689081-5: 038-689090: Baht 4,727,820,420 : Baht 4,727,820,420: 100.00% (Direct)
: PTA Production : 54 BB Building, 20th Floor, Sukhumvit 21 Road (Soi Asoke), Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand: 02-203-6900: 02-260-8018: 3, I-7 Road, Map Ta Phut Industrial Estate, Amphur Meuang, Rayong 21150 Thailand: 038-683288: 038-683300: Baht 6,903,000,000 : Baht 4,925,000,000: 54.60% (Direct)
: PTA Production : Markweg 201, 3198NB Europoort, Rotterdam, the Netherlands: Markweg 201, 3198NB Europoort, Rotterdam, the Netherlands: +31-181-285-455: +31-181-285-405: Euro 90,000 : Euro 18,000: 100.00% (Indirect)
: Holding Company for Indorama Holdings Rotterdam B.V.: Metalo g.16, LT-94102, Klaipeda, Republic of Lithuania: +370-46-300815: +370-46-314323: Litas 117,395,200: Litas 117,395,200: 100.00% (Indirect)
Annual Report 2009 15
1. Indorama Polyester Industries Public Company Limited. (Rayong) (Direct & Indirect Subsidiary)
2. Indorama Polyester Industries Public Company Limited. (Nakhon Pathom), formerly Indo Poly (Thailand) Limited* (Direct & Indirect Subsidiary)
3. Indorama Holdings Limited (Direct Subsidiary)
Polyester Fibers, Yarns & Wool Business
Type of businessHead Office
Tel.Fax.Plant
Tel.Fax.Registered CapitalPaid-Up Capital Percentage of Investment
Type of businessHead Office
Tel.Fax.Plant
Tel.Fax.Registered CapitalPaid-Up Capital Percentage of Investment
Type of businessHead Office
Tel.Fax.Plant
Tel.Fax.Registered CapitalPaid-Up Capital Percentage of Investment
: Polyester Fiber, Yarn and PET Chips Production : 75/92 Ocean Tower 2, 35th Floor, Soi Sukhumvit 19 (Wattana), Asoke Road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand: 02-661-6661: 02-661-6649, 02-661-6664: 6, I-2 Road, Map Ta Phut Industrial Estate Tambon Map Ta Phut Amphur Meuang Rayong, Rayong 21150, Thailand: 038-683870: 038-683884: Baht 2,226,220,000 : Baht 2,202,850,000: 64.94% (Direct) and 34.61% (Indirect)
: Polyester Fiber and Yarn Production: 35/8 Moo 4, Khun Kaew Sub-district, Nakhon Chaisri District, Nakhon Pathom 73100, Thailand: 034-222191: 034-324169-70: 35/8 Moo 4, Khun Kaew Sub-district, Nakhon Chaisri District, Nakhon Pathom 73100, Thailand: 034-222191: 034-324169-70: Baht 700,000,000 : Baht 700,000,000: 98.85% (Direct & Indirect)
: Holding Company and Production of Wool Yarn : 75/64,65 Ocean Tower 2, 28th Floor, Soi Sukhumvit 19 (Wattana), Asoke Road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand: 02-661-6661: 02-661-6649, 02-661-6664: 63 Moo 11 Bangngha-Thaklong Road, T. Kaosamorkorn A. Thawung Lopburi -15180 : +663 6489116-7: +663 6489115: Baht 774,468,000 : Baht 774,468,000: 97.93% (Direct)
* Indo Poly (Thailand) Limited was dissolved on August 3, 2009 and is being liquidated, which we expect to be completed by mid 2010
16 Indorama Ventures PCL
4. Indorama Textiles (Thailand) Limited. (Indirect Subsidiary)
Other Information
Type of businessHead Office
Tel.Fax.Plant
Tel.Fax.Registered CapitalPaid-Up Capital Percentage of Investment
Listing on Stock Exchange
Shares Registrar
Auditors
Legal Counsel
Company Contact
: Wool Tops Production: 75/64,65 Ocean Tower 2, 28th Floor, Soi Sukhumvit 19 (Wattana), Asoke Road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok, Thailand: 02-661-6661: 02-661-6649, 02-661-6664: 61 Moo 11 Bangngha-Thaklong Road, T. Khaosamorkorn A. Thawung Lopburi-15180 : 036-489116-7: 036-489115: Baht 51,000,000 : Baht 51,000,000: 95.10% (Indirect)
The Stock Exchange of ThailandThe Stock Exchange of Thailand Building, 62 Rachadapisek Road, Klongtoey, Bangkok, 10110, ThailandTel. +662-229-2000Fax. +662-359-1009-11www.set.or.th
Thailand Securities Depository Company LimitedThe Stock Exchange of Thailand Building, 62 Rachadapisek Road, Klongtoey, Bangkok, 10110, ThailandTel. +662-596-9302-12Fax. +662-359-1259www.tsd.co.th
KPMG Phoomchai Audit Limited50th - 51st Floors, Empire Tower195 South Sathon Road, Yannawa, SathonBangkok 10120, ThailandTel. +662-677-2000Fax. +662-677-2222
Weerawong, Chinnavat & Peangpanor Ltd.22nd Floor, Mercury Tower540 Ploenchit Road, LumpiniPathumwan, Bangkok 10330, THAILANDTel. +662-264-8000Fax. +662-657-2222
Company Secretary & Legal: 1) Mr. Souvik Roy Chowdhury2) Ms. Thamonwan Woraphongjirakarne-mail: [email protected] [email protected]
Investor Relations:1) Mr. Richard Jones 2) Mr. Ashok Jaine-mail: [email protected] [email protected] Company Address:75/102,103 Ocean Tower 2, 37th Floor, Soi Sukhumvit 19 (Wattana), Asoke Road, Kwaeng Klongtoey Nuer, Khet Wattana, Bangkok 10110, Thailand Tel. 02-661-6661Fax. 02-661-6664
* Indo Poly (Thailand) Limited was dissolved on August 3, 2009 and is being liquidated, which we expect to be completed by mid 2010
Annual Report 2009 17
Organization Structure
Board of Directors
Group Chief Executive Officer
Audit Committee
Polyester Fiber and Yarn & Wool BusinessPET BusinessPTA Business
Internal Audit Department
PresidentChief Executive OfficerPresident
Head of Accounting
Chief Operating OfficerChief Operating OfficerChief Operating Officer
Board of DirectorsOrganization Structure
Name/Surname: Mr. Sri Prakash Lohia Position: Chairman of the Board Age: 57 Education: Bachelor of Commerce Delhi University, IndiaWork Experience (5 years past and present) :2009 - present Chairman Indorama Ventures PCL2009 - present Director Indorama Group Holdings Limited2009 - present Director Indorama Corporation Pte. Ltd.2009 - present President Director PT Surya Sakti Investment2006 - present President Director Indorama International Limited, Dubai2006 - present Chairman Eleme Petrochemicals Co., Ltd.2006 - present Director Indorama Petro Limited2006 - present Director Indorama Shebin Textiles Co SAE2005 - present Director Indorama Petrochemicals (Nigeria) Limited2004 - present President Commissioner PT Indo-Rama Synthetics Tbk2003 - present Director Indorama Petrochem Limited1998 - present Director Indorama Iplik Sanayi ve Ticaret AS1997 - present President Director PT Indorama Industries1991 - present Director Isin International Pte Limited1991 - present Director Indorama Lanka Pvt Limited
Name/Surname: Mr. Aloke Lohia Position: Vice Chairman and Group Chief Executive Officer (The director who is authorized to sign on behalf of the Company)Age: 51 Education: Bachelor of Commerce Delhi University, India Director Certification Program (DAP) Class 65/2007, Thai Institute of Directors (IOD) Work Experience (5 years past and present) :2009 - present Vice chairman Indorama Ventures PCLPresent Director TPT Utilities Company Limited2009 - present Chairman Indorama Resources LimitedPresent Director Aviante International Ltd.2009 - present Director Indorama Petrochem Limited2008 - present Chairman TPT Petrochemicals PCL.2008 - present Director Indorama Polyester Industries PCL.2008 - present Director Indorama Ventures Limited, Jersey2008 - present Chairman Beacon Chemicals Ltd.2008 - present Director Indorama Ventures S.A. Luxembourg2007 - present Chairman Cryoviva (Thailand) Ltd.2007 - present Chairman UAB Indorama Holdings Europe2007 - present Chairman Indorama Polymers Rotterdam B.V.2007 - present Chairman Indorama Holdings Rotterdam B.V.2007 - present Chairman Indorama Polymers Workington Ltd.2007 - present Chairman UAB Indorama Polymers Europe.2007 - present Chairman Indorama Polymers (USA) Inc.2007 - present Chairman AlphaPet, Inc.2004 - present Chairman UAB Orion Global PET2004 - present Chairman StarPet Inc.2004 - present Chairman Asia Pet (Thailand) Limited2004 - present Director Canopus International Limited2003 - present Director Florrie Ltd.1997 - present Director V.O.X. Investment Limited1996 - present Director Petform (Thailand) Limited1995 - present Vice chairman Indorama Polymers PCL1994 - present Chairman Indo-Rama Textiles (Thailand) Ltd. 1994 - present Chairman Indorama Holdings Ltd.1991 - present Chairman Habitat Estate Development Co., Ltd.1987 - present Chairman Aurus Speciality Co., Ltd.1986 - present Chairman Winforce Trading (HK) Ltd.1985 - present Chairman Autumn Investment (HK) Ltd.
20 Indorama Ventures PCL
Annual Report 2009 21
Name/Surname: Mrs. Suchitra Lohia Position: Director (The director who is authorized to sign on behalf of the Company)Age: 45 Education: Bachelor of Commerce Delhi University, IndiaWork Experience (5 years past and present) :2009 - present Director Indorama Ventures PCL2009 - present Director Indorama Resources LimitedPresent Director TPT Utilities Company Limited2009 - present Director Indorama Petrochem Limited2008 - present Director TPT Petrochemicals PCL.2008 - present Director Indorama Ventures Limited, Jersey2008 - present Director Indorama Polyester Industries PCL.2008 - present Director Beacon Chemicals Ltd.2007 - present Director UAB Indorama Holdings Europe2007 - present Director Indorama Polymers Rotterdam B.V.2007 - present Director Indorama Holdings Rotterdam B.V.2007 - present Director Indorama Polymers Workington Limited2007 - present Director UAB Indorama Polymers Europe.2007 - present Director Indorama Polymers (USA) Inc.2007 - present Director Alpha Pet Inc.2004 - present Director UAB Orion Global PET2004 - present Director StarPet Inc.2004 - present Director Asia Pet (Thailand) Limited2004 - present Director Canopus International Limited2004 - present Director Aviante International Ltd.2003 - present Director Florrie Ltd.1997 - present Director V.O.X. Investment Limited1996 - present Director Petform (Thailand) Limited1995 - present Director Indorama Polymers PCL1994 - present Director Indo-Rama Textiles (Thailand) Ltd. 1994 - present Director Indorama Holdings Ltd.1987 - present Director Aurus Speciality Co., Ltd.1986 - present Director Winforce Trading (HK) Ltd.
Name/Surname: Mr. Sashi Prakash KhaitanPosition: Director and President Polyester fibers and Yarn & Wool Business (The director who is authorized to sign on behalf of the Company)Age: 61 Education: Bachelor of Science St. Xavier College, Kolkata, IndiaWork Experience (5 years past and present) :2009 - present Director Indorama Ventures PCLPresent Director Indorama Ventures Limited, JerseyPresent Director Indorama Ventures S.A.,Luxembourg2008 - present Director Indorama Polyester Industries PCL.2004 - present Director Indorama Holdings Ltd.2004 - present Director Indo-Rama Textiles (Thailand) Ltd.
Annual Report 2009 21
Name/Surname: Mr. Amit LohiaPosition: Director Age: 35 Education: Bachelor of Economics and Finance Wharton School of Business, USAWork Experience (5 years past and present) :2009 - present Director Indorama Ventures PCLPresent Director Indorama Polyester Industries PCL.Present Director TPT Petrochemicals PCL.2009 - present President Director PT Indo-Rama Synthetics TBK2009 - present Director Indorama Corporation Pte. Ltd.2009 - present Director Indorama Petrochemicals (Nigeria) Limited2008 - present Director Indorama Group Holdings Ltd.2006 - present Vice Chairman Indorama Shebin Textiles Co SAE2006 - present Director Eleme Petrochemicals Company Limited2006 - present Director Indorama Petro Limited2006 - present Director Indorama Investments Limited2006 - present Director Indorama International Limited, Dubai2004 - present Director Isin International Pte Limited2004 - present Director Indorama Lanka Pvt Ltd2004 - present Director Indorama Energy Pte Ltd., Singapore2003 - present Director Indorama Petrochem Limited1999 - present Director Indorama International Finance PLC.1998 - present Director Indorama Iplik Sanayi ve Ticaret AS
Name/Surname: Mr. Rathian Srimongkol Position: Independent Director and Chairman of the Audit CommitteeAge: 50 Education: Bachelor of Medical Science, Mahidol University Medical Degree (Siriraj Hospital), Mahidol University Master of Business Administration, Thammasat University Certificate in Politics and Governance in Democratics Systems for Executives Course (Class 9), King Prajadhipok’s Institute Diploma, National Defense College, The Joint State - Private Sectors Course Class 21 Director Certification Program (DCP) class 8/2001 and Role of the Chairman Program(RCP) class 19/2008, (IOD)Work Experience (5 years past and present) :2009 - present Director Indorama Ventures PCL2008 - present Senior Executive Vice President Siam City Bank Pcl.2008 - present Director State Enterprise Director Nomination Committee , Ministry of Finance2008 - present Director TOT PCL.2004 - present Performance Agreement Subcommittee, Organization Management (Internal Audit and Internal Control) State Enterprise Policy Office, Ministry of Finance2001 - present Performance Agreement Subcommittee (Energy sector) State Enterprise Policy Office,Ministry of Finance2007 - 2009 Adviser Siam City Securities Ltd.2004 – 2008 First Executive Vice President-Siam City Bank PCL2004 – 2008 Chairman The Zoological Park Organization2008 - 2008 Chairman Industrial Estate Authority of Thailand 2003 - 2007 Chairman and Chairman of Executive Directors Siam City Securities Ltd. 1999 - 2003 Chairman of Audit Committee and Director Matichon Pcl.2004 - 2005 Director Thailand Privilege Card Co., Ltd.2005 - 2005 Independent Director TOT PCL.2001 – 2004 Executive Vice President Siam City Bank PCL
22 Indorama Ventures PCL
Name/Surname: Mr. William Ellwood HeineckePosition: Independent Director and Director of Audit CommitteeAge: 60 Education: Honorary Doctoral Degree of Business Administration in Management, Yonok University, Lampang International School of Bangkok Director Certification Program (DCP) class 64/2005 (IOD)
Work Experience (5 years past and present) :2009 - present Director Indorama Ventures PCLPresent Chairman and Chief Executive Officer, Minor International PCLPresent Chairman and Chief Executive Officer, Minor Corporation PCLPresent Chairman Minor Food Group PCLPresent Director Rajadamri Hotel PCLPresent Director S&P Syndicate PCLPresent Director Everest Worldwide Ltd.Present Director Serm Suk PCLPresent Chairman Minor Hotel Group Co.,Ltd.Present Chairman Royal Garden Plaza Ltd.Present Chairman Royal Garden Entertianment Ltd.Present Chairman MSpa International Ltd.Present Chairman MSpa Venture Ltd.Present Chairman MSpa Enterprise Management (Shanghai) Ltd.Present Chairman Hua Hin Resort Ltd.Present Chairman Hua Hin Village Ltd.Present Chairman Royal Garden Development Ltd.Present Chairman RNS Holding Ltd.Present Chairman RGE (HK) Ltd.Present Director Chao Phaya Resort Ltd.Present Chairman Samui Village Ltd.Present Chairman Samui Resor & Spa Ltd.Present Chairman Samui Beach Residence Ltd.Present Chairman Baan Boran Chieng Rai Co., Ltd. Present Chairman Maerim Terrace Resort Ltd.Present Chairman Rajadamri Residence Ltd.Present Chairman MI squared Ltd.Present Chairman Coco Plam Hotel & Resort Ltd.Present Chairman Phuket Beach Residence Ltd.Present Chairman Minor Information Technology Ltd.Present Chairman Coco creation Ltd.Present Chairman Coco Residence Ltd.Present Director Swensen (Thai) LimitedPresent Director Minor Cheese LimitedPresent Director Minor Dairy LimitedPresent Director Minor DQ LimitedPresent Director RGR Food Service LimitedPresent Director Catering Associate LimitedPresent Director Berger (Thailand) LimitedPresent Director The Pizza Restaurant LimitedPresent Director SLRT Ltd.Present Director BEIJING LEJAZZ FOOD & BEVERAGE CO.,LTDPresent Director THAI EXPRESS CONCEPTS PTE. LPresent Chairman Chao Phaya Resort & Residence Ltd.Present Chairman Maifad Beach Resort LimitedPresent Chairman The Coffee Club (Thailand) Ltd
Name/Surname: Mr. Chakramon Phasukavanich
Position: Independent Director and Director of Audit Committee
Age: 61
Education: Bachelor’s Degree in Economics, Chulalongkorn
University M.A. (Economics), California
State University, Northridge, U.S.A.Certificate,
Senior Executive Development Program
class 12 The National Defense College
of Thailand (Class 39)
DAP 20/2004, FND 13/2004, ACP 14/2006,
DCP 71/2006, RCP 20/2008, R-CIS 1/2008,
R-Forum 1/2009 , (IOD)
Work Experience (5 years past and present) :2009 - present Director Indorama Ventures PCLPresent Independent Director and Chairman of Nomination PTT PCL.Present Committee Member, Monetary Policy Committee Bank of ThailandPresent Member Council of statePresent Member Council of Burapha UniversityPresent Member Economic Policy Advisory Committee of The Office of The Prime MinisterPresent Chairman Civil Service Commission Sub-committee on job Qualification and Post Classification for Senior Executives of Ministry of Public Health, Ministry of Science and Technology, and Nation Intelligence Agency2007 - 2008 Chairman Electrical and Electronic Institute2007 - 2008 Director Civil Service Commission2006 - 2008 Member National Legislative Assembly, Thailand2005 – 2009 Director Thai Oil PCL.2005 – 2008 Chairman Small and Medium Enterprise Development Bank of Thailand2004 – 2008 Permanent Secretary Ministry of Industry2004 – 2008 Chairman Thailand Productivity Institute2004 – 2008 Chairman Thailand Automotive Institute2004 – 2008 Chairman Thailand Textile Institute2004 – 2006 Chairman AVIVA (Thailand)2002 – 2008 Director Thai Asset Management Corporation
Annual Report 2009 23 Annual Report 2009 23
MAJOR SHAREHOLDERS as at 31 December 2009*
MAJOR SHAREHOLDERS as at 2 March 2010
No.1.2.3.4.5.6.7.
No.1.2.3.4.5.6.7.8.9.10.11.
NameIndorama Resources Ltd.Bangkok Bank PCL.DEG-Deutsche Investitions-Und Entwicklungsgesellschaft MBH.Bangkok Insurance PCL.Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden N.V.Mr. Aloke LohiaMr. Anuj Lohia
NameIndorama Resources Ltd.Bangkok Bank PCL.Indorama Synthetics (India) Ltd.Citibank Nominees Singapore Pte Ltd. - Thai Focused Equity Fund Ltd.Thai NVDR Ltd.Mr. Kamlesh Chandumal DaswaniMorgan Stanley & Co. International Pcl.The Bank of New York (Nominees) Ltd.DEG-Deutsche Investitions-Und Entwicklungsgesellschaft MBH.Goldman Sachs & CoK Equity 70:30 LTF
No. of shares3,112,562,720
167,509,15029,536,24025,300,00016,635,780
1010
No. of shares3,073,262,520
206,082,850128,029,20068,743,24747,183,21043,157,50038,536,73933,919,50029,536,24023,769,54622,918,000
% Holding92.84.990.880.750.490.000.00
% Holding70.914.752.951.591.091.000.890.780.680.550.53
Remarks: * Before IVL listed in the SET
SOURCE: Thailand Securities Depository Co., Ltd.
24 Indorama Ventures PCL
Dividend Policy
The Company has a policy to pay a total dividend of not less than 30% of our net profit after tax and after the appropriation of the reserve. However, our Board of Directors may amend the dividend policy at any time to take into account the availability of funds to be used as a reserve for debt repayment, capital investment for production expansion, to react to changing market conditions or as required to manage the company’s future cash flows. The policy of Indorama Polymers PCL, a core company, is to pay a total dividend of not less than 30% of its net profit after tax and after the appropriation of the reserve. However, the Board of directors of Indorama Polymers PCL may amend the dividend policy at any time to maximize shareholder’s wealth such as a reserve for debt repayment, capital investment for production expansion, reaction to changing market conditions or as required to manage its future cash flows.
In 2009, other subsidiaries, excluding Indorama Polymers PCL, do not have a dividend policy. Dividend distributions of our subsidiaries are subject to the approval of our Board of Directors and/or our subsidiaries’ shareholders, at an annual general meeting. Each subsidiary company is reviewing and setting out its future dividend policy.
Annual Report 2009 25
Core Business
PET – Thinking Global
The core business of IVL is PET resins which is held through its subsidiary Indorama Polymers Public Company Limited “IRP”. IRP owns and oper-ates plants in Asia, Europe and North America to produce PET resins. The presence in three continents provides it the ability to service global customers in each continent. The presence in three key global regions offers the advantage of fast and efficient delivery with a constant effort to lower logistical costs and to enhance the global distribution network. All plants use a range of shipping options to provide the best and lowest-cost delivery: road, rail, and sea. The assets are top end assets in terms of size, scale, economics and global positioning.
PET resins capacity by region:
IRP has established lasting customer relationships that involve close cooperation in formulations and applications development. IRP has diversified its product offering of different grades to meet the needs of customers in Asia, Europe, NAFTA and others. IRP and its subsidiaries have a marketing team in Thailand, USA and Europe which is focused on sales in respective regions. Further, it is supplemented by agent network in export markets. With different distribution bases, transportation costs are lower and the threat of trade barriers is less, thus, increasing the stability of the system, a major strength IRP offers.
The general market segmentation of plants in IRP:
ThailandUSAEuropeTotal
CompanyIndorama Polymers StarPet and AlphaPet
UAB Orion Global Pet Indorama Polymers Rotterdam
Indorama Polymers Workington
2007180,000225,000198,000603,000
Location Thailand, Asia
USA, North America
Lithuania, EuropeNetherlands, Europe
UK, Europe
MarketDomestic market, Asia-Pacific, Middle
East and AfricaUSA, Canada, Mexico and South
AmericaGreater Europe, EU and Non-EU, UK,
Russia and CIS
2008180,000225,000553,000958,000
2009180,000
657,000*553,000
1,390,000
*Includes 432,000 tons per annum of capacity in AlphaPet Inc. USA
Mr. Dilip Kumar AgarwalCEO, PET resins Business
26 Indorama Ventures PCL
BusinessOperations
Business Operations
Description of Indorama Ventures’ Business
Indorama Ventures Public Company Limited (IVL) is one of the world’s leading producers in the polyester chain industry, in terms of capacity and level of integration.
Crude oil Naphtha Paraxylene PTA PETMelt
fiber
/filam
ents
bottle-grade resinFigure 1 : The Polyester Chain
Figure 2: The Polyester Chain is Driven by the Fast Moving Consumer Goods Industry
Indorama Ventures part of the chain
Upstream raw materials
About 99% of our revenues come from the sale of products in the polyester value chain. IVL produces two major polyester poly-mer types, PET resin and polyester fibers and yarns, and some specialist polyester types such as film grade chips. In March 2008 we began to produce PTA, a feedstock essential to the production of polyester polymers.
The major products are all intermediates between the oil and petroleum industry and fast moving consumer goods producers. This lends itself to less volatility than those producers further up-stream and consistent demand from those customers down-stream from us. Contracts with customers are for long term volumes, however the pricing is adjusted each month to take into account the rise and fall of raw material supplies. This means that we are able to pass through price movements to customers. Crude oil prices have very little effect on global producers of carbonated soft drinks. For instance, the actual crude oil cost in a two liter PET bottle is around 2-3%, so IVL can pass on fluctuations in price with little or no effect to customers for whom volume sales are more important.
28 Indorama Ventures PCL
Description of business segments
Why Polyester?
The IVL Group is solely focused on the global polyester market. Polyester products act as an intermediary between large petrochemical companies, which provide the feedstock used in the manufacture of polyester, and Fast Moving Consumer Goods (FMCG) / Apparel Companies, which drive the demand for polyester products. Because of this central position between commodity petrochemical products and consumer end markets, polyester products do not exhibit the same kind of volatility as the olefins and aromatics sectors.
Polyester demand and pricing show resilience that olefins and aromatics products do not as it is the material of choice for both packaging and fiber applications, with a strong substitution effect on competing materials in the consumer packaging space.
Polyester products have some compelling attributes, such as versatility, convenience, affordability, high performance, comfort, and eco-friendliness that make it increasingly indispensible for use in a broad range of everyday applications.
We currently operate 13 manufacturing facilities in five countries located in Asia, North America and Europe.
Our operations have increased significantly since 2003, principally through acquisitions. This geographic reach means that IVL is the only producer with operations in Asia, North America, and Europe and this allows us not only to be close to our end customers but to be able respond quickly to their needs. From a cost perspective, this geographic reach allows us to compete as local players, avoiding high logistical costs and government-imposed import restrictions. It also allows us to switch from a market that has trade barriers to another, more efficient market if necessary.
Competitive Strengths
In summary, IVL’s strengths are its industry focus and leading market positions; its global sales and manufacturing footprint; its integrated business model; its strong cost position; and expe-rienced management team with a proven track record of growing and managing the business.
Supply/Demand Dynamics for Polyester
The global demand for PET resin, polyester fiber as well as PTA has been consistently growing .
Figure 3: Indorama Venture’s Global Reach
Annual Report 2009 29
Raw Materials
The two main feed stocks for PET and polyester fiber are PTA and MEG, with paraxylene, or PX, an important raw material for the production of PTA (see figure 1 above). The overall capacity increases for PX and MEG will provide sufficient raw materials for PET and polyester fiber requirements.
Since 2008 for instance, the global PX industry has shifted from a situation of balanced capacity to overcapacity with about 1.1 million tons of PX capacity added in 2008 and about 8.7 million tons of capacity currently under development and estimated to come on-stream by 2012.
Similarly, since 2008, the global MEG industry has shifted from a situation of balanced capacity to significant overcapacity with about 1.4 million tons of MEG capacity added in 2008 and about 7.4 million tons of capacity currently under development and estimated to come on-stream by 2012.
Polyester Industry Rationalization
The past two years have been marked by the acceleration of industry rationalization with 0.4 million tons and 0.2 million tons capacity estimated closed in 2008 and 2009 respectively and 0.6 million tons capacity shutdown in the USA and Canada in 2008 and 4.0 million tons capacity closed in Asia, especially China, which is 9.0% of the regional capacity, in 2009.
This industry rationalization has occurred as high cost, non-focused players have begun to exit the market. New capacity additions are now lagging behind plant closures and thereby provide an opportunity for stronger companies to further boost capacity uti-lization.
PET The PET (polyethylene terephthalate) business segment primarily comprises the manufacture and sale of PET, a plastic poly-mer resin primarily used for beverage containers and food, pharmaceutical and household product packaging and in industrial packaging applications. PET resin is produced from polyester polymer which is a mixture of Purified Terephthalic Acid (PTA) and Monoethylene Glycol (MEG). PET is one of the most widely-used packaging materials worldwide. From 2000 to 2009, global PET resin production grew at a CAGR of 8.25%, from 7.5 million tonnes in 1997 to 15.3 million tonnes in 2009. This growth has been driven by increasing consumer spending, population growth and the substitution by PET resin of traditional packaging materials and the increased use of PET resin in other products.
Description
PET can be semi-rigid to rigid, depending on its thickness, and very lightweight. PET bottle recycling is more practical than many other plastic applications. Plastic carbonated soft drink bottles and water bottles are almost exclusively PET, which makes them easier to identify for recycling. PET has a resin identification code of 1.
Installed Capacity
Our aggregate PET installed capacity is 1,282,000 tonnes per year as of December 31, 2009 (excluding the 216,000 tonnes capacity for the second line being installed at our PET plant in Alabama, USA). We have two PET plants in Thailand, three PET plants in Europe (the Netherlands, the United Kingdom and Lithuania) and two PET plants in the United States (North Carolina and Alabama).
PET Segment Financial Performance
Our PET business segment accounted for Baht 44,456 million, or 55%, of our total revenue from the sale of goods in 2009. The 98%, increase in PET operating EBITDA at the end of 2009 from the end of 2008, was primarily due to an increase in our PET gross margin through increased sales volumes, integration into PTA and decreased our per unit production costs resulting from lower energy prices.
30 Indorama Ventures PCL
Importance of Spreads to PET Producers
A determinant of the financial performance of a PET resin producer is the price spread that is earned on product sales relative to the cost of the main raw materials PTA and MEG. IVL was able to achieve slightly better than the market average due to its business strategies and intrinsic strengths, which are explained in more detail below.
Demand for PET for packaging
Demand for PET resin is predominantly driven by the growth in demand for end use products, for which PET resin is used as the primary packaging material, such as water and carbonated drinks. This growth is predominantly influenced by population growth, disposable income and consumer trends. PET is currently a substitute for traditional packaging materials such as alumi-num, glass, tetra pack and other polymers made from PET resin due to its ability to retain carbonation and freshness, chemical inertness, recyclability and cost. Moreover, demand has been created by the development and enhancement of PET resin pack-aging, which provides a high oxygen barrier, prevents oxygen seepage and increases product shelf-life. The end-use products which are susceptible to spoilage by oxygen leakage include beer and fruit juices.
Geographic demand drivers for PET
Demand for PET resin is still expected to post positive growth across all regions from 2009 to 2012F although at a slower rate than previously. This phenomenon is in some cases due to the maturity of markets like North American and Europe, the more common use of less PET resin per bottle or “light weighting” and post-consumer recycling, or PCR.
Supply to reflect demand
As demand is largely coming from developing regions and nations, the increase in global capacity for PET resin is expected to be mainly in Asia, primarily driven by China whose capacity additions are expected to service the growing domestic demand. In con-trast, North America and the European Union are expected to see a lack of capacity additions and some capacity rationalization.
Substitution
There is currently no commercially attractive or practical alternative to PET resin in packaging. While there could be other poly-mers which may be substitutes for PET resin in packaging materials, these other polymers are currently expensive to manufac-ture, require raw materials necessary for polymerization that are limited and therefore expensive, are unsafe for food products, difficult to mass produce or have limited production capacity.
Polyester Fiber and Yarn and Wool
Indorama Ventures polyester fiber and yarn and wool businesses constitute one business line of the company. The business embraces the manufacture and sale of a variety of polyester fibers, yarns and worsted wool.
Figure 4: Demand drivers for PET resin
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20.5Mt
1. Real GDP, US$-based, Constant 1998 Prices. Source : IMF
2. SBA-CCI (February 2010)
15.3Mt
North America
Asia
European Union
Central Europe
South America
Middle East & Africa
2009 2013F
North America
Asia
European Union
Central Europe
South America
Middle East & Africa
P E T R es in Demand(2)
R eal
G lobal G DP (1)
C AG R ’09E -’13F = +3.4%
C AG R ’09E -’13F = +7.6%
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Annual Report 2009 31
Product Description
Polyester is one of the most widely used synthetic fibers in the world and is a versatile material with wide-ranging textile and industrial applications. Fabrics woven from polyester thread or yarn are used extensively in apparel and home furnishings, from shirts and trousers to jackets and hats, bed sheets, blankets and upholstered furniture. Industrial polyester fibers, yarns and ropes are used in tire reinforcements, fabrics for conveyor belts, safety belts, coated fabrics and plastic reinforcements with high-energy absorption. Polyester fiber is used as cushioning and insulating material in pillows, comforters and upholstery padding.
Polyester fiber is classified as either a commodity or non-commodity polyester fiber, based on the end use application. Com-modity polyester fibers are sold in bulk with little differentiation between suppliers and generally at lower margins than non-commodity polyester fibers. Non-commodity polyester fibers are produced in smaller volumes. They are generally custom made, have a higher unit value and a customer base that has low price sensitivity. The production of commodity polyester fibers tends to be dominated by large producers with economies of scale, whereas the production of non-commodity fibers tends to be dominated by producers with fit-for-purpose assets and cost efficient and flexible operations.
Installed Capacity
IVL has two polyester plants in Thailand with a total capacity of 244,800 tonnes per year (excluding the 108,000 tonnes per annum converted to PET production at our polyester plant in Rayong) and one wool plant in Thailand with a capacity of 5,900 tonnes per year.
Gaining an Advantage in the Industry
A competitive advantage in the commodity polyester fiber segment of the business is gained through market share, economies of scale and low raw material and logistics costs. In the non-commodity polyester fiber segment, the competitive advantage is achieved through product differentiation, customized service, industry experience and operational excellence. Customers are looking for reliability, cost and flexibility.
Production Methods
Polyester fiber is produced from a mixture of PTA and MEG to produce polyester polymer. There are two polyester polymer production processes which may be used to produce polyester fibers: the batch process and the continuous process. In the batch process, polymerization yields polyester chips which are further processed into polyester fiber. In the continuous pro-cess, however, polyester fiber can be extruded directly from polymerization to direct spinning. For the production of commodity polyester fiber, the continuous process is favored because it is more economical for it creates less waste and has lower energy and labor costs than the batch process technology. For the production of non-commodity polyester fiber, batch processing is preferred because the producer has more flexibility to produce different types of polyester fibers with minimal losses of inter-mediate products.
Demand for polyester fiberThere is growth in demand for conventional end-use products, such as clothing, upholstery, home furnishing and floor covering, in which polyester fiber is used as the primary material. This is further influenced by population growth, disposable income and consumer trends. Polyester is causing the substitution of existing fibers such as cotton, nylon and acrylic due to its versatility and favorable cost-performance characteristics. Another demand driver is the development and enhancement of applications in which polyester adds value, such as those in the non-woven industry, including geotextiles where permeable fabrics are typi-cally used in civil engineering to separate, filter, reinforce, protect, or drain roads and embankments etc. Another industry that uses polyester is the automotive industry, which uses it in airbags, seatbelts and tires.
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The Polyester Fiber Industry
The polyester fiber industry is typically viewed as comprising two main product segments: polyester staple fibers and polyester filament yarns. Polyester staple fibers are bundles of strands cut into short lengths, which are primarily used in apparel and home textiles and are often blended with cotton or other natural and synthetic fibers. Another form of polyester staple fibers, fiberfill, is used as stuffing for toys and pillows and as insulation and padding for bedding and furniture. Polyester filament yarns are con-tinuous strands of fiber, which are used in apparel, home textiles, and industrial end use markets. In 2009, 60.7% of total global polyester fiber was used in the production of polyester filament yarns and the remaining 39.3% was used in the production of polyester staple fibers.
There is steady demand growth for polyester fiber in markets such as North America and the European Union, growing at ap-proximately 4.3% and 2.1%, respectively. Asian demand is rising on average by 7.0% a year, mostly driven by China and India (+8.3% and +8.2% respectively) due to low per capita consumption, disposable income growth and population growth.
The developed regions of North America and the European Union have a per capita consumption of 10.3 kg and 10.1 kg, respec-tively. In comparison, the developing regions of Central Europe, Asia, South America, and the Middle East & Africa, have lower per capita consumption of 6.4 kg, 4.6 kg, 4.1 kg, and 1.2 kg, respectively. Therefore, given the large gap of per capita consump-tion between the developed and the developing regions, there is ample scope for growth, most notably in Asia.
Asia is both the largest producer and consumer of polyester fiber and is a net exporter of polyester fiber. China is by far the largest regional producer and consumer of polyester fiber, accounting for 72.9% of the regional capacity and 64.0% of the re-gional consumption. China is also the largest net exporter of polyester fiber, which can be considered as a potential competitive threat to producers in Asia, in particular, and the rest of the world. Apart from China, the other major producing countries in the region are India, Indonesia, Taiwan, Korea and Thailand, collectively representing 22% of the regional capacity, while the major consuming countries in the region are India, Japan, South Korea and Thailand, collectively representing 22% of the regional consumption. The major net exporters in the region are Taiwan, South Korea, Indonesia and Thailand and the major net import-ers in the region are Japan, the Philippines, Bangladesh and Australia.
Substitution of Competing Fibers
Over the past decade, polyester fiber has been increasingly replacing other fibers such as cotton, nylon, acrylic, and other fi-bers. Polyester fibers are more economical to produce than other man-made fibers including nylon and acrylic. In addition, the substitution of nylon as well as acrylic fibers with polyester fibers has gathered significant momentum over the last two decades. As a result significant investment in polyester fiber production capacity and the lack of correspondingly sizeable investments in acrylic and nylon fibers have changed the economies of scale in the synthetic fiber industry. It is unlikely that such dynamics will be reversed.
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44.2Mt
1. Real GDP, US$-based, Constant 1998 Prices. Source : IMF
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Middle East & Africa
2009
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Annual Report 2009 33
Polyester vs. Cotton
In the past decade, polyester fiber has gained market share against cotton. In 2003, polyester fiber surpassed cotton as the most widely used fiber in the world. Unlike cotton, man-made polyester fiber production is not impacted by the elements and there is no “crop” to harvest. Polyester fiber is less expensive to produce than cotton (therefore energy costs are lower and its carbon footprint smaller) and can be used in a wide range of end use products ranging from apparel to industrial products.
Competitive FactorsIn the polyester fiber industry, companies compete on a variety of factors such as price, product quality, performance or specifi-cations, continuity of supply, customer service and breadth of product line. The competition among existing players is varied and is predominantly dependent on which sector the producer is focused on: commodity polyester fiber or non-commodity polyester fiber. For a commodity polyester fiber producer, the main pricing drivers are the raw material cost and supply/demand balances, wherein prices are public and based on cost-related formulas. For a non-commodity polyester fiber producer, however, price is a reflection of the value added to the customer and that value is decoupled from the raw material cost cycle.
In general, there is a high level of competition for the commodity polyester fiber products and moderate to low level of competi-tion for the non-commodity polyester fiber products.
Wool IVL’s wool business segment comprises the processing of wool into worsted wool yarn. We have a worsted wool spinning mill in Thailand with an installed capacity of 5,900 tonnes per year. Raw wool is imported from Australia, processed in to worsted yarns.
Polyester Fiber, Yarns and Wool Operational Performance
A determinant of the financial performance of a polyester fiber producer is the price spreads that are earned relative to the cost of raw materials. The spread is the difference between the product selling price and the cost of raw materials used in the production of polyester fiber, namely PTA and MEG.
Total revenues from polyester fibers and yarns and wool grew 87% from 2008 to 2009 as the impact of IVL’s acquisition of Tuntex (Thailand) Public Company Limited in 2008, and later renamed Indorama Polyester Industries Public Company Limited (IPI) commenced with a phased start up of operations in Q1/09 culminating in full operations in Q4/09. Accordingly, the operating EBITDA of the business line improved 128%. Integration into PTA and a switch to natural gas based utilities at IPI in the fourth quarter of 2009 also helped to lower production costs. In 2010, IVL will see the first full year of full utilization of this plant and should benefit accordingly.
PTA Our PTA business segment comprises the manufacture and sale of PTA, an organic acid in the form of fine, white powder prin-cipally used as a precursor or raw material in the production of polyester products.
Manufacturers of PTA can be classified between merchant producers and integrated PTA producers. Merchant producers manufacture and supply PTA to third parties, whereas integrated PTA producers manufacture PTA for their own captive con-sumption.
Competitive EnvironmentAs PTA is a commodity product, competition is based mainly on price and, to a lesser extent, on product quality and lead times to product delivery. As IVL has recently moved to integrate PTA into its business, it will continue to take advantage of economies of scale and provide low cost manufacturing due to lower logistics costs together with security of its raw material supply.
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Importance of UtilizationAn important influencing factor on the profitability of a PTA plant is capacity utilization. Down-stream integrated PTA producers can maintain higher capacity utilization due to captive PTA consumption as compared to merchant PTA producers. It has never been IVL’s intention to become a merchant producer – the company is seeking vertical integration to secure its feedstock.
Our PTA business segment supports our PET and polyester business segments and forms part of our strategy of vertically inte-grating our operations. Our aggregate PTA installed capacity is 1,590,000 tonnes per year as of December 31, 2009. We have two PTA plants in Thailand and a PTA plant in the Netherlands. Between 2008 and 2009, utilization of these factories rose from 93% to 100%.
PTA Demand and SupplyDemand for PTA is primarily driven by the growth in demand of polyester fiber, PET resin and film and specialties. Global PTA demand has been growing consistently and is expected to continue to grow at steady rates. The increase in global PTA demand is expected to be driven primarily in Asia and mainly in China. However, such has been the competition by major PTA suppliers to enter China that margins there have suffered.
Diversifying PTA MarketsThere had been talk of China protecting its domestic PTA industry in 2009 and it was no surprise that in early 2010, China im-posed anti-dumping duty on imports of PTA from South Korea and Thailand at a rate of 18 5% - 18 9%. By that time, IVL had already started to diversify its customer base to other markets in Asia and less than 10% of sales are now to China, all to the re-processing areas for re-exports which are not affected by the new duties.
PTA requirements in North America and the European Union are expected to decline or remain stable as a result of the slowdown in new capacity additions and the industry rationalization in the PET resin and/or polyester fiber industry discussed above.
The reduction reflected in demand for PTA in Europe is primarily attributed to the lack of new capacity additions and continued industry rationalizations in the PET resin and polyester fiber industries.
PTA Operational PerformanceOur PTA business segment in the first full year of operations in 2009, post acquisition in 2008, saw a 907%, increase in PTA EBITDA at the end of 2009 from the end of 2008, primarily due to an increase in production volumes of 197% and in our PTA gross margin. This was because we increased our sales volumes but decreased our per unit production costs resulting from lower energy prices. Investors should be aware that we are an integrated producer of PTA and we allo-cate earnings from this business to our PET and polyester businesses on a pro rata basis.
Financial Performance of product segmentsContributions of each segment in 200955% of revenue and 53% of EBITDA comes from PET15% of revenue and 13% of EBITDA from polyester and wool30% of revenue and 34% of EBITDA from PTA
Why IVL has performed wellManagement has a clear business strategy to become a leader in the polyester chain industry, and to lead its future consolidation.
Strategy SummaryAs one of the only vertically integrated producers of polyester products, with its own captive PTA production, IVL is able to take advantage of lower logistics costs as the feedstock is delivered via pipe or barge and thus gain a larger part of the polyester chain spread. IVL then also becomes protected from volatility in the PTA market. The company, while maintaining its identity as a low
Annual Report 2009 35
cost producer, has invested in the best technology to increase efficiency and lower conversion costs where possible. In many parts of the world, we now compete against manufacturers with considerably older and less efficient technology. And finally, we can exploit these advantages in an industry that is growing at a multiple of approximately twice GDP growth.
Over time we have sought and exploited opportunities to acquire and develop assets so as to capture market growth while at the same time differentiating ourselves to stay ahead of the competition. Business ObjectivesIVL’s objectives are to be the market leader in the polyester value chain in terms of scale and integration, profitability and re-turn on investment, supported by a focus on delivering superior customer satisfaction and on corporate responsibility, thereby enhancing shareholders’ value. Our ongoing and future strategy has therefore been designed to help us continue achieving our objectives.
How to get thereTo achieve these focused objectives, the company has to sustain and increase its market posi-tions through selective focused growth and investment. To create wider margins and lower volatility, IVL will also have to continue enhancing its vertical integra-tion, and we will explain more about this below. The past has taught us that a business cannot rely too much on one market or one product, so IVL will continue diversifying the product and customer mix, developing our recycling capabilities and increasing use of recycled materials to ensure global acceptability of our products continues to grow.
Net income growth will also come through additional margin expansions and cost savings initiatives in raw materials procure-ment, energy integration, more efficient logistical operations and continued financial discipline.
We will strive to maintain an efficient capital structure as we grow to provide us sufficient flexibility in our operations and sufficient liquidity in our cash flow position.
Management Track RecordAny new shareholders of IVL would do well to look at management performance of its previ-ously-listed subsidiary Indorama Polymers Plc (www.indoramapolymers.com) as it will become clear that management has a track record of success in generat-ing high returns for shareholders.
Financial Discipline and PrudenceIVL is committed to maintaining a continued emphasis on financial discipline and prudent investment decisions, evaluating each potential investment on the basis of stand-alone profitability and efficiency, in addition to potential synergistic contribution within the overall organization. IVL intends to continue to finance projects on a stand-alone basis, maintaining debt levels where cash flows from individual operations are sufficient to cover debt service requirements even during industrial downturns.
Indorama Ventures is committed to maintaining a continued emphasis on financial discipline and prudent investment decisions, evaluating each potential investment on the basis of stand-alone profitability and efficiency, in addition to potential synergistic contribution within the overall organization. We strive to maintain an efficient capital structure as we grow to provide us sufficient flexibility in our operations and sufficient liquidity in our cash flow position.
Integrated Business ModelWe expect vertical integration, either through asset ownership, co-location with third party assets or virtual integration through co-location with key raw material suppliers, to enhance our operational and logistical efficiency, cost competitiveness and raw material security. Integration through owned assets also enhances our ability to insulate ourselves from sector cyclicality and improve the quality and predictability of earnings. Moving forward, our strategy will focus on growing our PTA capacities in line with our downstream PET and polyester capacities, especially in markets that we identify to be important.
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During 2008, we entered the PTA segment of the polyester chain through the acquisition of three PTA production facilities, which provide raw material support for our downstream PET and polyester facilities. We intend to gradually consume an increasing quantity of PTA internally through our PET and polyester facilities, reducing quantities available for merchant sales. A significant proportion, 48% of our PTA production is used internally.
What we integrateThe key raw material for PET/Polyester production is PTA and MEG, with Paraxylene (PX) used to produce PTA. IVL is among the world’s largest buyers of PX and MEG. We are vertically integrated into PTA, either through our own co-located PTA produc-tion facilities, or through virtual integration with PTA piped in from adjacently located feedstock suppliers.
There are opportunities for further real or virtual integration into PX and MEG, as well as energy integration by acquiring the util-ity assets of, or partner with, suppliers. By increasing supply chain efficiency the logistics cost for raw materials will come down.
The key benefits of vertical integrationAs mentioned above, it is the security of PTA supply for our PET and polyester operations during periods of market fluctuations, specifically in periods of high PTA demand, that will allow us to make better cost planning and lower volatility. Integration means captive consumption for our PTA operations, resulting in the ability to maintain higher capacity utilization as compared to mer-chant PTA suppliers, even in periods of reduced PTA demand. Through PTA and PET and polyester site co-locations costs can be reduced due to the reduction of logistics costs and the sharing of common services. Also, there are cost savings due to the reduction of fixed costs associated with raw materials procurement, sales and marketing and administrative functions.
Integration enhances operating efficiency, competitiveness and responsiveness to customers and market developments, as well as allowing stability in volumes and profits. IVL can secure a PTA supply for internal PET and Polyester operations during periods of market fluctuation, especially in periods of high PTA demand.
In the current market environment, IVL also benefits from oversupply of our key raw materials, namely PX and MEG. This over-supply is driven by unprecedented recent capacity additions globally that will push supply to outstrip demand growth for both PX and MEG for the short and medium term. This will lead to downward pressure on PX and MEG prices, which in turn will benefit the polyester chain.
Industry Focus as a strategyIndorama Ventures Plc is one of the few petrochemical companies that focuses on the polyester value chain, compared with other important players who are organized in large divisions that, in turn, consist of many different businesses. We believe that the key advantages of being a focused player are a better understanding of the key success factors for individual businesses; a more efficient allocation of capital and human talent; an ability to make quick management and commercial decisions; and the reduction of overheads needed to manage a diverse set of operations.
We are solely focused on the polyester chain, with 99% of revenues coming from polyester products, whilst the majority of other important players are organized in large divisions, with polyester chain products being non-core businesses. This lack of focus often leads larger conglomerates to rationalize and divest if they are using older technology or are unable to maintain high uti-lization rates.
It is because of this keen focus and commitment to the industry that since 2003 we have grown through expansions and acquisi-tions and by expanding our business portfolio and geographical presence. In future, we will look closer at Brazil, Russia, India and China as well as the Middle East and Europe, to invest in or acquire large scale, latest generation assets, including PET pro-duction facilities with an economic size, that will contribute to a sustainable and competitive position on the cost curve. We will continue to expand and debottleneck capacity at existing facilities.
Global Sales and Manufacturing Footprint Leads to SuccessIndorama Ventures is a global company with 13 manufacturing facilities located in five countries, Thailand, the United States, Lithuania, the Netherlands and the United Kingdom, across three continents, namely Asia, North America and Europe, supplying products to customers worldwide. Indorama Ventures is the only PET resin producer with operations in Asia, North America and Europe, the three major PET resin regions. Our polyester business is located in Thailand and has a globally diversified customer
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base. Our PTA is manufactured in Thailand and Europe to provide the support to our downstream operations as well as to market to external customers worldwide.
This global footprint enables us to capture volume growth and widen our customer base. By being closer to both customers and suppliers, we can increase our cost competitiveness and lower our logistical costs. As protectionism leads to trade barriers, globalisation means we benefit by avoiding existing trade barriers and reduce exposure and dependence on any single market. Moreover, we are able to operate our facilities at higher utilisation rates than the average in each region
Economies of ScaleIVL has large, efficient, production facilities in the PET resin and PTA industries. Our newest PET facility, the AlphaPet PET facility, is one of the largest in North America and employs the latest generation PET technology from Germany’s Uhde Inventa Fischer. These large-scale, modern and efficient facilities enable us to achieve a competitive cost position in the industries where economies of scale are critical. In the polyester business, where we focus on the production of niche products, we have invested in fit-for-purpose, flexible assets which are ideally suited for the production of niche and value added products.
Manufacturing EfficiencyThis is achieved through running our facilities at high capacity utilization rates with optimal levels of manpower, low overhead costs, as well as energy and utilities cost savings. Cost competitiveness improved by building efficient utility plants using coal or gas as feedstock at most of our facilities and, where possible by selling excess electricity and steam to third parties to reduce our own cost of electricity and steam. We benchmark all of our facilities against each other in order to optimize performance.
Diversifying the Product and Customer MixDiversifying our customer mix, both geographically and through end-use applications (for some business segments), is an im-portant aspect for our continued success in the polyester value chain. We plan to continue to enhance our marketing efforts to geographically diversify our customer base for our PET and PTA product lines. For our PET and polyester business segments, in addition to continued expansion of geographic reach, we also look to diversify our customers based on the end-use applica-tion mix. We believe this strategy will help insulate us from dependence on individual customers and/or an individual application base, providing us with protection against potential customer distress or industrial downturns in individual application sectors.
In the polyester business, in addition to maintaining cost and price competitiveness, we seek to differentiate ourselves through value added products. This necessitates that we maintain a wide product range to be a “one-stop shop” for a customer’s require-ments and maintain flexibility in our manufacturing processes to satisfy customer requirements on short notice.
Focusing on Recycling to Protect the FuturePET resin is a recyclable and energy efficient packaging material, easily recovered and reused by simple washing processes to regenerate clean washed polymer flakes or by chemical treat-ment to break down the PET resin into raw materials or intermedi-ates which are converted into new PET resins. Recycled PET resin can be used to make many new products, including polyes-ter fiber for carpet, apparel, luggage, upholstery, fiberfill for sleeping bags and winter coats, industrial strapping, sheet and film, automotive parts, such as luggage racks, headliners, fuse boxes, bumpers, grilles and door panels.
IVL will focus on the development of our research and development capabilities to better serve our polyester polymer customers by developing products tailored to serve their requirements. Use of recycled materials within our standard processes will allow us to cater to changing customer objectives and proactively address environmental issues so that more people become aware of the environmental advantages of polyester and PET.
Acquisitions at a Reasonable CostAchieving a low capital cost structure has meant constructing large scale plants and acquiring assets at a discount to their re-placement cost. Our Orion Global and AlphaPet PET production facilities benefit from a low capital cost per tonne because of their large scale. We have acquired our Thai PTA and polyester assets as non-performing assets at a discount to their replace-ment cost. Our European PET and PTA assets were purchased at lower than the replacement cost and turned around in one year through a high utilization rate, increasing sales volume, the integration of PTA into our PET production in Europe and lower conversion costs to create excellent profita-bility.
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Risk Factors and Risk Management
The following describes some of the significant risks that could affect us and the value of our shares. All of these could affect our business, revenue, profit, assets and liquidity, or the Company’s source of fund.
Risks Relating to Our Businesses and Operations
We operate in highly competitive industries and the actions of our competitors could impact our profitability and market share. High levels of price and other competition characterize the industries in which we operate. In addition, many of our products are commodity products, and it may be difficult to have product differentiation and pass on increased cost to customers. Other com-petitive factors include product quality, specifications or product performance, continuity and reliability of supplies to customers and sustaining long-term customer relationships.
We principally compete with several large multinational companies in each of our business segments. We also compete with numerous regional and/or specialized producers in the markets for our polyester fiber products. Some of these competitors may have greater market presence and/or financial and other resources than us. In addition, margin pressure could arise from, among other factors, limited demand growth and overcapacity in a relevant market. For example, China, whose domestic de-mand for PET resin may fall short of the forecasted capacity increase), price reductions by competitors, new industry players, industry consolidation, the ability of competitors to capitalize on their economies of scale and create excess product supply and the access of competitors to new technology that we do not possess.
The cyclical nature of the PTA, the PET resin, and polyester fiber industries could result in overcapacity.Our operating results reflect the historical cyclical pattern of the PTA, PET resin, and polyester fiber industries, with periodic overcapacity and resulting pressure on pricing. This cyclicality arises, in part, from investments made at the top of the cycle (when margins are high and funds are available), thereby shifting the balance of supply and demand by new capacity coming on stream in large quantities. Consequently, the industry has from time to time experienced periods of overcapacity, such as when new plants are built and become operational, and there can be no assurance that this will not recur. In the absence of sufficient economic growth to generate increased demand or the closure of facilities to mitigate the effect, new capacity can cause a period of regional or global overcapacity that may lead to downward margin pressure.
Our inability to pass on raw materials price increases to customers could adversely affect our operating results.Any increase in raw materials costs without a corresponding increase in selling price would reduce our operating results. Our ability to pass on raw materials price increases is dependent upon market conditions and our relative cost position compared to competitors. There may be periods of time in which we may not be able to recover increases in the cost of raw materials fully due to contractual arrangements or to weaknesses in demand for, or oversupply of, our products. Our operations are dependent on the availability and cost of raw materials.Our operations are substantially dependent on the availability and cost of our primary raw materials: PTA (limited to merchant purchases primarily in USA) and MEG for our PET and polyester fiber and yarn businesses, and PX for our PTA business. PX, PTA and MEG are oil and natural gas derivatives, and are usually manufactured by large petrochemical companies. Thus, the costs of production of PTA, PET and polyester are affected by the international and domestic prices of crude oil, natural gas and refined petroleum products. Our financial condition and results of operations are thereby influenced by market prices for crude oil, natural gas and refined petroleum products, which are subject to the forces of international, regional and domestic supply and demand, as well as other factors beyond our control.
The markets and prices for petroleum products may be influenced by aggregate demand for such products (which can fluctuate with changes in economic conditions and cycles, seasons and weather patterns), the level of domestic and regional production, the prices and availability of imports, the prices and availability of substitute fuels and the extent and nature of governmental regulation and taxation. Worldwide supply conditions and the price levels of crude oil may also be significantly influenced by
Annual Report 2009 39
international groupings, which control the production of a significant portion of the worldwide supply of crude oil, and by political developments, especially in the Middle East. In addition, factors such as domestic and foreign government regulations, weather conditions, and competition from other energy sources also have an impact on crude oil and petroleum product prices.
Increases in our costs could adversely affect our operating results.As we are unable to influence commodity prices directly, our competitiveness and long-term profitability are, to a significant de-gree, dependent upon our ability to reduce costs and maintain low-cost and efficient operations. Our inability to maintain our cost structure and efficiently operate our manufacturing facilities may increase our costs and adversely affect our operating results. Certain non-controllable costs may increase due to external factors beyond our control, which may also reduce our operating results. Examples of non-controllable costs are energy costs, insurance costs, tax costs and pension costs.
Over the past few years, we have experienced significant cost increases for energy sources. While we attempt to match energy price increases with corresponding product price increases. Ultimately, our ability to pass on increases in our costs to customers is dependent upon market conditions.
In addition, production in our polyester fiber and yarn business is labor intensive. Consequently, inflationary pressures, changes in applicable laws and regulations or other factors resulting in increased labor costs.
Shortages or disruptions of supplies to our customers due to unplanned production capacity decreases or shutdowns of production plants may reduce sales.Production at our manufacturing facilities or delivery of supplies to our customers could be adversely affected by technical failures, strikes, natural disasters, regulatory rulings and other factors. Unexpected events, such as manufacturing problems, unplanned shutdowns or loss of supplies, could lead to reduced sales.
If the capacity of one or more material facilities is reduced or the manufacturing of material products is shut down for a prolonged period and we are unable to shift sufficient production to other plants or draw on inventories, or if we are unable to run our pro-duction facilities at our typical utilization rates because of a disruption to our raw material supplies, we may not be able to fulfill our product delivery obligations and we could be exposed to claims for damages and suffer reputational harm.
The costs and difficulties of integrating future acquired businesses and technologies could impede our future growth and adversely affect our competitiveness.As part of our strategy, we may seek further growth through acquisitions of other PET, polyester or PTA companies in order to maintain a competitive position within the industries in which we operate and to enhance our position in our core areas of operations. This strategy entails risks including:• unidentified or unanticipated liabilities or risks in the operations of the companies which we may acquire;• potential failure to achieve the economies of scale, synergies or other benefits sought;• greater than expected costs and management time and effort involved in completing and integrating the acquisitions;• inability to successfully integrate the services, products and personnel of the acquisitions into our operations or to realize any expected cost savings or other synergy benefits from the acquisitions;• inability to retain employees, customers and supplier relationships;• Lack of return on our investment. We may not be able to identify attractive acquisition opportunities or make acquisitions on attractive terms, or obtain financing necessary to complete and support such acquisitions. Regulation of merger and acquisition activity by the European Union, the United States, Thailand or other national regulators may also limit our ability to make future acquisitions or mergers.
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Significant capital investments including future development of new facilities have been, and may in the future con-tinue to be, necessary to achieve our growth plans, which carry project and other risks.Our growth plans have required, and may continue to require, significant capital investments to expand, renovate, convert or up-grade existing facilities, develop new facilities or make major acquisitions or investment. Projects that require significant capital expenditure carry risks including:• failure to complete a project within the prescribed project timetable and/or within budget; and• failure of the project to perform according to prescribed operating specifications following its completion.• In addition, any significant increases in costs unforeseen in the project plan and any inability to sell the products pro-duced at volumes and/or price levels envisaged in the project plan could affect the success of our projects. Due to the significant amount of capital required and the long lead time between planning and completion of such projects, project delays could have an effect on our business and prospects.
Our production facilities are subject to operating risks that may adversely affect our operations.We are dependent on the continued operation of our production facilities. These production facilities are subject to hazards associated with the manufacturing, handling, storage and transportation of chemical materials and products, including pipeline leaks and ruptures, explosions, fires, inclement weather and natural disasters, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, remediation complications, chemical spills, discharges or releases of toxic or hazardous substances or gases, storage tank leaks and other environmental risks. These hazards can cause personal injury and loss of life, severe damage to, or destruction of, property and equipment, environmental damage, fines and liabilities.
On January 8, 2010, Indorama Petrochem received a letter from the Industrial Estate Authority of Thailand (“IEAT”) informing it that, following an inspection of the Indorama Petrochem PTA facility, Indorama Petrochem is disposing of production waste by burning such waste using a thermal oxidizer without the requisite approval from the Department of Industrial Works (“DIW”). In addition, there were signs of chemical leakage at the thermal oxidizer, the nitrogen oxide and carbon monoxide emissions from the stack of the thermal oxidizer and the vent scrubber, respectively, exceeded applicable maximum permissible limits and a chemical odor originated from the facility. As a result, the IEAT ordered Indorama Petrochem to cease the treatment of waste using the thermal oxidizer immediately and make improvements to its air pollution treatment system by February 15, 2010. Indorama Petrochem has taken various steps to address the issues raised in the IEAT’s letter. IRPTA has undertaken and completed all the necessary requirements from IEAT and informed to them during their visit to the plant on February 15, 2010. In addition, some of our production facilities, such as our AlphaPet PET facility, our IRP Rotterdam PET and IRH Rotterdam PTA facilities, our Indorama Polyester Industries’ Map Ta Phut polyester facility and our TPT Petrochemicals PTA facility, are co-located at sites where our neighbors face the same operational risks and, in some cases, they provide critical supplies and/or services, and any disruption in those supplies and/or services could affect our operations.
Exchange rate and/or interest rate fluctuations may have a significant adverse impact on our business, financial condi-tion, results of operations and prospects.As a result of the global nature of our business, changes in foreign currency rates could have an adverse impact on our busi-ness, financial condition, results of operations and prospects. Currency fluctuations affect us because of mismatches between the currencies in which operating costs are incurred and those in which revenues are received. We sell products that are typically priced by reference to prices in U.S. dollars or Euros, while a portion of operating costs are incurred in local currencies, including the Baht, Sterling pound and Lithuanian Litas.
Our reported earnings may also be affected by fluctuations between the Baht, which is our reporting currency, and the non-Baht currencies in which some of our subsidiaries report their results of operations. As a result, for the year ended December 31, 2008, we incurred a net foreign exchange loss of Baht 523.8 million, and for the year ended December 31, 2009, we incurred a foreign exchange gain of Baht 567.7 million.
In addition, our operating subsidiaries usually borrow in the principal currency in which they do their business to minimize cur-rency risks. This exposes us to interest rate risks associated with these currencies, the principal ones being the Baht, the U.S. dollar and the Euro.
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Litigations 1. Eastman Chemical Company (“Eastman”) filed a complaint in the Delaware District Court against AlphaPet, IRP Rotterdam, IRP Workington, IRH Rotterdam and Indorama Polymers on December 18, 2009 in connection with commercial production at the AlphaPet PET facility. IRP Rotterdam, IRP Workington and IRH Rotterdam (the “European Defendants”) entered into a Technology License Agreement with Eastman in connection with our acquisition of Eastman’s north-west European PET and PTA businesses in March 2008, pursuant to which the European Defendants received a license to use licensed technology secrets to make certain commercial products as part of the acquired business. In the complaint, Eastman alleges that:
• AlphaPet infringes certain patents owned by Eastman;• the European Defendants breached the Technology License Agreement; and• the defendants misappropriated Eastman’s confidential and proprietary trade secret information under Delaware statutes.
We intend to defend ourselves vigorously against these claims. We have appointed our legal counsel Kirkland and Ellis LLP. The legal counsel is making initial investigations and preparing a response to be submitted in the courts. AlphaPet has pur-chased the plant and technology for its PET resins plant from Inventa Fischer, a plant and technology supplier. The audited fi-nancial statements have disclosed the lawsuit as a contingent liability and at this time not possible to quantify impact. However, litigation of this nature can take a long time to resolve and we cannot predict when these legal proceedings will be completed.
Eastman’s complaint includes an allegation that the European Defendants breached the Technology License Agreement, as described above. If the court were to find that the European Defendants had materially breached the Technology License Agreement, Eastman may be able to terminate the agreement and all licenses granted thereunder. In that event, the European Defendants would be required to either renegotiate the terms of the license with Eastman or implement suitable substitutes to continue operation of the plants, which could result in the suspension of operations until new terms were negotiated with East-man or a suitable substitute technology was implemented. We believe that alternative technologies are readily available in the market for a relatively low cost; however, we cannot assure you how long it would take to implement any new technologies at these plants.
2. On June 19, 2009, two Thai NGOs and a number of people living in Map Ta Phut, Ban Chang and Meuang District, Rayong Province filed a lawsuit in the Thai Central Administrative Court against various Thai Ministers and governmental entities. The claimants alleged that the respondents breached Thai constitutional and other laws by approving the construction or operation of 76 projects without complying with the relevant procedures specified under such laws. One of the projects named in the lawsuit is the Indorama Petrochem PTA facility, located in Ban Chang, Rayong.
On September 29, 2009, the Thai Central Administrative Court issued an injunction ordering the respondents to procure the temporary suspension of operations of the 76 projects until final judgment. The Thai Attorney General and a number of indus-trial operators, including Indorama Petrochem, filed an appeal against such injunction to the Supreme Administrative Court. On December 2, 2009, the Supreme Administrative Court stated that its preliminary consideration of the type or nature of the proj-ects or activities that were subject to the injunction led them to the view that certain projects or activities were unlikely to have a material impact on the local community because they focused on the control or treatment of, or the installment of additional equipment to control or treat, pollution. Therefore, the Supreme Administrative Court ruled that the Indorama Petrochem PTA facility was one of the 11 projects that would no longer be subject to the injunction.
Changes in laws and regulations relating to beverage containers and packaging could reduce demand for such end use productsLegal requirements have been enacted in various jurisdictions in the United States and elsewhere requiring that deposits or certain eco-taxes or fees be charged for the sale, marketing and use of certain non-refillable beverage containers. Other pro-posals relating to additional beverage container deposits, recycling, eco-tax and/or product stewardship have been or may be introduced in various jurisdictions in the United States and elsewhere. Consumers’ increased concerns and changing attitudes about solid waste streams and environmental responsibility and related publicity could result in the adoption of such legisla-
42 Indorama Ventures PCL
tion or regulations. This has encouraged some of our PET customers to reduce the amount of PET resin they use in their bottle production process. This process, known as light weighting, has reduced the amount of PET resin used in each bottle and has affected the demand for PX, PTA and PET resin.
Environmental regulations may cause us to incur costs and liabilities.Our operations are subject to environmental laws and regulations by central and local authorities in the countries in which we operate. These include laws and regulations pertaining to pollution, the protection of human health and the environment, air emissions, wastewater discharges, occupational safety and health, and the generation, handling, treatment, remediation, use, storage, release and exposure to hazardous substances and wastes. These requirements are complex, subject to frequent change and have tended to become more stringent over time. We have incurred, and will continue to incur, costs and capital expenditures in complying with these laws and regulations and in obtaining and maintaining all necessary permits.
We have procedures in place to allow us to comply with environmental laws and regulations; however, there can be no assur-ance that we will at all times be in compliance with all of our obligations in the future or that we will be able to obtain or renew all licenses, consents or other permits necessary to allow us to continue to operate our businesses. Any failure by us to comply with such laws and regulations could subject us to fines, penalties and other liabilities.
We have activities in certain countries that are subject to sanctions in the United States and elsewhere and such activi-ties could trigger these sanctions under relevant legislation.The U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC, administers certain laws and regulations that impose penalties upon U.S. persons and, in some instances, foreign entities, for conducting activities or transacting business with certain countries, governments, entities or individuals subject to U.S. economic sanctions, or U.S. Economic Sanctions Laws.
As a globally operating organization, we conduct business with customers (either directly or indirectly through traders and agents) in various countries including Iran, Syria, Myanmar and the Ivory Coast. Our activities with customers in these states, which are predominantly sales of PET resin, polyester fiber and yarn and wool, are insignificant when compared to our entire business. We seek to comply fully with international sanctions to the extent they are applicable to us and will continue to do so.
Our international presence exposes us to macro economic, political, legal and regulatory risks in the markets in which we operate and to other challenges.International operations present challenges related to operating under different business cultures and languages. We may ex-perience increased difficulty in the collection of accounts receivable, including longer collection periods; we may have to comply with inconsistent, or unexpected changes in, foreign laws and regulatory requirements which could negatively impact our op-erations and ability to manage our global financial resources; export controls or other regulatory restrictions could prevent us from shipping our products into and from some markets; quota requirements, including quotas regulating the composition of our employee base or promoting local sourcing of raw materials, could have an adverse effect on our production costs; changes in currency control, tax regulation and international tax treaties could impact the financial performance of our international opera-tions and their contributions to our overall financial performance. Similarly, events beyond our control, such as political instability or social unrest, could affect consumer demand in general and increase volatility in price of raw materials and other costs.
We could be affected by the application of antitrust laws and anti-dumping and anti-subsidy duties.In recent years, antitrust investigations and actions have been launched in a number of jurisdictions against companies in indus-tries in which we are active, indicating that the sector in which we operate may face continuing regulatory scrutiny. Therefore, we face the risk that our business could be adversely affected by the application of U.S., European Union or other national competition laws to any agreements or practices in which we have been engaged or is a party to. In addition, anti-dumping and anti-subsidy duties have been imposed by the European Union on Asian imports of PET resin. These anti-dumping and import duties make it more difficult for imported PET resin to compete with locally produced PET resin. These anti-dumping and import duties give PET resin producers in Europe a competitive advantage over Asian importers of PET resin. However, there is no
Annual Report 2009 43
guarantee that the European Union will continue to maintain such anti-dumping and import duties on imported PET resins. In February 2010, China imposed anti-dumping duties on imports of PTA from Thailand and South Korea.
Our business depends, in part, on our informal relationships with other Indorama group entities in Indonesia and India.We are a part of an informal Indorama Group, which consists of three independently managed associate groups, namely our-selves, the S.P. Lohia Group Indonesia and the O.P. Lohia Group India. The Indorama Group was founded by Mr. M.L. Lohia in 1976 in Indonesia, and each of the groups is currently managed by one of Mr. M.L. Lohia’s sons.
The Indorama name does not belong to us, and we have a non-exclusive license for its use pursuant to a License Agreement with Lohia Global Holdings Limited, a company controlled by Mr. M.L. Lohia. The S.P. Lohia Group and the O.P. Lohia Group also use the Indorama name. We do not control how the S.P. Lohia Group and the O.P. Lohia Group use the Indorama name and cannot assure you that their actions will not adversely affect the reputation associated with the Indorama name.
The Company is a holding company and is dependent on the receipt of dividends to make dividend payments on our sharesAs a holding company, the Company is dependent on the receipt of dividends from its subsidiaries and associated companies. Payment of these dividends will depend on their future financial performance, which in turn depends on successfully implement-ing their strategies, and on financial, competitive, regulatory, technical and other factors; general economic conditions; demand and selling prices for their products and other factors specific to their respective industries or specific projects, many of which are beyond our control.
The ability of our direct and indirect subsidiaries to pay dividends to their shareholders, including the Company, is subject to applicable law. Although we intend to pay dividends our ability to pay in the future will depend upon the decision of the Board of Directors and/or the approval of the shareholders at a general meeting, our results of operations, cash flows, financial condi-tion, contractual restrictions and restrictions imposed by applicable law and other factors the Board of Directors deems relevant.
[For details: Please refer to Section on Risk Factors in Form 56-1]
44 Indorama Ventures PCL
Related Party Transactions
The related party transactions of IVL occur in the normal course of business and the pricing is akin to market prices that would normally be charged to/ by any other customer/ supplier with comparable and reasonable terms and conditions. The following is a summary of such transactions as at 31 December 2009 with the rationale for each:
I. Normal Business Transactions
Type of Transaction
Sale of Preforms, Closures and Bottles
1) Petform (Thailand) Ltd. sales to Sermsuk PCL.
Sale of Purified Terephthalic acid
1) Indorama Petrochem Ltd. sale to Indorama Syn thetics India Ltd.
Sale of Polyester Fibers and Yarns
1) Indorama Polyester Industries PCL. sales to P.T. Indorama Synthetics Tbk Ltd, Indonesia
Purchase of Additive & Chemicals
1) Indorama Polyester Industries PCL. (“IPI “) purchase from P.T. Indorama Synthetics Tbk Ltd, Indonesia
Type of Transaction
Dormitory Rental at Rayong
1) Indorama Polyester Indus-tries PCL. Payment to Pacific Resources Ltd.
Rationale
Sermsuk PCL is Petform’s major customer, buying preforms, closures and bottles for blowing/filling Pepsico products.
Indorama Synthetics India Ltd. is a Polyester manufacture and uses PTA as a raw material.
Since IPI started operations after closure of the plant for more than 3 years, sales transactions were undertaken in order to test and establish quality of the product.
Some of these chemicals and ad-ditives were required on an urgent basis for the start up operation of the plant
Rationale
Pacific Resources owns dormitory near the factory site of IPI measuring 7,577 Sqm which IPI required to rent for their factory staff.
Pricing Method
Rent and service charge based on fair market value of property with a return of 7% – 8%.
Pricing Method
Pricing is negotiated with Serm-suk PCL periodically reflecting prevailing market prices.
Negotiated per market rate as ap-plicable to other customers.
On applicable market rate basis
On market rate basis
OutstandingAmount (MB)
702.50
926.99
52.66
0.82
Amount (MB)
2.70
II. Rental/Lease (not exceed 3 years) without any indication of General Trading Condition
Annual Report 2009 45
Office Space Rental at Ocean Tower 2, Bangkok
1) Indorama Polyester In-dustries PCL. Formerly Indo Poly (Thailand) Limited. Pay-ment to Pacific Resources Ltd.
2) Indorama Holdings Limited. Payment to Pacific Resources Ltd.
Office Space Rental at Nakhon Pathom
1) Indorama Polyester Indus-tries PCL. formerly Indo Poly (Thailand) Limited. Received payment from Cryoviva (Thailand) Ltd.
Pacific Resources, owner of 28th floor at Ocean Tower 2, Bangkok, has rented out office space of 1,457.88 Sqm to Indorama Polyester Industries Pcl for their use.
Pacific Resources owner of 28th floor at Ocean Tower 2, Bangkok has rented out office space of 857.73 Sqm to Indorama Holdings for their use.
Indorama Polyester Industries for-merly named Indo Poly (Thailand) Ltd. owner of the factory office building at Nakhon Pathom has rented out office space of 630 Sqm to Cryoviva (Thai-land) Ltd. for their use.
As per prevailing rent in Ocean Tower building
As per prevailing rent in Ocean Tower building
The rental charge is based on comparable market rates in that area
3.45
1.80
0.94
Type of Transaction Rationale Pricing Method Amount (MB)
III. Financial Assistance
Type of Transaction Long Term Loan
1) Canopus International Ltd. provides to Indorama Ventures Limited
Rationale
Canopus lent USD 10 Million loan to IVL as financial support for the restructuring of IRPTA
Pricing Method
Interest free
Amount (MB)
24.47
Relationship with Related Parties Related parties are those parties linked to the Group and the Company as shareholders or by common shareholders or directors. The relationships for the above transactions are as follows:
Name of entities
Petform (Thailand) Ltd.
Serm Suk PCL
Indorama Petrochem Ltd.
Country of incorporation
Thailand
Thailand
Thailand
Nature of relationships
Indirect Subsidiary, joint venture company between Indorama Polymers PCL. Serm Suk PCL.
Major Shareholder of Petform (Thailand) Ltd., holding 40%, one common director
Direct Subsidiary, 100% shareholding
46 Indorama Ventures PCL
Name of entities
Indorama Synthetics India Ltd.
Indorama Polyester Industries PCL.
P.T. Indorama Synthetics Tbk Ltd.
Pacific Resources Ltd.
Indorama Holdings Limited
Cryoviva (Thailand) Ltd.
Canopus International Ltd.
Country of incorporation
India
Thailand
Indonesia
Thailand
Thailand
Thailand
Mauritius
Nature of relationships
Mr. O.P. Lohia, major shareholder of Indorama Synthet-ics India Ltd. is a blood brother of Mr. Aloke Lohia
Direct Subsidiary, 99.55% shareholding
One common director
Mr. Anuj Lohia, son of Mr. Aloke Lohia is the major shareholder of Pacific Resources Ltd.
Direct Subsidiary, 97.93% shareholding
One common director
Ultimate shareholders
License Agreement and Royalty Fee Agreement, dated 16 November, 2009The Board of Directors of IVL approved the above two agreements at its Board meeting no 2/2009 dated November 16, 2009 for the payment of Royalty fee to Lohia Global Holdings Limited, the owner of the name “INDORAMA” for the perpetual use of the said name by IVL or its subsidiaries as stated in the License Agreement and Royalty Fee Agreement.
Relationship:
Mr. M.L. Lohia is a major shareholder and a director of Lohia Global Holdings Limited and is a father of Mr. Sri Prakash Lohia and Mr. Aloke Lohia who are directors of the Company.
Terms and Fees:
IVL has to pay royalty fees at the rate of US$0.5 per tonne produced by IVL and its subsidiaries (excluding waste) .The payment of fees will be made quarterly effective from March 1, 2010.
On the occurrence of the actual transaction, the same will be disclosed in the Financial Statements and reported to the Audit Committee and Board every quarter in the prescribed statement. IVL may in the larger interest/ benefit of the Company and the Group suitably amend the License agreement and Royalty fee agreement
The Audit Committee Opinion on the Related Party Transaction
The abovementioned related party transactions have been considered by the Company’s Audit Committee, which opined that said transactions are reasonable and necessary to the Company’s operations. Entering into those transactions, the Company has considered the best interest of the Company as a priority and there was no transfer of benefit between the Company and the persons who have a conflict of interest.
Policy and Procedure to Approve Related Party Transactions
In such event that the Company carries out any business with a related party who may have a conflict of interest with the Company, the Audit Committee will express its opinion regarding the necessity of such transactions. The Audit Committee will ensure that the terms and conditions of these transactions are consistent with market practice and that the prices charged are
Annual Report 2009 47
evaluated and comparable with market prices. In the event that the market price is not available, the Audit Committee must ensure that the price is reasonable and the transaction carried out in the best interest of the Company and its shareholders. If the Audit Committee is unable to evaluate a related party transaction due to lack of expertise in certain areas, the Company will arrange an independent expert to evaluate and give an opinion on such transaction. The Board of Directors or Audit Committee or the Company shareholders, as the case may be, will use this opinion from the independent expert as a supplement to form their own conclusion. Those directors who may have a conflict of interest with the Company are prohibited from voting on issues regarding related parties transactions. All Related Party transactions will be reported by the statutory auditors in their quarterly and audited financial statements and in Form 56-1 and Annual Report as per the SEC/SET guidelines.
Policy on Entering into New Related Party Transactions
For any new related transaction, Indorama Ventures PCL will ensure that such transactions are carried out in compliance with the SEC Act, rules, notifications and regulations of the Capital Market Supervisory Board, the SEC and the SET. In addition, the Company must also comply with the Thai GAAP on disclosure rules related to related party transactions and other requirements as specified by the Institute of Certified Accountants of Thailand and the policy of Indorama Ventures PCL
As above, when proposing to conduct business with a related party, Indorama Ventures PCL will seek its Audit Committee’s opinion on the reasonableness of such transaction. In the event that the Audit Committee is unable to evaluate a related party transaction due to lack of expertise, the Committee may arrange an independent expert, such as independent appraiser, to evaluate and give an opinion on the transaction. The opinion of the Audit Committee or the independent expert will be used by the Company’s Board of Directors or shareholders to make a decision to ensure that these related party transactions are carried out without any conflict of interest and in the best interest of all shareholders.
However, the Company and its subsidiaries may have related party transactions with their directors, executives or potentially connected persons. The Board of Directors meeting has approved in principle that the management is empowered to approve such transactions under reasonable, transparent and non-corrupt conditions, provided that such transaction is categorized as a transaction with the same commercial terms as those an ordinary person would agree with any unrelated counterparty under similar circumstances, on the basis of commercial negotiation (general trading conditions) and without any dependent interest resulting from the status of director, executive or related person as the case maybe.
48 Indorama Ventures PCL
Management Discussion and Analysis
Indorama Ventures Consolidated 2009 Highlights
• Record consolidated sales and earnings in year 2009:- Net sales for year 2009 of Baht 79,994 million, a growth of 50%- EBITDA for year 2009 of Baht 10,636 million, a growth of 177%- Profit before tax of Baht 6,573 million, a growth of 107%- *Net profit after tax and minority of Baht 5,346 million (including minority interest for IRP considering on completion of tender offer IVL shareholding has increased from 69.29% to 99.08% on February 3, 2010), a growth of 68%
• Benefit from integration with PTA which is a key raw material for PET resins and Polyester fibers and yarns:- Gross margin improved to 15.4% from 9.7%- EBITDA margin improved to 13.3% from 7.2%- Net profit before minority margin improved to 7.5% from 5.9%
• Earnings per share of Baht 1.44 per share and return on equity of 30% • Increase in free cash flow before capex and investments of Baht 7,404 million and free cash flow after capex of Baht 3,454 million• Net debt reduced by Baht 3,152 million, resulting in net gearing ratio of 63% (before including IPO proceeds which have been received in Q1, 2010) lower than 70% at the end of 2008• Completed major capital expenditure:- Greenfield PET resin plant of 432,000 tons per annum located in Decatur, Alabama, USA. AlphaPet first line with capacity of 216,000 tpa started-up initial operations in October 2009- Phased restart of commercial operations in year 2009 at Indorama Polyester Industries (Rayong facility, Thailand) with a total capacity of 252,000 tons per annum of which Polyester fibers and yarns 144,000 tpa and PET resins 108,000 (converted a line to PET resins which started in Q4, 2009) Year 2009 reflects the full year results of operations of major acquisitions completed in year 2008 within our product lines of PTA, PET resins and Polyester fibers and yarns. Despite the recessionary conditions in year 2009, our products saw positive growth in global demand reflecting of there consumer staple nature. PET resins and Polyester fibers and yarns are primarily used in daily necessity like food and beverage and clothing. The management emphasized on lowering of costs through integration, increase utilization rates to full capacity and take benefit of lower energy prices.
*Net profit after tax and minority as per audited financial statements for year 2009 is Baht 4,824 million Indorama Ventures Consolidated Performance
OPERATIONS
This section presents a summary of the key events observed in 2009 at each of IVL’s business groups.
PET business reported sales of Baht 44,456 million a growth of 9% over the corresponding period. The increase in sales is from growth in sales volume by 32% to 1.02 million tons. Lower raw material prices led to lower selling prices. The sales volume in-crease came from full year sales from European assets acquired on March 31, 2008 and higher utilization rate of 101%. The PET business represented 55.6% of consolidated sales and 53.5% of consolidated EBITDA.
Polyester fibers and yarns & Wool yarns business reported sales of Baht 11,668 million, a growth of 87% over the corre-sponding period. The increase in sales is primarily from 199% increase in sales volume in polyester fibers and yarns business contributed from the restart of Indorama Polyester Rayong facility which was restarted in phases for commercial operations in Q1, 2009 after acquisition on September 30, 2008. The Polyester fibers and Wool yarns business represented 14.6% of consolidated sales and 12.7% of consolidated EBITDA.
Annual Report 2009 49
PTA business reported merchant sales (excludes captive sales) for PTA of Baht 23,870 million, a growth of 318% over the corresponding period. The increase in sales is from full year operations of all 3 PTA plants acquired in year 2008 and higher utilization rate of 100%. 48% of PTA sales was for captive use to PET resins and polyester fibers and yarns business within the group. The PTA business represented 29.8% of consolidated sales and 33.8% of consolidated EBITDA.
CONSOLIDATED FINANCIAL RESULTSIVL’s consolidated sales were Baht 79,994 million in 2009, increasing 50% from the previous year. These were driven by in-creases in sales volume of PET resins, Polyester fibers and yarns and PTA. The sales increase was mainly driven by full year operation of acquired business in year 2008 in Thailand and Europe in PET resins, Polyester fibers and yarns and PTA. The acquired plants were operating at full capacity by Q4, 2009.
EBITDA, as a result of higher sales and cost improvements, jumped to Baht 10,636 million in 2009 which was 177% higher than 2008. EBITDA margin also improved significantly from 7.2% in 2008 to 13.3% in 2009. High EBITDA generation in 2009 resulted in free cash flow after capex of Baht 3,454 million which was used in reduction of debt. The net debt in the year 2009 decrease by Baht 3,315 million after draw down of additional debt for completion of AlphaPet project and for expansions and improvements in Indorama Polyester Rayong Facility.
IVL posted profit before tax of Baht 6,573 million in 2009, increasing 107% from the previous year, on the back of the strong sales and operating income in the year. Tax expense was higher at Baht 554 million in the year 2009 compared to Baht 53 million in the previous year. The tax expense was 8.4% of profit before tax and was primarily on the earnings of subsidiaries in USA and Europe.
IVL posted net profit after minority interest of Baht 4,824 million, increasing 82% from the previous year. In 2008, IVL recorded net profit after minority interest of Baht 2,656 million. Minority interest increased from Baht 467 million to Baht 1,195 million in year 2009 and the major components are minority shareholders in Indorama Polymers Public Company Limited “IRP” and TPT Petrochemicals Public Company Limited.For comparison to future results, considering IVL has increased shareholding in IRP from 69.29% to 99.08% on completion of share swap on February 3, 2010, the IVL net profit after minority interest (except IRP) was Baht 5,346 million, an increase of 68% over 2008.
CAPITAL EXPENDITURES AND NET DEBTTotal capital expenditure of IVL in year 2009 of Baht 3,785 million which was primarily in greenfield project for PET resins in AlphaPet for Baht 2,479 million and expansion and improvement projects in Indorama Polyester Rayong facility for Baht 665 million. The total capital expenditures in 2009, Baht 3,478 million was for investment/ expansion and Baht 307 million was for maintenance. The total capital expenditure in year 2008 was Baht 4,856 million which Baht 3,466 million was in the greenfield project for PET resins in AlphaPet Inc., USA. The total assets at the end of December 31, 2009 were Baht 74,260 million of which net fixed assets are Baht 49,505 million, equivalent to 67% of total assets.
At the end of the year, IVL’s total net debt stood at Baht 37,540 million, an 8% decrease from the previous year. The company repaid debt from its high EBITDA generation and free cash flow after capex. Net gearing ratio went down from 70% in 2008 to 63% at the end of the year. The net debt consists of:
Bank overdrafts and short term loans Baht 10,004 millionCurrent portion of long term loans Baht 4,692 million Long term loans net of current portion Baht 25,404 million TOTAL Baht 40,100 millionLess: Cash and cash equivalents Baht 2,560 millionNet debt Baht 37,540 million
[ NOTE: Please refer to Form 56-1 under Section Management Discussion and Analysis for additional details ]
50 Indorama Ventures PCL
IVL CONSOLIDATED
IVL : REVENUES
Total revenuesBaht in millionsUSD in millionsProportion of revenues by geographic ThailandAsia (excluding Thailand)North AmericaEuropeRest of the World
FY09
79,994 2,331
15%24%16%38%8%
FY08
53,332 1,600
11%11%24%48%7%
FY09 vs. FY08
50%46%
IVL : KEY FINANCIAL PERFORMANCE
EBITDABaht in millionsUSD in millionsMargin (%)Profit (loss) before taxBaht in millionsUSD in millionsMargin (%)Net profit (loss) after tax and minority Baht in millionsUSD in millionsMargin (%)
FY09
10,636 310
13.3%
6,573 192
8.2%
*5,346 156
6.0%
FY08
3,838 115
7.2%
3,176 95
6.0%
*3,182 95
5.0%
FY09 vs. FY08
177%169%
107%101%
68%64%
*including minority interest for IRP considering on completion of tender offer IVL shareholding has increased from 69.29% to 99.08% on February 3, 2010
Annual Report 2009 51
IVL : FINANCIAL RATIOS
Current ratio (times)Net gearing ratio (%)Net operating gearing ratioInterest coverage ratio (times)ROE (%)ROCE (%)
FY09
0.963%60%
6.730.0%13.8%
FY08
0.870%67%
2.726.0%6.7%
BUSINESS SEGMENTS PET
PET : CAPACITY AND UTILISATION (%)
Production capacity (in Tonnes)Production volumes (in Tonnes)Utilisation rate (%)
FY08 869,250 804,190
93%
FY091,012,0001,026,582
101%
FY09 vs. FY08 16%28%
IVL : CASH FLOWBaht in millions
EBITDANet working capital and othersNet financial expensesIncome taxFree cash flow before CapexCapital expendituresNet (acquisitions) disposals of subsidiariesMargin (%)Free cash flow after CapexDividendsProceeds from issues of sharesChanges in net debt
FY09
10,636 (1,084)(1,884)
(264)7,404
(3,785)(165)3,454 (182)
0 (3,272)
FY08
3,838 (1,290)(1,302)
(28)1,218
(4,856)(14,194)(17,832)
(136)4,025
13,943
FY09 vs. FY08
177%-16%45%
843%508%-22%-99%
n/a34%
-100%n/a
Note: The consolidated financials are based upon elimination of intra-company (or intra business segment) transactions rea-son which the total of each segment may not tally with consolidated financials.
52 Indorama Ventures PCL
PET : REVENUES
Total revenuesBaht in millionsUSD in millionsGrowth in Baht revenues from: Volume movementPrice movementProportion of revenues by geographic ThailandAsia (excluding Thailand)North AmericaEuropeRest of the World
PET : OPERATING EBITDA AND MARGIN
Operating EBITDABaht in millionsUSD in millionsMargin (%)
POLYESTER & WOOL : CAPACITY AND UTILISATION (%)
POLYESTER FIBERS AND YARNS Production capacity (in Tonnes)* Production volumes (in Tonnes)Utilisation rate (%)WOOL YARNSProduction capacity (in Tonnes)* Production volumes (in Tonnes)Utilisation rate (%)
FY08
40,969 1,229
6%3%
30%54%8%
FY08
2,873 86
7.0%
FY08
100,000 109,651
110%
5,900 4,136 70%
FY09
44,456 1,295
6%3%
27%58%6%
FY09
5,687 166
12.8%
FY09
333,080 318,582
96%
5,900 3,062 52%
FY09 vs. FY08
9%5%
32%
-18%
FY09 vs. FY08
98%92%
FY09 vs. FY08
233%191%
0%-26%
POLYESTER & WOOL
* volumes based on equivalent production
Annual Report 2009 53
POLYESTER & WOOL : REVENUES
Total revenuesBaht in millionsUSD in millionsGrowth in Baht revenues from:Volume movementPrice movementProportion of revenues by geographic ThailandAsia (excluding Thailand)North AmericaEuropeRest of the World
PTA : CAPACITY AND UTILISATION (%) Production capacity (in Tonnes)Production volumes (in Tonnes)Utilisation rate (%)
Total revenues Baht in millionsUSD in millionsGrowth in Baht revenues from:Volume movementPrice movementSales to PET businessBaht in millionsUSD in millionsSales to Polyester businessBaht in millionsUSD in millionsTotal revenues after eliminationsBaht in millionsUSD in millionsPTA integration ratio (%)Proportion of revenues (after eliminations) by geographicThailandAsia (excluding Thailand)North AmericaEuropeRest of the World
POLYESTER & WOOL : OPERATING EBITDA AND MARGIN
Operating EBITDABaht in millionsUSD in millionsMargin (%)
FY08
6,243 187
37%32%3%
25%3%
FY08572,500 534,260
93%
FY08
593 18
9.5%
FY09
11,668 340
22%45%5%
14%14%
FY091,590,000 1,584,683
100%
FY09
45,981 1,340
15,418 449
6,693
195
23,870 696
48%
28%52%0%
13%8%
FY08
14,732 442
8,645 259
377 11
5,710 171
61%
20%47%5%
24%4%
FY09 vs. FY08
212%203%
197%
5%
78%73%
1675%1624%
318%306%
FY09
1,353 39
11.6%
FY09 vs. FY08
87%82%
193%-37%
FY09 vs. FY08178%197%
FY09 vs. FY08
128%121%
PTA
PTA : REVENUES
54 Indorama Ventures PCL
*Operating EBITDABaht in millionsUSD in millionsMargin (%)
Baht in millions
Net salesCost of salesGross profitSelling and administrative expensesRealised foreign exchange gain (loss)Other income (expense), netEBITDADepreciation and amortisationOperating incomeUnrealised foreign exchange gain (loss)Extraordinary itemsInterest incomeInterest expenseProfit (loss) before taxIncome tax expenseProfit (loss) for the periodMinority interestNet profit after minority interestOutstanding no. of shares (in Million)Annualized earnings per share (in Baht)
Baht in millions
AssetsCash and current investmentsTrade accounts receivableInventoriesOther current assetsTotal current assetsProperty, plant and equipmentIntangible assetsOther assetsTotal assets
Dec-09
2,560 9,963 9,674 1,369
23,566 49,505
879 310
74,260
Dec-08
1,435 8,525 7,419 1,456
18,835 49,642
968 323
69,768
Dec-09 vs. Dec-08
78%17%30%-6%25%
0%-9%-4%6%
FY09
79,994 67,666 12,328 5,045
98 95
10,636 3,160 7,476
470 210 18
1,601 6,573
554 6,019 1,195 4,824 3,352 1.44
FY08
53,332 48,178 5,154 2,973
(32)122
3,838 1,567 2,271 (492)2,837
27 1,467 3,176
53 3,123
467 2,656 3,352 0.79
FY09 vs. FY08
50%40%
139%70%
n/a-22%177%102%229%
n/a-93%-33%
9%107%945%
93%156%
82%0%
82%
FY09
3,551 103
14.9%
FY08
353 11
6.2%
FY08
907%878%
PTA : OPERATING EBITDA AND MARGIN
IVL CONSOLIDATED STATEMENT OF INCOME
IVL CONSOLIDATED BALANCE SHEET
*Based on pro-rata allocation of earnings of PTA business calculated on intra-group sales to PET and Polyester fibers
Note: The consolidated financials are based upon elimination of intra-company (or intra business segment) transactions reason which the total of each segment may not tally with consolidated financials.
Annual Report 2009 55
LiabilitiesBank OD and short-term loans from financial institutionsTrade accounts payableCurrent portion of long-term loansCurrent portion of finance lease liabilitiesOther current liabilitiesTotal current liabilitiesLong-term loans from financial institutionsLong-term loans from related partiesFinance lease liabilitiesOther liabilitiesTotal liabilities
Shareholder’s equityShare capitalShare premiumRetained earningsReservesTotal equity attributable to shareholdersMinority interestTotal shareholder’s equity
Total liabilities and shareholder’s equity
10,004 9,004 4,667
25 2,085
25,785 25,331
0 73
605 51,794
3,352 4,443
10,093 (709)
17,179 5,287
22,466
74,260
11,205 6,863 3,265
73 2,373
23,779 27,507
474 77
224 52,061
3,352 4,443 5,463 (463)
12,795 4,912
17,707
69,768
-11%31%43%
-66%-12%
8%-8%
-100%-5%
170%-1%
0%0%
85%53%34%
8%27%
6%
Note: The consolidated financials are based upon elimination of intra-company (or intra business segment) transactions reason which the total of each segment may not tally with consolidated financials.
Baht in millions Dec-09 Dec-08 Dec-09 vs. Dec-08
56 Indorama Ventures PCL
Corporate Governance
Annual Report 2009 57
Corporate Governance Report
Indorama Ventures PCL (IVL) believes in striking a balance between economic and social goals by executing high standards of Corporate Governance and always strives to implement the Corporate Governance principles set by the Stock Exchange of Thailand.
The Company firmly believes in transparency, accountability and ethical conduct in pursuit of its mission and acts in accordance with our framework for sound corporate governance to enhance Company’s competitiveness and best serve the interests of our many stakeholders – and our business.
IVL has in place a written Corporate Governance Policy and the Policy follows the guidelines set out by SET. The Board and management are strongly committed to the implementation and practice of the Corporate Governance principles and this reflects our allegiance to doing what is fair, right and legal.
Indorama Polymers Pcl (IRP), a subsidiary of the Company which was listed in the SET up until February 2010, received a Cor-porate Governance Scoring for the years 2007 and 2008 of ‘Very Good’ and ‘Excellent’ respectively. This early effort to promote and develop good corporate governance practices will be continued by IVL.
It is the policy of IVL to uphold the core and relevant principles of corporate governance as hereunder:
Rights of Shareholders and Equitable Treatment of ShareholdersIt is the Company’s top most priority to protect Shareholders’ rights, irrespective of their shareholding, and encourage them to exercise those rights as spelt out in relevant laws.
The Company recognizes the basic legitimate right of Shareholders to participate in Shareholders’ meetings; the right to appoint a proxy to participate and vote at the said meeting; the right to vote for the appointment or removal of individual directors; the right to vote on the annual appointment of statutory auditors and fix their remuneration and the right to vote on various other busi-nesses of the Company. IVL will implement these rights of the shareholders at their first Annual General Meeting of Shareholders to be held in April, 2010.
Shareholders rights also include eligibility to receive dividend payments, the right to give opinions and enquire into business matters of the Company during the Shareholders’ meeting.
Apart from the above, IVL also recognizes the equal rights of all Shareholders to obtain accurate, adequate and timely informa-tion from the Company, for their decision-making and will always strive to provide the same.
General Rights and EqualityIVL will provide the opportunity to minority shareholders to propose agenda items and to nominate qualified individuals to be elected as directors of the Company before the AGM, effective from the year 2010.
IVL will continue to provide opportunities to the minority shareholders to participate in fundamental corporate decisions.In order to ensure that the shareholders receive the annual audited financial statements and the quarterly reviewed financial re-sults on time, IVL shall continue and maintain the practice of disclosing the results the very next day of its approval by the Board of Directors through the website of the Stock Exchange of Thailand and also through its website - www.indoramaventures.com, both in English and Thai.
IVL will also make regular disclosures through its website and also through SET about all relevant information like the Annual Report, Form 56-1, Shareholders’ meeting resolutions, important Board resolutions, analyst reports and press releases about the Company and its subsidiaries in an effort to keep the Shareholders informed.
58 Indorama Ventures PCL
IVL will encourage shareholders to attend the AGM in person or by proxy. In case of proxy, Shareholders can either appoint their authorized person or any one of the two independent Directors nominated by the Company in this regard. The profiles of the Independent Director(s) will be attached to the notification of the meeting. To enable Shareholders to make decisions, IVL will provide adequate information in the Notice to the meeting on the agenda items.
Re-appointment of Directors and appointment of new DirectorsProfiles of the directors retiring and offering themselves for re-appointment will be provided, including name, age, type of director, educational background, working experience, positions held in other organizations, number of years as director of the Company and the opinion of the Board, in order to facilitate the voting of the Shareholders.
Approving Directors remunerationThe total remuneration for the Independent Directors as proposed by the Board will be given in the Notice together with the amount approved and paid during the year. The Board will review the annual remuneration of the Directors with comparable listed companies.
Appointing the external auditor and approving the audit feeThe name of the audit firm and the auditor’s names, independence of the proposed auditor, number of years as the company’s auditor, remuneration proposed for the year together with the opinion of the Board in order to facilitate the voting of the Share-holders will be given. For the year 2009, IVL and its subsidiaries paid an audit fee of Baht 30 million.
Payment of dividendThe dividend policy of the Company, the amount paid in comparison with the policy and the amount paid in the previous year, if any and the opinion of the Board shall be given.
Shareholders MeetingIt is IVL’s policy to conduct Shareholders meetings properly in accordance with the Articles of Association of the Company and related laws to allow Shareholders to exercise their rights fully and in an informed manner.The annual general meeting of the Company will be organized within four months from the closure of the financial year. For the financial year 2008, the AGM was held on April 30, 2009.
Internal Information and related party transactionsThe Company has in place a written policy on the use of confidential and/or internal information so as to prevent any illegal use. The statement is prominently displayed at the head office and at the offices and the working places of all its subsidiaries, for the knowledge of all employees.
The code of conduct prohibits employees from buying, selling, transferring or accepting the transfer of Company securities by using confidential and/or internal information in any manner that may take advantage of outsiders by using inside information. All directors, senior management, auditors and employees having access to financial statements of the Company are required to make a declaration of their movement in shareholding including their spouse and minor children, to the Company Secretary who in turn presents a summary report to the Board.
Also the directors shall file with the company a report, in the form as approved by the Board, on their interest or a related person’s interest in the company or its subsidiaries.
Reporting of and trading in IVL SecuritiesThe Company has in place a written policy on reporting of and trading in IVL Securities. As per this policy no director or executive shall directly or indirectly trade in IVL Securities during the period of 15 working days prior to and 2 working days subsequent to the date of filing with the SET of the quarterly and annual financial statements of the Company. Further if any director or executive trades, they must report to SET and the Company. They should also deliver a quarterly declaration to the Company Secretary listing all Trading in IVL Securities.
Annual Report 2009 59
Related party transactionsThe Company has in place a detailed policy on related party transactions. It very clearly defines who is a related party and what constitutes a connected party transaction and what procedures to follow when there is a related party transaction. The policy is circulated at the beginning of each year in order to remind all concerned about the compliance requirement on related party transactions. The Compliance Officer of the Company is responsible to ensure that all related party transactions follow the rules and regulations as prescribed by SEC/SET and the internal policy guidelines. Any new connected transaction is first brought to the notice of the Audit Committee. The Committee after reviewing the same recommends to the Board for their approval. With-out the Board’s approval no new related party transaction is allowed to take effect.
However, the Company and its subsidiaries may have related transactions with their directors, executives or potential connected persons. As a result, the Board of Directors Meeting approves, in principle, that the management is empowered to approve such transactions under reasonable, transparent and non-corrupt conditions, provided that such transaction is categorized as a transaction with the same commercial terms as those an ordinary person would agree with any unrelated counterparty under similar circumstances, on the basis of commercial negotiation (general trading conditions) and without any dependant interest resulted from the status of director, executive or related person, as the case may be.
The internal audit department, every quarter carries out a check of the continuing transactions in order to ensure that they are following the approved principles. The internal audit department will give their report to the Secretary to the Audit Committee who in turn will report to the Audit Committee. The Audit Committee meeting considers and upon their satisfaction on the basis, reasonability of the transactions, recommends to the Board for their approval.
Any Director who is directly or indirectly interested in any transaction abstains from discussions and voting.
The Company also has in place a written Board and Audit Committee Charters, Code of Conduct for directors & employees, an Internal Audit Manual and Internal Audit Charter.
Role of StakeholdersIVL gives equal importance to all of its stakeholders both internal and external such as shareholders, personnel, business part-ners, customers, competitors, creditors, community, environment and society. The Company is fully aware that support from each stakeholder will sustain and reinforce its competitive advantage and profitability.
It is the policy of IVL to safeguard their rights by strictly complying with applicable laws and regulations and to take into consid-eration their interests.
Shareholders: IVL and its subsidiaries strive to conduct its business in a transparent and efficient manner with a view to enhancing shareholder value and returns.
Customers: IVL and its subsidiaries will strive to maintain and strengthen its long-term and loyal relationships with its customers and is de-termined to ensure customer delight by providing high quality products and services that best fit customer needs at competitive prices, supported by a high standard of service and accurate information regarding our operations and products.
The Company believes in and will strive to keep communication channels open for constant customer feedback. Personnel: All personnel of IVL and its subsidiaries are considered to be valuable assets, critical to the growth and profitability of the com-pany and its subsidiaries, and strive to provide a conducive and quality oriented work environment with utmost emphasis on safety along with fair and equitable compensation compatible with similar businesses.
60 Indorama Ventures PCL
The Company gives importance to developing skills, knowledge and potential of its employees, and strives to build a work envi-ronment that is rich in diversity and will attract and retain high performance employees.
Business Partners: IVL and its subsidiaries fosters symbiotic, long-standing and growing relationships with all its business partners, based on mutual benefit and guided by good business ethics.
Creditors: IVL and its subsidiaries attempts to provide its creditors with all full and accurate information about the progress of the company, as required for smooth business dealings and to comply with all its obligations.
Community, environment, & society: IVL and its subsidiaries cares about safety of its society, environment, and quality of life of people associated with all its opera-tions and strives to comply with applicable laws and regulations.
IVL and its subsidiaries try to actively participate in all activities that support and care for environment and society and promote the cultures in which the companies operate.
IVL and its subsidiaries treat and dispose of waste in a manner that will have least impact on Society, environment and people.
Competitors: IVL and its subsidiaries will act within the rules with respect to its competitors and employ best practices in dealing with them, as well as working towards market development and growth for the benefit of the industry as a whole.
Disclosure and Transparency
It is IVL’s policy to deliver all-important information relevant to the Company, both financial and non-financial that may have an impact on the interests of the Shareholders or any decision to invest in or on the price of its shares. All such information will be disclosed sufficiently, accurately, on a timely basis and transparently through easy-to-access channels that are fair and trustwor-thy and all such information to comply with the relevant rules of SEC/SET.
The communication channels used are the Annual Reports, Form 56-1, SET website, Shareholders meeting and Company’s own website.
The designated executives that can disclose information about IVL is the Group Chief Executive Officer (Group CEO), and the Secretarial and Investor Relations Department. They provide information to interested parties on various occasions such as one-on-one meetings with Shareholders, creditors, analysts, quarterly meetings with analysts to discuss the recent financial performance, road shows and others.
The Company gives utmost importance to its website, which is in English at present, and regularly reviews it to ensure all in-formation provided is current and up-to date. The Company has taken effective steps to develop the website in Thai, which is expected to be completed in the first half of this financial year.
The information of the following provided on the Company website is regularly updated: Vision, Mission, Value statements, financial statements, analyst reports, press releases, Annual report, IVL Board and manage-ment structure, shareholding structure and major shareholders.
The company has a designated department / person for Investor relations for disclosing essential information to investors and financial reporting. An annual investor relations plan is established and the executive in charge is involved in various investor relations activities including but not limited to periodical plant visits for the benefit of shareholders, investors and analysts etc. Also regular investor meetings are organized.
Annual Report 2009 61
To contact the Company’s investor relations department, the general public may call (+66) 2 661 6661 or email [email protected] or [email protected]. The details are provided on the Company website.
A statement on the Board’s responsibility concerning the Company’s financial report is disclosed in the Annual Report which mentions among other things that the Company complies with generally accepted accounting principles and that accounting standards and practices used are appropriate and consistent to the nature of the business. It also states that all information presented in the financial reports are accurate, complete and adequate. The Chairman of the Board and the Group CEO sign the statement.
NameMr. Sri Prakash LohiaMr. Aloke Lohia Mrs. Suchitra Lohia Mr. Sashi Prakash KhaitanMr. Amit LohiaMr. Rathian SrimongkolMr. William Ellwood HeineckeMr. Chakramon PhasukavanichMr. Dilip Kumar AgarwalMr. Prem Chandra GuptaMr. Gopal Lal ModiMr. Satyanarayan MohtaMr. Ramesh Kumar NarsinghpuraMr. Vikash JalanMr. Anuj LohiaMr. Harsha V ReddyMr. Richard Jones
Opening-
1*---------------
Purchased--------------
1*--
Sold-----------------
Balance-
10*------------
10*--
Responsibility of the BoardBoard StructureThe IVL Board during the year increased the number of Directors from 4 to 8 consisting of 3 Executive Directors, 2 Non-Exec-utive Directors and 3 Independent Directors representing more than one-third of the total Board size.
The Board structure is appropriate in relation to the size of the Company, number of executive, non-executive and independent directors and qualification in terms of knowledge and expertise and provides a fair balance of power and effective management monitoring.
In the Directors’ profile, IVL discloses its director’s names, profiles, qualifications, experience, and shareholding in the Company to demonstrate the Board’s knowledge, competence, qualification and experience via the Annual Report and its website. It also mentions which Director is independent, executive and non executive and representative of a major shareholder.The profile mentions the Board membership of other Companies held by the Directors.
In order to achieve a balance of power, the position of the Chairman of the Board and that of the Group CEO are different. The Chairman of the Board of Directors is a Non Executive Director.
One third of the Directors retire by rotation at every Annual General Meeting as specified in the Articles of Association of the Company. The directors to retire during the first and second years following the registration of the Company shall be drawn by
The individual shareholdings of Directors, Senior Management, auditors and employees having access to financial information including their spouse and minor children for the period January 1, 2009 to December 31, 2009 is as follows:
* The par value of the shares has been changed from Baht 10 (Ten) to Baht 1 as approved by the Shareholders in the Extraordinary General Meeting held on September 28, 2009.None of the Auditors were holding any shares for the period January 1, 2009 to December 31, 2009.
62 Indorama Ventures PCL
The Audit Committee Charter was approved by the Board in their Meeting held on September 18, 2009. The Charter is in line with the new SEC regulations. It is available for reference on the Company’s website.The main duties and responsibilities of the Audit Committee include:1. review of company’s financial reporting process to ensure that it is accurate and adequate;2. review of the company’s internal control system and internal audit system to ensure that they are suitable and efficient, to determine an internal audit unit’s independence, as well as to approve the appointment, transfer and dismissal of the chief of an internal audit unit or any other unit in charge of an internal audit;3. review of the company’s compliance with the law on securities and exchange, the regulations of the Stock Exchange of Thailand, and the laws relating to the company’s business;4. to consider, select and nominate an independent person to be the company’s auditor, and to propose such person’s remuneration, as well as to attend a non-management meeting with an auditor at least once a year;5. review of the connected transactions, or the transactions that may lead to conflicts of interest, to ensure that they are in compliance with the laws and the regulations of the Stock Exchange of Thailand, and are reasonable and for the highest benefit of the Company;6. to prepare, and to disclose in the company’s annual report, an Audit Committee’s report which must be signed by the Chairman of the Audit Committee and consist of at least the following information: (1) an opinion on the accuracy, completeness and credibility of the company’s financial report; (2) an opinion on the adequacy of the company’s internal control system;(3) an opinion on the compliance with the law on securities and exchange, the regulations of the Stock Exchange of Thailand, or the laws relating to the company’s business;(4) an opinion on the suitability of an auditor;(5) an opinion on the transactions that may lead to conflicts of interests;(6) the number of the Audit Committee meetings, and the attendance at such meetings by each committee member;(7) an opinion or overview of comments received by the Audit Committee from its performance of duties in accordance with the charter; and(8) other transactions which, according to the Audit Committee’s opinion, should be known to the shareholders and general investors.7. to perform any other act as assigned by the company’s board of directors, with the approval of the Audit Committee. The Audit Committee is responsible to the Board of Directors according to the duties assigned by the Board of Directors, while the responsibilities for all activities of the company towards third persons are still vested in the entire Board of Directors.
lots. In subsequent years, the director who has been in office for the longest term shall retire. A retiring director is eligible for re-election. Voting for appointment/ re-appointment of Directors is done individually.
The Board has appointed the Company Secretary in order to meet the requirements of the SEC regulations. The Company secretary is responsible for matters connected with meetings of the Board and Shareholders and to advise the Board on law and regulations that the Board must know to effectively perform its duties and to administer the Board’s activities and ensure Board resolutions are complied with.
Audit CommitteeThe Audit Committee of IVL was constituted by the Board at its meeting on September 18, 2009 for a period of two years. The Committee comprises of Mr. Rathian Srimongkol as Chairman, Mr. William Ellwood Heinecke, and Mr. Chakramon Phasuka-vanich as members. All members are independent Directors and have the requisite experience and knowledge to review finan-cial statements. The attendance of the Committee members for the year 2009 is given below:
NameMr. Rathian SrimongkolMr. William Ellwood HeineckeMr. Chakramon Phasukavanich
Attendance3/32/33/3
Annual Report 2009 63
The Chairman reports on the Audit Committee’s activities to the Board, immediately following the Audit Committee meetings. Between the meetings, the Committee reviews emerging issues with the management team, Secretary of Audit Committee and Chief of Internal Audit.
Nomination, Compensation and Corporate Governance Committee (NC&CG)At present the Company has no Nomination, Compensation and Corporate Governance Committee. However, in order to pro-mote Good Corporate Governance, the Company is taking effective steps to constitute the Nomination, Compensation and Corporate Governance Committee in the year 2010.
Responsibility and duties of the Board of DirectorsThe Board of Directors of IVL has the vision, mission, value statement, plans, strategies, key policies and budgets of the Com-pany with a view to effectively and efficiently manage the business for maximum Shareholder value. Detailed budgets and plans are formulated for the Company and its subsidiaries. The Board closely monitors the management and implementation of busi-ness plans to achieve targets. The Board also sets internal controls and audit procedures, including risk management.
The Board through the Audit Committee, internal auditor, and compliance department reviews potential conflicts of interest. The internal guidelines of the company on related party transactions and the relevant rules and regulations of SET/ SEC provide a basis for avoiding conflicts of interest. Details of all related party transactions are updated in Form 56-1 and reported in the An-nual Report. Those Board members who have an interest in a matter that might involve a conflict of interest must abstain from voting and other involvement, as prescribed by the Board. Company policy prohibits personnel at all levels from using inside information for personal benefit with all business decisions based on achieving the maximum benefit for the company and its subsidiaries.
The company has a code of conduct for Directors, executives and employees, approved by the Board and communicated to everyone. The Company through this Code of Conduct strives to achieve observance of ethical practices, honesty, and account-ability, as well as a responsibility to all stakeholders and external agencies.
Internal AuditThe company has its own Internal Audit Department, Internal Audit Manual and Internal Audit Charter. The Internal Audit Depart-ment is entrusted to carry out internal audit activities of the company and its subsidiaries under the supervision of the Chief of Internal Audit. The Internal Audit Department reports functionally to the Audit Committee. A detailed plan for the year is formu-lated for the units and approved by the Audit Committee which then reviews the work of the internal audit department against the plan periodically and makes recommendations to management. For the year 2009, the audit was carried out for Thailand units and some overseas units. The Secretary of Audit Committee follows up on the implementation of recommendations and reports the progress to the Audit Committee and also undertakes periodic checks to ensure compliance with statutory and regulatory requirements.
A report by the Audit Committee to the Shareholders on its activities for the year 2009 is separately disclosed in the Annual Report.
The regulations on the use of internal information of the Company The regulations on the use of internal information of the Company are as follows: 1) All directors, executives, staff and employees of the Company shall keep the confidential and/or internal, all information of the Company except for the purpose of the operation of the Company’s businesses;2) All directors, executives, staff and employees of the Company shall not disclose confidential and/or internal information of the Company with the aim to seek benefit for oneself or for other persons either directly or indirectly regardless of whether or not such benefit is to be received; and 3) All directors, executives, staff and employees of the Company shall not sell, purchase, transfer or take the assignment of securities of the Company by using confidential and/ or internal information of the Company and/ or enter into any transactions by using confidential and/or internal information of the Company in a manner that could possibly cause
64 Indorama Ventures PCL
damage to the Company either directly or indirectly. This provision shall also apply to spouses and minor children of the directors, executives, staff and employees of the Company. Violators of the regulations shall be deemed as committing a serious offence.
After the shares of the Company have been listed on the Stock Exchange of Thailand (“SET”), directors, executives, managers, person responsible for the operation, auditor, staff or employees of the Company purchase or sell, offer to purchase or sell or invite any other person to purchase, sell or offer to purchase or sell the shares of the Company in such a way as to take advan-tage of other persons by using internal information material to changes in the prices of the shares of the Company which has not yet been disclosed to the public and to which information he has access by virtue of his office or position, and whether or not such act is done for his own or another person’s benefit, or to disclose such information so that he will receive consideration from the person who engages in the aforesaid acts, such person shall be liable under the applicable laws with respect to insider trading as a result of such contravention.
In case, directors, executives, managers, person responsible for the operation, auditor of the Company acquire or dispose of shares or other securities (if any) of the Company, such person have to report on such acquire or dispose to the SEC within the time described by SEC Act B.E. 2535. The said acquire or dispose of such person shall include the holding of shares and other securities (if any) by his spouse and minor children of securities in the Company.
These regulations have been informed to all employees.
Board of Directors’ performanceThe Board of Directors has met 4 times since its decision to convert the Company to a Public Limited Company in August, 2009. The Company generally proposes to schedule a minimum of 4 meetings a year. Typically, a meeting is convened every 3 months with extra meetings convened as and when deemed necessary to review operations, financial matters, plans, or other matters. At the end of each year a schedule of meetings for the next year is circulated to the members so as to fix the meeting dates well in advance and also to ensure maximum participation.
The Chairman, Group CEO and Company Secretary set Board meeting agendas and the Company Secretary sends invitation letters together with the Agenda and relevant documents to the Directors at least 7 days prior to the meeting to allow adequate time for the directors to study the information.
At each Board Meeting, the Chairman allows each Board member to express his or her views and management to answer all queries in full. If desired, Directors can request for additional information from a designated person.
Detailed minutes are prepared for each meeting which includes the meeting date, beginning and ending times, name of Direc-tors who attended and were absent from the meeting, summarized information proposed to the Board on each issue, summa-rized discussion and Director’s observations and the person authorizing the Minutes.
The following are the details of attendance of the Board of Directors’ meeting in 2009* Name
1. Mr. Sri Prakash Lohia 2. Mr. Aloke Lohia3. Mrs. Suchitra Lohia4. Mr. Sashi Prakash Khaitan 5. Mr. Amit Lohia 6. Mr. Rathian Srimongkol 7. Mr. William Ellwood Heinecke 8. Mr. Chakramon Phasukavanich
No. of attendance / total meeting
-/33/33/33/3-/33/33/33/3
Remarks: * The company became a public limited company on 25 September 2009
Annual Report 2009 65
The Executive Directors on the IVL Board are not paid any director’s fee. Remuneration paid to the Management team for the year was Baht 45,731,335.
Professional Development of Directors & Management
The Directors who joined the Company during the year are given a Directors Orientation folder with complete information about the Company and its subsidiaries to assist them in getting well acquainted with the business, practices and procedures of the company and their rights, duties and obligations as Directors.
In addition to the above, the new directors were arranged orientation meetings with the management team members.The Board encourages the Board members, Audit Committee members, management team members, Company Secretary and Internal Auditor to attend seminars, training and courses which would assist in further improving their contribution/performance in the Company.
We encourage the member of the Board to undergo applicable training programs.
Our company’s policies, integrity, ethics and disclosures always seek to emulate the best practices in Corporate Governance.
RemunerationThe current remuneration of Independent Directors is established based on assignments, responsibilities. Such remuneration proposed by the Board requires the approval of the Shareholders’ meeting.For the year 2009 the total annual remuneration to the Independent Directors approved at the Extraordinary General Meeting No.1/2009 held on September 19, 2009 was for an amount not exceeding Baht 1,300,000.
The actual remuneration paid in 2009 is Baht 1,300,000 as against the approved amount of Baht 1,300,000. The details of the remuneration paid are as hereunder:
As Directors of the Company
No.123
Independent DirectorsMr. Rathian SrimongkolMr. William Ellwood HeineckeMr. Chakramon PhasukavanichTotal
Amount approved (Baht)50,000 per month50,000 per month50,000 per month
Actual Paid (Baht)200,000200,000200,000600,000
Note: The remuneration to Independent Directors is paid effective from September, 2009
As Audit Committee members
No.
123
Members
Mr. Rathian SrimongkolMr. William Ellwood HeineckeMr. Chakramon PhasukavanichTotal
Amount approved(Baht)
75,000 per month50,000 per month50,000 per month
Actual Paid(Baht)
300,000200,000200,000700,000
Note: The remuneration to the Audit Committee Members is paid effective from September, 2009
66 Indorama Ventures PCL
People & CSR
Our People - Drivers of Performance at IVL
The EEE (3E) Concept- – Environment, Engagement and Excitement, which is a way of life at IVL, has been instrumental in creating employee participation and involvement thereby bringing improvement in all spheres of the IVL business.
During the last year, IVL has moved from the margins of employee involvement agenda towards constantly engaging employees through various forums and events to build excitement, passion and competency of the people. Our 3E facet is all the more critical in a global and multicultural environment, such as at IVL.
Environment
Through our periodic measures we have been ensuring that a sense of control over one’s environment, a sense of shared des-tiny, and opportunities for development and advancement is maintained at our company. Some of the measures being:
Indorama Song – This song has been emblematic of the ways in which it ignites a sense of passion, pride and belongingness within every employee for their company. Emotions run high each time the song is played or sung and it has gone onto become an anthem that every one at IVL identifies with.
Communication of Vision Mission and Values (VMV) - VMV have been the beacon which signal intent and direction and feel-ing of oneness in employees that is crucial in creating a thriving organization that people feel committed to. Regular sessions on communication of VMV are enabling employees to acquire the necessary knowledge, skills and attitude so that they can contribute their best to the achievement of our vision. Our vision, mission and values
Environment, Health and Safety (EHS) - The week from 1st to 5th June 2009 included several eco-awareness activities, including plantations aimed at increasing green areas belts. Many activities stressed the importance of maintaining a clean en-vironment. Also, the celebration of World Environment Day on 5th June catalyzed the endeavors. The Management team and employees planted trees on this day as an act of collective responsibility. The health programs highlighted the importance of educating the community on various protection measures against impending diseases.
A Complete Medical Health Check up for all employees was held at head office. Indorama is focused on building a sustainable healthy fraternity for the good of the whole community
As part of SHE fortnight, following activities were carried out –
- Health care workshop for employees organized by local hospital.- Fire fighting training organized by local fire station staff.- Traffic safety seminar given by local Police chief.- Tree plantation done at site- Training on Action for good health in order to protect from diseases.Training on Aids & Tuberculosis (TB) prevention and management in
Employee Opinion survey (EOS) – EOS activities are carried out at IVL where in employees provide their feedback about the organization, peers, superiors and culture / environment. These opinions are of paramount importance in the building of a smooth organizational culture and development.
Communication Month - March 2009 was declared as the Communication Month wherein Vision, Mission, Values were rein-forced and communication workshops were conducted across all facilities of Indorama Thailand which culminated in interesting competitions towards the end of the month.
68 Indorama Ventures PCL
To a large extent it was successful in improving the participants’ understanding and practical experience of the skills required for communicating in a professionally assertive manner. Simulation activities and a single day workshop were conducted by Hans Andersson and Inn Narula, who have been working in the field of education and management training for more than 20 years.
Quality Circles concept (QCC) - Quality Circles drive continues to spread its wings by encouraging an environment for participation and involvement at grass root levels. These groups identify their own problems, which turns into a “Problem Bank”. Out of this problem bank, easy ones are picked to be worked on for solu-tions. These groups meet every month, discuss problems and go for solutions using our 7 Quality Tools. They present their case studies to the management and take pride in sharing their success stories.
The dynamic and ongoing mid-year QCC continued with its efforts to improve the performance of the organization by enriching the work of employees
The annual event – Quality Day was conducted on 12th December 2009. The convention was held at CTE, with the Quality Day Flag being hoisted, the Quality circle committee was formed and t-shirts with the ‘Q’ logo were introduced. The program was concluded with the Royal Anthem and Indorama song.
Quality week was conducted from 7th-12th December 2009 wherein the concept of quality was further reinforced and its mean-ingful contribution to the organization was brought to the forefront.
After winning national accolades, IVL’s Quality Circles (QC) initiatives have soared international.
It is really a matter of great pride for us at Indorama that our teams have progressed to achieve the international accolades. Three Quality Circle Concept (QCC) Teams (Two from Indorama Polyester Industries and One from Wool) recently participated in the national event of QCC HQ. The presentations made by the teams at the competition were excellent. The next step from QCC HQ was the site visit to the two locations at Indopoly and Wool, which was also appreciated by the judges as they could see the movement on the shop floor showcasing what the teams had talked about in the presentation at the competition.
The QC Group “Two for One” was awarded “Best QC Group” from The 23rd Quality Control Circles (QCC) Presentation held by The QC Head Quarter of Thailand on 28th April, 2009. Furthermore the group also was selected for International Convention on Quality Control Circle for the International Exposition for Team Excellence (IETEX) 2009 at SINGAPORE during 9-12 June 2009.
The Sen Dai Kao Klai Team from Indorama Polyester Industries was been selected for the International competition in China on 3rd Nov 2009
Engagement
Engagement remains the ultimate prize given to the employees. Having a critical mass of employees who are engaged in activities that lead to their self develop-ment and learning is of tremendous value for IVL.
Employee engagement is a process that never ends. And it rests on the foundation of a meaningful and task-driven enriching work experience. What is on the engage-ment list are the things that take time and commitment — such as strong leader-ship, interaction amidst employees, training etc. In the end, it only reminds us that there are no substitutes for these fundamentals. Some of the measures being:
Annual Report 2009 69
Promoting Mutual Learning (PML) – Knowledge is power and it multiplies with every sharing process. PML continues to be our step towards building “Knowledge Bank” for the company by motivating people to participate in the knowledge sharing process by learning from their superiors as well as their subordinates thus promoting the culture of two-way learning process. During this year two PML sessions were conducted by the Production department.
Total Quality Assurance (TQA)- Inspired by the Malcolm Bald ridge Model for Total Quality Assurance IVL gave birth to an evolutionary model Indorama Business Excellence Model “ IRBEM” .We are already working on this model where in improve-ments under the concept of Approach, Deployment, Integration and Learning. The following committees are already working on this concept:
This model will aid in improving organizational performance practices, capabilities and results and also facilitate communication and sharing of opportunities for learning. It will serve as a working tool for understanding and managing business performance and also lead to improvement in overall organizational effectiveness
The categories of the IRBEM model at IVL are:Leadership StrategyEmpowermentCapability BuildingContinuous ImprovementBenchmarkingCommitmentInvolvementSelf Development
Quality of life (QOL) - Working towards its target of Total Quality Management, IVL moved on with its periodical QOL activities. Employees got together on a weekend program on self development. This stimulated good performance, boosted performance and eased work pressures after a weekend getaway.
Training and Development (T&D) - Being good at a job bolsters confidence and ensures both the organization and the em-ployees achieve individual and collective goals. Training and development programs, mentor/coach relationships and regular feedback from managers not only engender competence, but help a company build the skills and behaviors that meet specific business objectives.
Regular training and developments programs are conducted at various levels of the manpower. Employees are trained on vari-ous areas of improvement like attitude for excellence, team work, interpersonal skills, motivation, success as well as technical training related to their job. On an average employees are given 16 hours training per year. For employees who are involved in the QCC concept they undergo additional eight to ten days training per year.
The Visit of Mr. Lulla was facilitated in January 2009, wherein he endeavored to enhance training effectiveness by ensuring all committees related to the IRBEM model start working on the preparation of action plans called RACI (Responsibility, Account-ability, Consult and Inform) and submit it for review to him. He very vividly made clear the “Approach for Making Action Plan” on the base elements of TQA i.e. Leadership, Strategic Planning and Customer and Market Focus, taking inputs from Customer and Market Focus and Leadership (Vision, Mission and Values), and drilled down to Strategic Planning. ADLI Model (Approach, Deployment, Learning, and Integration) is creating excitement all around.
Indorama also conducted the Thai Labor for stability occupation training. The Opening ceremony of this training of Indorama Polyester Industries’ employees took place on 27 March 2009 and was done by Nakhonpathom Deputy Governor Mr.Uthan Chawamethee
70 Indorama Ventures PCL
PERFORMANCE MANAGEMENT SYSTEM (PMS) - PMS deals with identifying, evaluating and facilitating the work perfor-mance of employees in the organization which facilitates in achieving the organizational goals and objectives in a more effective way through the employees and also provides rewards to employees through recognition for their work.Activities were designed that will facilitate overall development of the employees.- Career Growth opportunities for talented people.- Succession planning for effective business. - Job Rotation/ Multi-Skilling opportunities to enable effective use of in-house talents for better results. - Recognition and Rewards to motivate people
ExcitementIVL indulges its employees in various activities and events allowing employees the freedom to breakaway from their erratic schedules which is an essential part of enthusiastic execution. These events provide a platform to highlight those aspects of our employee’s personalities that have the most positive impact on behavior and performance and also make them a part of the happenings around the world. This way our multi-cultural team gets to be a part of every Global event. Events held during year 2009 are:
Picnic getawaysFamily Day CelebrationsFather’s Day CelebrationsDiwali and New Year Party CelebrationsSongkran
Successful employee involvement and participations strategies help create a community at the workplace and not just a work-force. When employees are effectively and positively engaged with their organization it leads to competitive advantage. At IVL we thrive on an open and transparent culture to empower people and develop better managers. The 3E concept which is mov-ing on successfully is gradually evolving into a fourth E-“Excellence” in all arenas of IVL operations and people. It is an endeavor towards enhancing the existing culture of Education so IVL becomes– a learning organization.
“We care for our communities”IVL’s main objective of social activities is sustainable growth of the society and a better environment. These objectives are achieved by working directly or with government or non-government organizations works to support communities. IVL continues to be involved in social contribution activities in Thailand, Lithuania and USA. IVL learns from the community how best to serve and participates in annual public events to cultivate positive human and social relationships. Many line employees are members of these communities. IVL social activities and respect for communities reflect its commitment to be a good corporate citizen.The main activities include:• Scholarships for primary education of children • Sponsor sports team • Support for the public health center• Green program for planting trees• Support and organize cultural activities and events• Participating in various local festivals, such as National Children’s Day, Song-kran, Loy Krathong and Makhabucha Day.
IVL focus is also to reduce and reuse natural resources. Energy and water conservation is of paramount importance and re-quires greater efficiency in use of natural resources. IVL has implemented EHS, environment - health - safety, practice at all
Annual Report 2009 71
plants and a set of guidelines were prepared, EHS Manual, and distributed to all plants for its implementation.
To ensure operations meet all government and industry standards, IVL hires professionals to assess, recommend, and monitor environmental and workplace programs. IVL has staff dedicated to implementing all environment-related systems to ensure they are functioning properly and that staff are observing prudent safety practices. Outside professionals test regularly as an added measure.During 2009, our endeavor towards Corporate Social Responsibility at various IVL locations unfolded in the form of following activities:At OGPET Lithuania the following activities were conducted
- Meeting with Klaipeda Enviroment organization Žvejonė like Green peace organization - Annual presentation of Environmental Monitoring for society (villagers, city administration, Environment Department). - Also conducted was the Fire prevention training with Klaipėda Fire and Rescue Department- Annual Football Charity Cup at FEZ
A Boat Race was conducted on Oct 5th, 2009 at Bangkham River, Koksalod Village located at the backside of Indorama Poly-mers PCL, Lopburi. This is a Traditional Function for conservation of water source at Bangkham River. IRP has supported it and got involved in it by sending IRP’s team to participate in this event. The team also emerged victorious for the year 2009.
Activity training on HIV AIDS by Thailand Business Coalition was conducted at Lopburi (IRP) on Sept 28th,2009.
Indorama Polyester Indutries PCL-Nakhonpathom’s employees co-operated to donate blood with Department of Transfusion Medicine, the Faculty of Medicine Siriraj Hospital, Mahidol University on September 21st, 2009.
Environment Good Governance Reward “Green Star on White Flag - On June 5th, 2009, TPT Petrochemicals Plc. and TPT Utilities Company have received the Excel-lent Reward on Environment Good Governance from the Industrial Estate Authority of Thailand Governor. Before the award, ‘Green Star on White Flag’, was received, IEAT assessment team along with representatives from communities had audited TPT four times in year 2008. They focused on our environment management, i.e. water consump-tion and waste water treatment, wastes management, air emission and noise control, VOCs monitoring, Green Area/Buffer Zone, support student trainees program to train at plant site and hire local people to work at TPT.
Indorama presented a gift of Baht 20,000 to H.H Princess Somsawalee during her visit to Thaklong on 25th April 2009 for ‘Sapakachat Thai’ towards project of preparing rice grain as improvement for the people affected by the last flooding.
At Alphapet, USA, the following activities took place:
- Relay For Life American Cancer Society- Charity Golf Tournament The Pilot Club of Decatur- Annual Membership Industrial Emergency Association- Scholarship Funding Decatur General Foundation- Hindu Cultural Center of North Alabama- Avon Breast Cancer Foundation- Student Leadership Scholarship DECATUR - MORGAN COUNTY CHAMBER OF COMMERCE
72 Indorama Ventures PCL
In 2009 the following external projects were executed at Indorama Polymers/Holdings Rotterdam B.V:
• Donated redundant computers to a charity organization in the Netherlands
• Participated in the program “feel the chemistry”. This program is initiated by the VNCI (Association of Chemical Industry). The objective is to let children, from primary school, visit chemical plants and see what chemistry is all about. Approximately 35 school kids visited our site in June. Presentation about Indorama and their products was given. The children were invited to execute chemical proofs by making hair gel and shampoo.
• Indorama participates in the Process College Mainport Rotterdam. Promoting the schools for process operator and mainte nance technician is one of the major tasks. The need for more students following a technical education is a priority. By inviting students from secondary schools to our site, giving presentations, explaining about the job should help students to make a decision about their next step in education. During the week of the process industry in January various groups of students visited the plant site.
• A number of trainees from the Process College are offered an internship within our company. For some of them it resulted in employment with Indorama.
Indorama Petrochem Plant in Rayong undertook the following activities during the year
• Coordinated with IEAT and Ban Chang District local community leaders during Jun-Dec 09 on smell impact reduction plan to nearby communities.
• Regular visit to local communities every month during Jan-Dec 09. • Organized “School Safety Project” activities at Prachummit Bumrung School (basic fire fighting training for school children and teachers) on 4/9/09.
• Donating items , luncheon, and organizing sports activities for orphans at Huay Pong Youth Care Center, Rayong, on 26/12/09.
• Joined MPR (Map Ta Phut Public Relations Club) activity of “Happy Healthy Youth Camp with MPR” during 28-29/5/09 at PTT Herb Garden, Rayong.
• Supported gifts and presents to young children during 2009 National Children Day.
• Donated to support 2009 Rayong Red Cross Fair organized by Rayong Province.
• Donated to support Songkran Festival organized by Prachummit community and Chak Look Ya community.
• Donated to support 2009 Chinese temple charity at Payoon Chinese Temple
Indorama Ventures will always stand to support and contribute to the well being of its people, communities and the environment.
Annual Report 2009 73
Report of Audit Committee for the Year 2009
The Audit Committee of Indorama Ventures PCL consists of three independent directors of the Company namely; • Mr. Rathian Srimongkol - Chairman • Mr. William Ellwood Heine - Member • Mr. Chakramon Phasukavanich – Member The Audit Committee was constituted by the Board at its meeting no. 6/2009 dated 18 September 2009 for a period of two years. An Audit Committee Charter was approved by the Board at the same meeting which incorporated the provisions of the SEC Act.During the year 2009, the Committee held 3 meetings (details provided in Corporate Governance Report) and performed the following tasks in accordance with the scope of their responsibilities as assigned by the Board of Directors and those required by regulations.
Reviewed the financial statements of the Company with the Company’s auditors, including the significant accounting policies, the preparation process for financial statements, information disclosures and other issues, for the third quarter of 2009 (reviewed) and for the annual audited financial statements in order to assure that the financial reports are accurate, reliable and in compliance with generally accepted accounting standards and relevant regulations.
Approved the Internal Audit Plan for 2009 and reviewed the opinion on internal control on all the major subsidiaries of Indorama Ventures with the Internal Auditor of the Company. The Audit Committee also approved the Internal Audit Plan for the year 2010. The Internal Audit Department carried out its audit activities covering all subsidiaries of IVL except two US units. US units have been included in the Internal Audit Plan for the year 2010.
Assessed the adequacy of internal control system of the company with the Company’s Auditors, Internal Auditors and Management. The Committee will work together with the Internal Auditor and Management to further streamline the systems and procedures.
Reviewed the company’s compliance with laws and regulations of the Stock Exchange of Thailand, the Securities and Exchange Commission and other relevant laws pertaining to the Company’s business and found no issue of non-compliance for the period.
Since the Audit Committee was not in existence at the time of the appointment of Company’s Auditors including the setting of the Annual Audit Fee for 2009, the same has been recommended to the Shareholders’ Meeting by the Board of Directors.The Committee reviewed for each quarter all connected party transactions of the Company and its subsidiaries and found the same to be line with the internal Related Party Transaction Policy on connected transactions and regulatory requirements. The Audit Committee believes that the Company’s financial statements are properly presented, Internal Controls are adequate and the Company’s practices are in compliance with relevant regulations and good governance practices.
Rathian Srimongkol Chairman of the Audit Committee February 24, 2010
74 Indorama Ventures PCL
Report of the Board of Directors’ Responsibilities for the Financial Statements
The Board of Directors of Indorama Ventures PCL places significance on its roles and responsibilities in supervising the Com-pany’s operations in compliance with good Corporate Governance Principles and is accountable for the financial statements including financial data as shown in the Annual Report.
The financial statements for the accounting year ended December 31, 2009 has been prepared under the generally accepted accounting standards of Thailand. In preparing the said financial statements, the Company has adopted accounting practices and standards that are appropriate to its nature of business. All material information has been sufficiently disclosed in the notes to financial statements. The financial statements have been audited by qualified and independent auditors who have confirmed that the said statements accurately reflect the actual financial standing, results and operating results over the past year, as well as being transparent.
Moreover, the Board of Directors has instituted and maintained internal control, internal audit, risk management and corporate governance in order to ensure the completeness, adequacy and accurateness of the financial statements. The Board of Direc-tors has appointed the Audit Committee to review the quality of financial reports, the internal control system as well as complete and appropriate disclosure of connected transaction.
The Board of Directors expresses its satisfaction on the adequacy, credibility and reliability on the internal control system and the financial statements of Indorama Ventures Public Company Limited and its subsidiary companies for the year ended December 31, 2009.
Mr. Sri Prakash Lohia Mr. Aloke Lohia Chairman Group CEO
Annual Report 2009 75
FinancialStatements
Annual Report 2009 77
Audit report of Certified Public Accountant
To the Shareholders of Indorama Ventures Public Company Limited
I have audited the accompanying consolidated and separate balance sheets as at 31 December 2009 and 2008, and the related statements of income, changes in equity and cash flows for the years then ended of Indorama Ventures Public Company Limited and its subsidiaries, and of Indorama Ventures Public Company Limited, respectively. The Company’s management is responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to express an opinion on these financial statements based on my audits. I did not audit the financial statements of two subsidiaries acquired in 2008 included in the consolidation which had total assets as at 31 December 2009 and 2008 constituting 26 percent and 22 percent and total revenues for the years then ended constituting 22 percent and 5 percent, respectively, of the related consolidated totals. The carrying value of these investments in the separate balance sheets as at 31 December 2009 and 2008 amounted to Baht 3,752.2 million and Baht 2,928.2 million, respectively. The financial statements of the subsidiaries were audited by another auditor whose reports have been furnished to me, and my opinion, insofar as it relates to the amounts included for these subsidiaries, is based solely on the report of the other auditor.
I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits and the reports of the other auditor referred to in the first paragraph provide a reasonable basis for my opinion.
In my opinion, based on my audits and the reports of the other auditor, the consolidated and separate financial statements referred to above present fairly, in all material respects, the financial positions as at 31 December 2009 and 2008, and the results of operations and cash flows for the years then ended of Indorama Ventures Public Company Limited and its subsidiaries, and of Indorama Ventures Public Company Limited, respectively, in accordance with generally accepted accounting principles.
Without qualifying my opinion on the consolidated financial statements for the year ended 31 December 2008 of Indorama Ventures Public Company Limited and its subsidiaries, I draw attention to Note 4, during the year ended 31 December 2008, the Company completed a number of acquisitions, resulting in the recording of negative goodwill, which was recorded in the consolidated statement of income for the year ended 31 December 2008 in the amount of Baht 3,123.8 million.
(Vichien Thamtrakul)Certified Public Accountant Registration No. 3183
KPMG Phoomchai Audit Ltd.Bangkok25 February 2010
78 Indorama Ventures PCL
2009
1,396,824 1,162,929 9,962,811
- 9,673,954 1,369,479
23,565,997
- 32,706
- 49,505,319
878,874 277,216
50,694,115
74,260,112
Indorama Ventures Public Company Limited and its Subsidiaries Balance sheets
As at 31 December 2009 and 2008
Consolidated financial statements
Separate financial statements
Assets
Current assets Cash and cash equivalents Current investments Trade accounts receivable Short-term loans to related parties Inventories Other current assets Total current assets Non-current assets Investments in subsidiaries and associates Other long-term investments Long-term loans to related party Property, plant and equipment Intangible assets Other non-current assets Total non-current assets Total assets
Note
675, 8595, 10
1175121314
2008
1,179,241 257,020
8,525,056 212,800
7,419,235 1,242,144
18,835,496
- 100,118
- 49,641,830
967,825 222,806
50,932,579
69,768,075
(in thousand Baht)
2009
131,727 572,808
-
- 301,415
1,005,950
9,622,066 -
1,262,628 - - -
10,884,694
11,890,644
2008
27,450 - - - -
5,666 33,116
9,473,822 -
924,023 - - -
10,397,845
10,430,961
The accompanying notes are an integral part of these financial statements.
Annual Report 2009 79
Consolidated financial statements
Separate financial statements
Indorama Ventures Public Company Limited and its Subsidiaries
Balance sheets
As at 31 December 2009 and 2008
Liabilities and shareholders’ equity
Current liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Current portion of long-term loans from financial institutions Current portion of long-term loans from related parties Current portion of finance lease liabilities Income tax payable Other current liabilities Total current liabilities Non-current liabilities Long-term loans from financial institutions Long-term loans from related parties Finance lease liabilities Other non-current liabilities Total non-current liabilities Total liabilities
Note
1516
15
515
17
155
15
2009
10,004,447 9,003,958
4,643,396
24,467 24,538
313,643 1,770,907
25,785,356
25,330,385 -
73,374 605,182
26,008,941 51,794,297
2008
11,205,149 6,863,101
3,264,924
- 73,467 28,172
2,344,520 23,779,333
27,507,305 473,989 77,399
223,107 28,281,800 52,061,133
2009
- -
162,600
24,467 - -
222,255 409,322
2,155,158 - - -
2,155,158 2,564,480
2008
565,543 -
45,870
- - -
10,455 621,868
1,195,217 460,646
- -
1,655,863 2,277,731
(in thousand Baht)
The accompanying notes are an integral part of these financial statements.
80 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Balance sheets
As at 31 December 2009 and 2008
Consolidated financial statements
Separate financial statements
Liabilities and equity
Equity Share capital Authorised share capital Issued and paid-up share capital Additional paid-in capital Share premium Unrealized surpluses (deficits) Revaluation surplus Fair value changes on cash flow hedges Currency translation differences Excess of book value of acquired subsidiaries over cost Differences arising from common control transactions Retained earnings Appropriated Legal reserve Unappropriated Total equity attributable to equity holders of the Company Minority interests Total equity Total liabilities and equity
Note
1818
19
192919
19
19
19
2009
5,082,000 3,351,544
4,443,214
864,535 (132,795)(324,283)
173,674
(1,580,670)
290,575 10,093,238
17,179,032 5,286,783
22,465,815
74,260,112
2008
3,351,544 3,351,544
4,443,214
986,546 -
(109,247)
94,517
(1,580,670)
146,011 5,462,619
12,794,534 4,912,408
17,706,942
69,768,075
(in thousand Baht)
2009
5,082,000 3,351,544
4,443,214
- - - - - - -
- 1,531,406
9,326,164 -
9,326,164
11,890,644
2008
3,351,544 3,351,544
4,443,214
- - - - - - -
- 358,472
8,153,230 -
8,153,230
10,430,961
The accompanying notes are an integral part of these financial statements.
Annual Report 2009 81
Indorama Ventures Public Company Limited and its Subsidiaries
Statements of income
For the years ended 31 December 2009 and 2008
Revenues Revenue from sale of goods Interest income Dividend income Net foreign exchange gain Negative goodwill Other income Total revenues Expenses Cost of sale of goods Selling expenses Administrative expenses Management benefit expenses Impairment loss on investment Loss on disposal of subsidiary Net foreign exchange loss Total expenses Profit before finance costs and income tax expense Finance costs Profit before income tax expense Income tax expense Profit for the year Profit attributable to: Equity holders of the Company Minority interests Profit for the year Earnings per share - Basic (in Baht) Par value per share (in Baht)
Consolidated financial statements
Separate financial statements Note 2009 2008 2009 2008
(in thousand Baht)
55
4 (a)
5, 215, 225, 23
2411
4 (b)
5, 25
26
28
18
79,994,226 18,360
- 567,715
- 305,274
80,885,575
67,665,880 4,269,652
651,973 123,901
- - -
72,711,406
8,174,169 1,601,532 6,572,637 553,954
6,018,683
4,824,097 1,194,586 6,018,683
1.44
1
53,331,844 26,858
- -
3,123,837 122,358
56,604,897
48,178,261 2,553,200
366,274 53,044
- 287,202 523,765
51,961,746
4,643,151 1,467,460 3,175,691
52,641 3,123,050
2,656,296 466,754
3,123,050
16.51
10
- 33,074
1,232,471 - - -
1,265,545
- -
11,496 1,300
16,103 -
7,115 36,014
1,229,531 56,564
1,172,967 33
1,172,934
1,172,934 -
1,172,934
0.35
1
- 21,621
128,927 - - -
150,548
- -
6,438 - - -
26,892 33,330
117,218 20,619 96,599
31 96,568
96,568 -
96,568
0.60
10
The accompanying notes are an integral part of these financial statements.
82 Indorama Ventures PCL
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rplu
s
Fair
valu
ech
ange
s on
cash
flow
hedg
es
Cur
renc
y tra
nsla
tion
diffe
renc
es
Exc
ess
of b
ook
valu
e of
acq
uire
dsu
bsid
iarie
s ov
er
cost
Diff
eren
cear
isin
g fro
m
com
mon
con
trol
trans
actio
nsLe
gal r
eser
veU
napp
ropr
iate
d
Tota
l equ
ityat
tribu
tabl
e to
the
Com
pany
equi
ty h
olde
rsM
inor
ityin
tere
sts
Tota
l eq
uity
4 18
400
,000
- - - - - - - - - - 2
,951
,544
3,3
51,5
44 - - - - - - - - -
3,3
51,5
44
167
,601
- - - - - - - - - - 4
,275
,613
4,4
43,2
14 - - - - - - - - -
4,4
43,2
14
969
,270
(106
,608
) - (2
08,2
28)
(314
,836
) - (3
14,8
36)
332
,112
- - - -
986
,546
(132
,329
) - - (1
32,3
29) -
(132
,329
) 1
0,31
8 - -
864
,535
- - - - - - - - - - - - - -
(132
,795
) -
(132
,795
) - (1
32,7
95) - - -
(132
,795
)
(117
,563
) -
8,3
16 -
8,3
16 -
8,3
16 - - - - -
(109
,247
) - -
(215
,036
)
(215
,036
) - (2
15,0
36) - - -
(324
,283
)
89,
094 - - - - - - -
5,4
23 - - -
94,
517 - - - - - -
79,
157 - -
173
,674
(788
,867
) - - - - - -
(791
,803
) - - - -
(1,5
80,6
70) - - - - - - - - -
(1,5
80,6
70)
129
,682
- - - - - - - - 1
6,32
9 - -
146
,011
- - - - - - 5
,228
1
39,3
36 -
290
,575
2,6
98,3
36 - -
(73,
471)
(73,
471)
2,6
56,2
96
2,5
82,8
25
197
,787
- (1
6,32
9) - -
5,4
62,6
19 - - - -
4,8
24,0
97
4,8
24,0
97
(54,
142)
(139
,336
) - 1
0,09
3,23
8
3,5
47,5
53
(106
,608
)
8,3
16
(281
,699
)
(379
,991
) 2
,656
,296
2
,276
,305
(261
,904
) 5
,423
- - 7
,227
,157
12,
794,
534
(132
,329
)
(132
,795
)
(215
,036
)
(480
,160
) 4
,824
,097
4
,343
,937
4
0,56
1 - - 1
7,17
9,03
2
2,8
00,0
64
(43,
827)
21,
376
(74,
179)
(96,
630)
466
,754
3
70,1
24
(267
,164
) 2
,145
,422
- (1
36,0
38) -
4,9
12,4
08
(194
,732
)
(72,
622)
(69,
825)
(337
,179
) 1
,194
,586
8
57,4
07
(301
,112
) - (1
81,9
20)
5,2
86,7
83
6,3
47,6
17
(150
,435
)
29,
692
(355
,878
)
(476
,621
) 3
,123
,050
2
,646
,429
(529
,068
) 2
,150
,845
- (1
36,0
38)
7,2
27,1
57
17,
706,
942
(327
,061
)
(205
,417
)
(284
,861
)
(817
,339
) 6
,018
,683
5
,201
,344
(2
60,5
51) -
(181
,920
) 2
2,46
5,81
5
The
acco
mpa
nyin
g no
tes
are
an in
tegr
al p
art o
f the
se fi
nanc
ial s
tate
men
ts.
Annual Report 2009 83
Indorama Ventures Public Company Limited and its SubsidiariesStatements of Changes in Equity
For the years ended 31 December 2009 and 2008
Separate financial statements Additional
paid-in capital Retained earnings
Issued and
Balance at 1 January 2008Profit for the yearTotal recognised income Issue of share capitalBalance at 31 December 2008 and 1 January 2009Profit for the yearBalance at 31 December 2009
Note
18
paid-upshare capital
400,000 - -
2,951,544
3,351,544 -
3,351,544
Share premium
167,601 - -
4,275,613
4,443,214 -
4,443,214
Unappropriated
261,904 96,568 96,568
-
358,472 1,172,934 1,531,406
Totalequity
829,505 96,568 96,568
7,227,157
8,153,230 1,172,934 9,326,164
(in thousand Baht)
The accompanying notes are an integral part of these financial statements.
Bal
ance
at
1 Ja
nuar
y 20
08
U
nrea
lized
loss
es
D
epre
ciat
ion
of re
valu
atio
n in
crem
ent
in p
rope
rty, p
lant
and
equ
ipm
ent
Tran
slat
ion
of fi
nanc
ial
st
atem
ents
diff
eren
ces
Dis
posa
l of s
ubsi
diar
ies
N
et in
com
e (e
xpen
se) r
ecog
nise
d
di
rect
ly in
equ
ity
Pro
fit fo
r the
yea
r
Tota
l rec
ogni
sed
inco
me
and
expe
nse
D
iffer
ence
s ar
isin
g fro
m b
usin
ess
com
bina
tions
invo
lvin
g en
titie
s un
der c
omm
on c
ontro
l A
cqui
sitio
n of
sub
sidi
arie
s
Tran
sfer
to le
gal r
eser
ve
D
ivid
ends
Issu
e of
sha
re c
apita
l
Bal
ance
at 3
1 D
ecem
ber 2
008
and
1
Janu
ary
2009
U
nrea
lized
loss
es
D
epre
ciat
ion
of re
valu
atio
n in
crem
ent
in p
rope
rty, p
lant
and
equ
ipm
ent
Cas
h flo
w h
edge
s Lo
ss re
cogn
ised
in e
quity
Tr
ansl
atio
n of
fina
ncia
l
stat
emen
ts d
iffer
ence
s N
et e
xpen
se re
cogn
ised
dire
ctly
in e
quity
P
rofit
for t
he y
ear
To
tal r
ecog
nise
d in
com
e an
d ex
pens
e
Pur
chas
e of
min
ority
inte
rest
s
Tran
sfer
to le
gal r
eser
ve
D
ivid
ends
Bal
ance
at 3
1 D
ecem
ber 2
009
84 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Statements of cash flows
For the years ended 31 December 2009 and 2008
Consolidated financial statements
Separate financial statements Note 2009 2008 2009 2008
(in thousand Baht)
Cash flows from operating activities Profit for the year Adjustments for Depreciation and amortisation Interest income Dividend income Finance costs Unrealized foreign exchange (gain) loss Recovery of bad and doubtful debts expense, net (Reversal) provision for inventory obsolescence (Gain) loss on disposal of property, plant and equipment Impairment loss on investment in subsidiary Loss on disposal of subsidiary Negative goodwill Income tax expense Changes in operating assets and liabilities Trade accounts receivable Inventories Other current assets Other non-current assets Trade accounts payable Other current liabilities Other non-current liabilities
Income taxes paid Net cash provided by (used in) operating activities Cash flows from investing activities Interest received Dividend received Purchase of property, plant and equipment Proceeds from sale of property, plant and equipment (Purchase) sale of other investments, net Purchase of intangible assets Loans to a related party Cash outflow on acquisition of subsidiaries, including cash acquired of Baht 845,255,121 in 2008, and additional investment in subsidiaries Return of capital from subsidiary Net cash inflow on disposal of subsidiary Net cash provided by (used in) investing activities
11
11
6,018,683
3,081,932 (18,360)
- 1,601,532 (470,097) (28,527) (87,764) (1,045)
- - -
553,954 10,650,308
(1,080,090) (2,202,914)
319,836 86,085
1,886,452 (139,268) (33,875)
(263,634) 9,222,900
31,475 -
(3,784,501) 2,741
(900,082) (2,730)
(236,721)
(165,092) - -
(5,054,910)
3,123,050
1,566,585 (26,858)
- 1,467,460
491,627 (28,967) 229,564
156 -
287,202 (3,123,837)
52,641 4,038,623
3,734,855 679,669
(168,365) 51,753
(4,909,809) (968,500)
32,726 (27,565)
2,463,387
37,487 -
(4,855,854) 186,394 535,145 (7,372)
(42,612)
(14,474,047) -
279,941 (18,340,918)
1,172,934
- (33,074)
(1,232,471) 56,564 22,071
- - -
16,103 - -
33 2,160
- -
(301,188) - -
216,761 -
(33) (82,300)
3,962 1,232,471
- -
(572,808) -
(354,586)
(824,058) 659,711
- 144,692
96,568
- (21,621)
(128,927) 20,619 26,892
- - - - - -
31 (6,438)
- - - - -
345 -
(31) (6,124)
2,955 128,927
- -
90,189 -
(894,217)
(3,466,833) - -
(4,138,979)
The accompanying notes are an integral part of these financial statements.
Annual Report 2009 85
Indorama Ventures Public Company Limited and its Subsidiaries
Statements of cash flows
For the years ended 31 December 2009 and 2008
Consolidated financial statements
Separate financial statements Note 2009 2008 2009 2008
(in thousand Baht)
Cash flows from financing activities Interest paid Dividends paid Proceeds from borrowings Repayment of borrowings Repayment of finance leases Proceeds from issue of shares Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of exchange rate changes on balances held in foreign currencies Cash and cash equivalents at end of year
6
(1,915,610) (181,920) 3,870,572
(5,618,712) (72,269)
- (3,917,939)
250,051 1,179,241
(32,468) 1,396,824
(1,338,520) (136,038)
18,699,773 (4,410,353)
(64,772) 4,025,136
16,775,226
897,695 281,654
(108) 1,179,241
(59,111) -
1,147,541 (1,046,545)
- -
41,885
104,277 27,450
- 131,727
(10,568) -
2,242,689 (2,131,010)
- 4,025,135 4,126,246
(18,857) 46,307
- 27,450
Non-cash transaction In 2008, the Company issued ordinary shares at a premium with an aggregate value of Baht 3,202,021,384 to acquire shares in a subsidiary and Baht 676,216,599 for additional investment in shares in a subsidiary.
The accompanying notes are an integral part of these financial statements.
Note 2009 2008 2009 2008 (in thousand Baht)
86 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Note Contents 1 General information 2 Basis of preparation of the financial statements 3 Significant accounting policies 4 Acquisitions and disposal of subsidiaries 5 Related party transactions and balances 6 Cash and cash equivalents 7 Other investments 8 Trade accounts receivable 9 Inventories10 Other current assets11 Investments in subsidiaries and associates12 Property, plant and equipment13 Intangible assets14 Other non-current assets15 Interest-bearing liabilities16 Trade accounts payable17 Other current liabilities18 Share capital19 Additional paid-in capital and reserves20 Segment information21 Cost of sales22 Selling expenses23 Administrative expenses24 Employee benefit expenses25 Finance costs26 Income tax expense27 Promotional privileges28 Earnings per share29 Financial instruments30 Commitments with non-related parties31 Contingent liabilities32 Events after the reporting period33 Thai Accounting Standards (TAS) not yet adopted34 Reclassification of accounts
Annual Report 2009 87
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
These notes form an integral part of the financial statements.
The financial statements were authorised for issue by the Board of Directors on 25 February 2010.
1. General information
Indorama Ventures Public Company Limited, the “Company”, is incorporated in Thailand and has its registered office at 75/102, Ocean Tower II, 37th Floor, Sukhumvit Soi 19, Asoke Road, Klongtoeynua, Wattana, Bangkok, Thailand.
Subsequent to 31 December 2009, the Company was listed on the Stock Exchange of Thailand (see note 32 (b)).
The immediate and ultimate parent company as at 31 December 2009 was Indorama Resources Limited, incorporated in Thailand, and Canopus International Limited, incorporated in Mauritius.
The principal business of the Company and its subsidiaries (collectively, the “Group”) is the manufacture and distribution of polyethylene terephthalate (“PET”), purified terephthalic acid (“PTA”) and related products: polyester fibres and yarns, and wool products. Details of the Company’s subsidiaries as at 31 December 2009 and 2008 were as follows:
Name of the entity
Direct subsidiariesIndorama Petrochem Limited
Indorama Holdings Limited
TPT Petrochemicals PublicCompany Limited
Direct and indirect subsidiariesIndorama Polyester Industries PublicCompany Limited[formerly Tuntex (Thailand)Public Company Limited]
Indo Poly (Thailand) Limited
Indorama Polymers PublicCompany Limited
Type of business
Manufacture of purifiedterephthalic acid (“PTA”)Manufacture of woolproducts, polyester fiber and yarns and furfural and furfural alcohol Manufacture of PTA
Manufacture of polyesterfibers and yarns
Manufacture of polyesterfibers and yarns
Manufacture and sale of solid-state polymerised chips (generally known as bottle grade resin chips), polyethylene terephthalate (“PET”)
Country ofincorporation
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Effective ownership interest (%)
2009 2008
100.00
97.93
54.60
Direct64.94
Indirect33.9098.84Direct44.38
Indirect53.3397.71Direct42.81
Indirect25.9368.74
100.00
97.93
50.56
Direct97.01
Indirect-
97.01Direct44.38
Indirect53.3397.71Direct42.81
Indirect25.9368.74
88 Indorama Ventures PCL
Indirect subsidiariesUAB Indorama Holdings EuropeIndorama HoldingsRotterdam B.V. Indo Rama Textiles (Thailand) Limited UAB Indorama Polymers Europe Indorama PolymersRotterdam B.V. Indorama PolymersWorkington LimitedAlphaPet, Inc.
Indorama Polymers (USA), Inc.UAB Orion Global Pet
StarPet Inc.
Asia Pet (Thailand) Limited Petform (Thailand) Limited
TPT Utilities Company Limited
Chao Pha Ya HeritageCompany Limited
Indirect associatesTuntex Textile (Thailand) Company LimitedTri Ocean Tuntex Textile (Thailand) Company Limited
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Name of the entity Type of business
Trading in PTAManufacture of PTA
Manufacture of wool top
Trading in PET
Manufacture of bottle-grade resin chips Manufacture of bottle-grade resin chips Manufacture of bottle-grade resin chips
Holding companyManufacture of PET bottle-grade resin chips Manufacture of bottle-grade resin chips Manufacture ofAmorphous chips Manufacture of PETpreforms, closures and blown bottles Power generation andother utilitiesReal estate development
Manufacture of fibersand yarns Trading of fibers and yarns
Country ofincorporation
LithuaniaThe Netherlands
Thailand
Lithuania
The Netherlands
United Kingdom
United Statesof America
(“USA”)USA
Lithuania
USA
Thailand
Thailand
Thailand
Thailand
Thailand
Thailand
Effective ownershipinterest (%)
2009 2008
97.9397.93
93.13
68.74
68.74
68.74
68.74
68.7468.74
68.74
68.74
41.24
54.60
98.84
16.48
5.93
97.9397.93
93.13
68.74
68.74
68.74
68.74
68.7468.74
68.74
68.74
41.24
50.56
97.01
16.17
5.82
On 19 March 2008, the Company registered a change in its name from “Beacon Global Limited” to “Indorama Ventures Limited” with the Ministry of Commerce, Kingdom of Thailand.
Effective 31 July 2009, Indo Poly (Thailand) Limited (“IPL”) transferred its entire business to Indorama Polyester Industries Public Company Limited (“IPI”). IPI purchased all the IPL’s assets and assumed all its liabilities for a consideration of Baht 1,487.5 million which was equal to the net book value of the IPL’s assets and liabilities as at 31 July 2009. IPL registered its dissolution with the Ministry of Commerce on 3 August 2009, but was still controlled by the Group as at 31 December 2009.
On 19 September 2009, the shareholders approved the change of the status of the Company from a private company to a public company.
Annual Report 2009 89
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
On 25 September 2009, the Company registered a change in its name from “Indorama Ventures Limited” to “Indorama Ventures Public Company Limited” with the Ministry of Commerce.
On 27 October 2009, the shareholders approved a shareholding restructuring plan between Indorama Polymers Public Company Limited (IRP) and the Company wherein, upon the successful completion of the initial public offering by the Company in February 2010, the Company would exchange all of the shares in IRP currently held by IRP’s shareholders excluding those held by the Company and its subsidiaries for shares in the Company. IRP’s shares would then be subsequently delisted from the Stock Exchange of Thailand (“SET”). On 27 October 2009, IRP filed the application for delisting of shares with the SET. A tender offer for the IRP shares was initiated on 24 December 2009 (see note 32 (a)).
Effective 9 November 2009, IPI’s shares were delisted from the Stock Exchange of Thailand.
Effective 14 November 2009, TPT Utilities Company Limited (“TPT-UC”) transferred its entire business to TPT Petrochemicals Public Company Limited (“TPT”). TPT purchased all the TPT-UC’s assets and assumed all its liabilities for a consideration of Baht 1,556.9 million which was equal to the net book value of the TPT-UC’s assets and liabilities as at 14 November 2009. TPT-UC registered its dissolution with the Ministry of Commerce on 16 November 2009, but was still controlled by the Group as at 31 December 2009.
2. Basis of preparation of the financial statements
The financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of the financial statements has been prepared for the convenience of readers not conversant with the Thai language.
The financial statements are prepared in accordance with Thai Accounting Standards (“TAS”) and Thai Financial Reporting Standards (“TFRS”) including related interpretations and guidelines promulgated by the Federation of Accounting Professions (“FAP”) and with generally accepted accounting principles in Thailand.
On 15 May 2009, the FAP announced (Announcement No. 12/2009) the re-numbering of TAS to the same numbers as the In-ternational Accounting Standards (“IAS”) on which the TAS/TFRS are based.
The Group has adopted the following revised TAS/TFRS and accounting guidance which were issued by the FAP during 2008 and 2009 and effective for annual accounting periods beginning on or after 1 January 2009:
TAS 36 (revised 2007) Impairment of Assets
Framework for the Preparation and Presentation of Financial Statements (revised 2007) (effective 26 June 2009)
Accounting Guidance about Leasehold Right (effective 26 June 2009)
Accounting Guidance about Business Combination under Common Control
The adoption of these revised TAS/TFRS and accounting guidance does not have any material impact on the consolidated and separate financial statements.
Indorama Ventures Public Company Limited and its Subsidiaries
90 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
The FAP has issued during 2009 a number of new and revised TAS/TFRS which are not currently effective and have not been adopted in the preparation of these financial statements. The revised TAS applicable to the Group is disclosed in note 33.
The financial statements are presented in Thai Baht, rounded to the nearest thousand unless otherwise stated. They are prepared on the historical cost basis except as stated in the accounting policies.
The preparation of financial statements in conformity with TAS and TFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which estimates are revised and in any future periods affected.
Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:
Note 4 Business combinationsNote 24 Measurement of defined benefit obligationsNote 29 Valuation of financial instrumentsNote 31 Evaluation of contingent liabilities
3. Significant accounting policies
(a) Basis of consolidation
The consolidated financial statements relate to the Company and its subsidiaries and the Group’s interests in associates.
Business combinations
Business combinations are accounted for under the purchase method. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the Group’s interest in the net identifiable assets and liabilities of the acquiree over cost (“negative goodwill”) is recognized in the consolidated statement of income.
Business combinations of entities or businesses under common control are accounted for using a method similar to the pooling of interests method and in accordance with the Guideline issued in 2009 by the FAP.
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by the Group.
Annual Report 2009 91
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
The difference between the proceeds from the disposal of a subsidiary and its carrying amount as of the date of disposal, includ-ing the cumulative amount of any currency translation differences that relate to the subsidiary recognised in equity, is recognised in the consolidated statement of income.
Associates
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. The consolidated financial statements include the Group’s share of the income, expenses and equity movements of associates from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
(b) Foreign currencies
Foreign currency transactions
Transactions in foreign currencies are translated to Thai Baht at the foreign exchange rates ruling at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Thai Baht at the foreign exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of income.
Non-monetary assets and liabilities measured at cost in foreign currencies are translated to Thai Baht using the foreign exchange rates ruling at the dates of the transactions.
Foreign entities
The assets and liabilities of foreign entities are translated to Thai Baht at the foreign exchange rates ruling at the reporting date.
Goodwill and fair value adjustments arising on the date of acquisition of foreign entities are stated at exchange rates ruling on transactions dates.
The revenues and expenses of foreign entities are translated to Thai Baht at rates approximating the foreign exchange rates ruling at the dates of the transactions.
Foreign exchange differences arising on translation are recognised in a separate component of equity until disposal of the investments.
Indorama Ventures Public Company Limited and its Subsidiaries
92 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Where monetary items, in substance, form part of the Group’s net investment in a foreign entity, foreign exchange differences arising on such monetary items and related hedges are recognised directly in a separate component of equity until disposal of the investment.
(c) Derivative financial instruments
Derivative financial instruments are used to manage exposure to foreign exchange and interest rate risks arising from opera-tional, financing and investment activities. Derivative financial instruments are not used for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments are recognised initially at fair value; attributable transaction costs are recognised in the statement of income when incurred. Subsequent to initial recognition, they are remeasured at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the statement of income. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged (see accounting policy 3(d)).
The fair value of interest rate swaps is based on broker quotes at the reporting date. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the reporting date.
The fair value of forward exchange contracts is based on their listed market price, if available. If a listed marked price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price at the reporting date for the residual maturity of the contract using a risk-free interest rate (based on governmental bonds).
(d) Hedging
Fair value hedges
Where a derivative financial instrument hedges the changes in fair value of a recognised asset, liability or unrecognised firm commitment (or an identified portion of such asset, liability or firm commitment), any gain or loss on remeasuring the fair value or foreign currency component of the hedging instrument is recognised in the statement of income. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognised in the statement of income.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity.
If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or financial liability, the associated cumulative gains or losses that were recognised directly in equity are recognised in the statement of income in the same period or periods during which the asset acquired or liability assumed affects the statement of income.
If a hedge of a forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, or a forecast transaction for a non-financial asset or non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, the associated cumulative gains or losses that were recognised directly in equity are removed from equity and recognised in the statement of income in the same period or periods during which the asset acquired or liability assumed affects the statement of income.
Annual Report 2009 93
For cash flow hedges other than those noted in the preceding two paragraphs, the associated cumulative gains or losses that were recognised directly in equity are removed from equity and recognised in the statement of income in the same period or periods during which the hedged forecast transaction affects the statement of income.
Discontinuing hedge accounting
Hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss on the hedging instrument existing in equity is retained in equity and is recognised when the forecast transaction is ultimately recognised in the statement of income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is recognised in the statement of income immediately. (e) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits and highly liquid short-term investments. Bank overdrafts that are repayable on demand are a component of financing activities for the purpose of the statement of cash flows.
(f) Trade and other accounts receivableTrade and other accounts receivable are stated at their invoice value less allowance for doubtful accounts.
The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future expectations of customer payments. Bad debts are written off when incurred.
(g) Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost is calculated using the weighted average cost principle, and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of production overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to complete and to make the sale.
(h) Investments
Investments in subsidiaries and associates
Investments in subsidiaries in the separate financial statements of the Company are accounted for using the cost method.
An investment in a subsidiary that is not controlled by the Group is accounted for using the cost method in the consolidated financial statements.
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Indorama Ventures Public Company Limited and its Subsidiaries
94 Indorama Ventures PCL
(i) Property, plant and equipment
Owned assets
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, except for machinery and equipment related to the manufacture of textiles and related products which are stated at their revalued amounts. The revalued amount is the fair value determined on the basis of the assets’ existing use at the date of revaluation less any subsequent accumulated depreciation and impairment losses.
Leased assets
Leases in terms of which the Group substantially assumes all the risk and rewards of ownership are classified as finance leases. Property, plant and equipment acquired by way of finance leases is capitalised at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease, less accumulated depreciation and impairment losses. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the statement of income.
Revalued assets
Revaluations are performed by independent professional valuers with sufficient regularity to ensure that the carrying amount of these assets does not differ materially from that which would be determined using fair values at the reporting date.
Any increase in value, on revaluation, is credited to equity under the heading ‘revaluation surplus’ unless it offsets a previous decrease in value recognised in the statement of income in respect of the same asset. A decrease in value is recognised in the statement of income to the extent it exceeds an increase previously recognised in equity in respect of the same asset. The revaluation surplus is utilised by reference to the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset’s original cost and credited to accumulated depreciation. Upon disposal of a revalued asset, any remaining related revaluation surplus is transferred from equity to retained earnings and is not taken into account in calculating the gain or loss on disposal.
Depreciation
Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives of each item of prop-erty, plant and equipment. The estimated useful lives are as follows:
Land improvements 20-25 yearsBuildings and building improvements 20-30 yearsMachinery and equipment 5-30 yearsOffice furniture, fixtures and office equipment 3-10 yearsTransportation equipment 5-10 years
No depreciation is provided on freehold land or assets under construction.
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Annual Report 2009 95
(j) Intangible assets
Intangible assets that are acquired by the Group, which have finite useful lives, are stated at cost less accumulated amortisation and impairment losses. Intangible assets are amortised in the statement of income on a straight-line basis over their estimated useful lives of intangible assets from the date that they are available for use. The estimated useful lives are as follows:
Rights acquired 3-15 yearsSoftware licenses 5-7.5 yearsCustomer lists 9 yearsTechnology license 30 Years
(k) Impairment
The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in the statement of income unless it reverses a previous revaluation credited to equity, in which case it is charged to equity.
Calculation of recoverable amount
The recoverable amount of a non-financial asset is the greater of the asset’s value in use and fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
Reversals of impairment
An impairment loss in respect of a financial asset is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized.
Impairment losses recognised in prior periods in respect of non-financial assets are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carry-ing amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(l) Interest-bearing liabilities
Interest-bearing liabilities are recognised initially at fair value. Subsequent to initial recognition, interest-bearing liabilities are stated at amortised cost with any difference between cost and redemption value being recognised in the statement of income over the period of the borrowings on an effective interest basis.
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Indorama Ventures Public Company Limited and its Subsidiaries
96 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
(m) Trade and other accounts payable
Trade and other accounts payable are stated at cost.
(n) Employee benefits
Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of income as incurred.
Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. Any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on AA credit-rated bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit, the recognised asset is limited to the total of any unrecognised past service costs and the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. An economic benefit is available if it is realisable during the life of the plan, or on settlement of the plan liabilities.
(o) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
(p) Revenue
Revenue excludes value added taxes and is arrived at after deduction of trade discounts.
Sale of goods
Revenue is recognised in the statement of income when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there is continuing management involvement with the goods or there are significant uncertainties regarding recovery of the consideration due, associated costs or the probable return of goods.
Interest and dividend income
Interest income is recognised in the statement of income as it accrues. Dividend income is recognised in the statement of income on the date the Group’s right to receive payment is established.
Annual Report 2009 97
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
(q) Expenses
Operating leases
Payments made under operating leases are recognised in the statement of income on a straight line basis over the term of the lease.
Finance costs
Interest expenses and similar costs are charged to the statement of income for the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale. The interest component of finance lease payments is recognised in the statement of income using the effective interest method.
(r) Income tax
Income tax on the profit or loss for the year comprises current tax. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
4. Acquisitions and disposal of subsidiaries
(a) Acquisitions
(i) Negative Goodwill The excess of the Group’s interest in the net identified assets and liabilities of the companies acquired during the year ended 31 December 2008 is considered by management as negative goodwill attributable to bargain purchase factors, and is recognized in the consolidated statement of income and comprised the following:
(in thousand Baht) Eastman Chemical Company 1,027,446Indorama Petrochem Limited 1,339,860TPT Petrochemicals Public Company Limited 619,367Indorama Polyester Industries Public Company Limited (formerly Tuntex (Thailand) Public Company Limited) 137,164Total negative goodwill 3,123,837
(ii) Eastman Chemical Company
On 31 March 2008, the Group acquired the net assets (property, plant and equipment and working capital) and assumed the operations of two PET production facilities and a PTA production facility located in the Netherlands and the United Kingdom, previously owned and operated by Eastman Chemical Company (“Eastman”). The net assets were acquired for a cash con-sideration of €221.28 million (Baht 11,007.2 million).
Indorama Ventures Public Company Limited and its Subsidiaries
98 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
The acquirees’ net assets at the acquisition date comprised the following:
Trade and other receivablesInventoriesProperty, plant and equipmentIntangible assetsTrade and other payablesNet identifiable assets and liabilitiesNegative goodwillTotal consideration
Recognisedvalues
2,918,7581,575,7547,872,052
552,364(884,268)
12,034,660(1,027,446)11,007,214
Fair value adjustments
--
487,637552,364
-1,040,001
Carryingamounts
2,918,7581,575,7547,384,415
-(884,268)
10,994,659
(iii) Indorama Petrochem LimitedEffective 30 September 2008, the Group acquired, from a shareholder group controlled by a related party, 100% of the outstanding shares of Indorama Petrochem Limited (“IRPTA”), in exchange for 26,115,400 shares of the Company with fair value of Baht 2,525.8 million. IRPTA is principally engaged in the manufacture and distribution of PTA.
IRPTA’s net assets at the acquisition date comprised the following:
Cash and deposits at financial institutionsTrade accounts receivableInventoriesOther current assetsProperty, plant and equipmentIntangible assetsOther non-current assetsInterest-bearing loans and borrowingsTrade accounts payableOther liabilitiesNet identifiable assets and liabilitiesInterest acquired (%)Net identifiable assets and liabilities-acquiredNegative goodwill Total consideration
Fair value of shares issuedCash acquiredNet cash inflow
Recognisedvalues
4,110
1,853,1211,466,235
265,70013,497,206
410,29012,827
(11,218,938)(2,383,134)
(41,752)3,865,665
100%
3,865,665(1,339,860)
2,525,805
(2,525,805)(4,110)
4,110
Fair value adjustments
----
266,697-----
266,697
Carryingamounts
4,1101,853,1211,466,235
265,70013,230,509
410,29012,827
(11,218,938)(2,383,134)
(41,752)3,598,968
(in thousand Baht)
(in thousand Baht)
Annual Report 2009 99
(iv) TPT Petrochemicals Public Company Limited
In three transactions between 15 August 2008 to 16 October 2008, the Group obtained a 50.56% equity interest in TPT Petro-chemicals Public Company Limited (“TPT”) for a cash consideration of Baht 2,128.5 million. TPT is principally engaged in the manufacture and distribution of PTA.
The acquisition was considered effective on 30 September 2008. TPT’s net assets at the acquisition date comprised the following:
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Cash and deposits at financial institutionsTrade accounts receivableInventoriesOther current assetsProperty, plant and equipmentIntangible assetsOther non-current assetsInterest-bearing loans and borrowingsTrade accounts payableOther liabilitiesNet identifiable assets and liabilitiesInterest acquired (%)Net identifiable assets and liabilities-acquiredNegative goodwillTotal consideration
Cash acquiredNet cash outflow
Recognisedvalues
Fair valueadjustments
Carryingamounts
(in thousand Baht)
518,080 2,042,591 898,048 378,298 9,789,620 9,380 155,601 (6,930,231) (969,715) (456,651) 5,435,021 50.56% 2,747,867 (619,367) 2,128,500 (518,080) 1,610,420
----
272,384 -----
272,384
518,080 2,042,591 898,048 378,298 9,517,236 9,380 155,601 (6,930,231) (969,715) (456,651) 5,162,637
(v) Indorama Polyester Industries Public Company Limited (formerly Tun tex (Thailand) Public Company Limited)
In two transactions on 16 September 2008 and 4 December 2008, the Group acquired a 97.01% equity interest in Tuntex (Thailand) Public Company Limited (“Tuntex”) for a cash consideration of Baht 799.7 million. Tuntex is principally engaged in the manufacture and distribution of polyester yarn.
The acquisition was carried out as part of a plan of a business rehabilitation plan for Tuntex, including the restructuring of debts with its lenders. On 25 September 2008, the business rehabilitation plan was completed and on 27 October 2008, the Central Bankruptcy Court approved the Company’s exit from the business rehabilitation process. The acquisition was considered effective on 30 September 2008.
The net assets of Tuntex after giving effect to the provisions of the rehabilitation plan comprised the following:
Indorama Ventures Public Company Limited and its Subsidiaries
100 Indorama Ventures PCL
Cash and deposits at financial institutionsTrade accounts receivableInventoriesOther current assetsProperty, plant and equipmentIntangible assetsOther non-current assetsInterest-bearing loans and borrowingsTrade accounts payableOther liabilitiesNet identifiable assets and liabilitiesInterest acquired (%)Net identifiable assets and liabilities-acquiredNegative goodwillTotal consideration
Cash acquiredNet cash outflow
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Recognised values(in thousand Baht)
323,06522,68370,34013,992
1,819,9831,968
13,790(1,210,632)
(34,670)(54,774)965,74597.01%936,847
(137,164)799,683
(323,065)476,618
(b) DisposalOn 19 June 2008, the Group sold its 89.71% interest in a subsidiary, Indo-Rama Chemicals (Thailand) Ltd., to a related party, for a cash consideration in the amount of Baht 279.9 million. As a result, the Group recognised a loss on the disposal in the amount of Baht 287.2 million in the 2008 consolidated statement of income.
5. Related party transactions and balancesRelated parties are those parties linked to the Group and the Company as shareholders or by common shareholders or direc-tors. Transactions with related parties are conducted at prices based on market prices or, where no market price exists, at contractually agreed prices.
Relationships with related parties that control the Company or are being controlled by the Company or have transactions with the Group were as follows:
Name of entity
Canopus International LimitedIndorama Resources Limited
Indorama PetrochemLimitedIndorama Holdings Limited
Country of incorporation/ nationality
Mauritius
Thailand
Thailand
Thailand
Nature of relationship
Ultimate parent company of the Group, some common directors Immediate parent company, 92.87% shareholder, some common directors Subsidiary, 100% shareholding; some common directorsSubsidiary, 97.93% shareholding, some common directors
Annual Report 2009 101
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Name of entity
Indorama Polyester Industries Public Company LimitedTPT PetrochemicalsPublic Company LimitedIndo Poly (Thailand) Limited
Indorama PolymersPublic Company Limited UAB Indorama HoldingsEurope Indorama HoldingsRotterdam B.V. Indo Rama Textiles (Thailand) Limited UAB Indorama Polymers Europe Indorama PolymersRotterdam B.V. Indorama PolymersWorkington LimitedAlphaPet, Inc.
Indorama Polymers(USA), Inc.UAB Orion Global Pet
StarPet Inc.
Asia Pet (Thailand) Limited Petform (Thailand) Limited TPT Utilities CompanyLimited Chao Pha Ya HeritageCompany LimitedTuntex Textile (Thailand) Company LimitedP.T. Indorama Synthetics TBK LimitedTri Ocean Tuntex Textile (Thailand) Company LimitedSerm Suk Public Company Limited Pacific Resources LimitedCryoviva (Thailand) Limited
Country of incorporation/ nationality
Thailand
Thailand
Thailand
Thailand
Lithuania
The Netherlands
Thailand
Lithuania
The Netherlands
United Kingdom
USA
USA
Lithuania
USA
Thailand
Thailand
Thailand
Thailand
Thailand
Indonesia
Thailand
ThailandThailandThailand
Nature of relationship
Subsidiary, 64.94% shareholding and 33.90% interest held indirectly, some commondirectorsSubsidiary, 54.60% shareholding, some common directorsSubsidiary, 44.38% shareholding and 53.33% interest held indirectly, some common directorsSubsidiary, 42.81% shareholding and 25.93% interest held indirectly, some commondirectorsIndirect subsidiary, 97.93% effective interest, some common directorsIndirect subsidiary, 97.93% effective interest, some common directorsIndirect subsidiary, 93.13% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 68.74% effective interest, some common directorsIndirect subsidiary, 41.24% effective interest, some common directorsIndirect subsidiary, 54.60% effective interest, some common directorsIndirect subsidiary, 98.84% effective interest
Indirect associate, 16.48% effective interest
Some common shareholders and directors
Indirect associate, 5.93% effective interest
Shareholder of subsidiary, 40% shareholding, some common directors Some common shareholdersSome common directors
Indorama Ventures Public Company Limited and its Subsidiaries
102 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Name of entity
Tuntex Petrochemical Inc.Era Global LimitedIndo-Rama Chemicals (Thailand) LimitedIndo Rama Synthetics (India) Limited
Country of incorporation/ nationality
TaiwanGibraltarThailand
India
Nature of relationship
Shareholder of subsidiary, 21% shareholdingSome common shareholdersSubsidiary (up to June 2008), some common directorsFamily relationships with directors
The pricing policies for particular types of transactions are explained further below:
TransactionsSales of goodsPurchases of goodsInterest incomeOther incomeInterest expenseSelling and administrative expenses
Pricing policies Market pricesMarket pricesMarket linked rateContractually agreedMarket linked rateContractually agreed
Significant transactions for the years ended 31 December 2009 and 2008 with related parties were as follows:
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
SubsidiariesInterest incomeInterest expenseOther related partiesSales of goodsPurchases of goodsSelling and administrative expensesInterest incomeInterest expense
--
1,682,143823
7,94811,528
-
--
683,858-
5,24813,173
713
33,0537,436
-----
18,6662,415
-----
Balances as at 31 December 2009 and 2008 with related parties were as follows:
Trade accounts receivable from related parties
Other related partiesSerm Suk Public Company LimitedIndo Rama Synthetics (India) LimitedTuntex Textile (Thailand) Company Limited
Less allowance for doubtful accountNetBad and doubtful expense for the year
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
136,075244,457
-380,532
-380,532
-
125,016-
26,692151,708(26,692)125,016
26,692
--
---
-
--
---
-
Annual Report 2009 103
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Consolidated financial statements
Separate financial statements
2009 2008 2009 2008 (in thousand Baht)
Interest rate
2009 2008(% per annum)
Short-term loans to related parties
Comprising:
Short-term loans to related partyOther related partyIndo-Rama Chemicals (Thailand) Limited Total
Other receivables from related partySubsidiaryIndorama Holdings Ltd.Total
Total short-term loans to related parties
- 5.75 --
--
-
212,800212,800
--
212,800
--
--
-
--
5,6665,666
5,666
Consolidated financial statements
Separate financial statements
2009 2008 2009 2008 (in thousand Baht)
Interest rate
2009 2008(% per annum)
Long-term loans to related parties
Comprising:Long-term loans torelated partySubsidiaryIndorama Petrochem LimitedTotal
Other receivables fromrelated partySubsidiaryIndorama Petrochem LimitedTotal
Total long-term loansto related parties
2.42-5.13 5.58 -
-
--
-
-
-
--
-
1,217,2651,217,265
45,36345,363
1,262,628
911,023911,023
13,00013,000
924,023
The above long-term loan, including the related interest, is repayable only after full repayment of the long-term indebtedness of Indorama Petrochem Limited to a financial institution.
Summary of loans to related parties
Short-termLong-termTotal loans to related parties
Consolidated financial statements
Separate financial statements
2009 2008 2009 2008 (in thousand Baht)
---
212,800-
212,800
-1,262,6281,262,628
5,666924,023929,689
Indorama Ventures Public Company Limited and its Subsidiaries
2009 2008 2009 2008 (in thousand Baht)
104 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Movements of loans to related parties for the years ended 31 December 2009 and 2008 were as follows:
Consolidated financial statements
Separate financial statements
2009 2008 2009 2008 (in thousand Baht)
Loans to related parties
Short-term loans:Other related partyAt 1 JanuaryIncreaseDecreaseAt 31 December
Long-term loans:SubsidiaryAt 1 JanuaryIncreaseDecreaseAt 31 December
212,800-
(212,800)-
----
170,188212,800
(170,188)212,800
----
----
911,023354,587(48,345)
1,217,265
----
-911,023
-911,023
Loans from related parties
Long-term loansParentCanopus International Ltd.SubsidiaryIndorama Holdings LimitedOther related partyEra Global LimitedTotalLess current portionLong-term loans fromrelated parties
Consolidated financial statements
Separate financial statements
2009 2008 2009 2008 (in thousand Baht)
Interest rate
2009 2008(% per annum)
Nil
-
-
Nil
5.75
Nil
24,467
-
-24,467
(24,467)
-
403,171
-
70,818473,989
-
473,989
24,467
-
-24,467
(24,467)
-
350,824
109,822
-460,646
-
460,646
Movements of loans from related parties during the years ended 31 December 2009 and 2008 were as follows: Consolidated financial statements
Separate financial statements
2009 2008 2009 2008 (in thousand Baht) Long-term loans
Parent At 1 JanuaryIncreaseDecreaseAt 31 December
403,171-
(378,704)24,467
2,162,548352,520
(2,111,897)403,171
350,824-
(326,357)24,467
2,111,897350,824
(2,111,897)350,824
Annual Report 2009 105
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht) SubsidiaryAt 1 JanuaryIncreaseDecreaseAt 31 December
Other related partyAt 1 JanuaryIncreaseDecreaseAt 31 December
Total long-term loansrelated partiesAt 1 JanuaryIncreaseDecreaseAt 31 December
----
70,818-
(70,818)-
473,989-
(449,522)24,467
----
53,75217,066
-70,818
2,216,300369,586
(2,111,897)473,989
109,822-
(109,822)-
----
460,646-
(436,179)24,467
-109,822
-109,822
----
2,111,897460,646
(2,111,897)460,646
Loans from related parties are unsecured and comprise the following:
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
Loan - USD 730,000 (2008: USD 10,000,000) repayable on or before 31 December 2013* Subordinated loan - nil (2008: USD 1,500,000), repayable on demand upon repayment of certain long-term loans from financial institutionsLoan, repayable on or before 31 December 2013Loan - nil (2008: Baht 53.8 million and USD 525,514), repayable on or before 31 December 2013Total
* The Company has declared its intention to repay the loan in 2010. As a result, the outstanding loan balance is classified as current liabilities at 31 December 2009.
24,467
--
-24,467
350,824
52,347-
70,818473,989
24,467
--
-24,467
350,824
-109,822
-460,646
Indorama Ventures Public Company Limited and its Subsidiaries
2009 2008 2009 2008 (in thousand Baht)
2009 2008 2009 2008 (in thousand Baht)
2009 2008 2009 2008 (in thousand Baht)
106 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
6. Cash and cash equivalents
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
Cash on handCash at bank - current accountsCash at bank - savings accounts
Highly liquid short-term investmentsTotal
2,311557,619797,619
1,357,54939,275
1,396,824
4,000706,701467,077
1,177,7781,463
1,179,241
-1,252
130,475131,727
-131,727
-304
27,14627,450
-27,450
As at 31 December 2009, cash at bank amounting to USD 1.2 million (Baht 39.3 million; 2008: USD 1.3 million (Baht 44.8 million)), was restricted for loan principal and interest repayments to financial institutions.
The currency denomination of cash and cash equivalents as at 31 December was as follows:
Consolidated financial statements
Separate financial statements
2009 2008 2009 2008 (in thousand Baht)
Thai Baht (THB)United States Dollars (USD)Euro (EUR)Pounds Sterling (GBP)Lithuanian Litas (LTL)Total
391,40586,327
772,491101,02045,581
1,396,824
603,841178,694370,81615,82710,063
1,179,241
131,727----
131,727
27,450----
27,450
7. Other investments
Consolidated financial statements
Separate financial statements
2009 2008 2009 2008 (in thousand Baht)
Current investmentsShort-term deposits atfinancial institutions
Other long-term investmentsLong-term deposits atfinancial institutions
Total
1,162,9291,162,929
32,70632,706
1,195,635
257,020257,020
100,118100,118357,138
572,808572,808
- -
572,808
- -
- - -
Annual Report 2009 107
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
The currency denomination of other investments as at 31 December was as follows:
THBUSDEURGBPLTLTotal
612,654347,837235,144
--
1,195,635
100,118-
215,92335,286
5,811357,138
572,808----
572,808
-----
-
Deposits in the amount of Baht 267.8 million (2008: Baht 357.1 million) have been pledged to secure loans from financial institutions.
8. Trade accounts receivable Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
Note
Related partiesOther parties
Less allowance for doubtful accountsTotal
Reversal of bad anddoubtful debts expense during the year, net
5 380,5329,609,0119,989,543
(26,732)9,962,811
28,527
151,7088,428,6078,580,315
(55,259)8,525,056
28,967
-
-
-
-
-
-
Aging analyses for trade accounts receivable were as follows:
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht) Related partiesWithin credit termsOverdue:Less than 3 months Over 12 months
Less allowance for doubtful accountsNet
315,290
65,242 -
380,532 -
380,532
61,522
63,49426,692
151,708(26,692)125,016
-
- - - - -
-
- - - - -
-
-
-
-
-
-
Indorama Ventures Public Company Limited and its Subsidiaries
2009 2008 2009 2008 (in thousand Baht)
2009 2008 2009 2008 (in thousand Baht)
2009 2008 2009 2008 (in thousand Baht)
108 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht) Other partiesWithin credit termsOverdue:Less than 3 months 3-6 months 6-12 months Over 12 months
Less allowance for doubtful accountsNet
Total
8,085,788
1,351,72164,92979,26127,312
9,609,011(26,732)
9,582,279
9,962,811
6,800,441
1,559,53235,6687,227
25,7398,428,607
(28,567)8,400,040
8,525,056
-
- - - - - - -
-
-
- - - - - - -
-
The normal credit term granted by the Group ranges from 15 days to 360 days.
The currency denomination of trade accounts receivable as at 31 December was as follows:
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht) THBUSDEURGBPLTLTotal
2,538,7254,864,7211,650,759
814,79693,810
9,962,811
968,0465,414,4621,285,388
835,79421,366
8,525,056
- - - - - -
- - - - - -
Trade accounts receivable with a carrying amount of Baht 3,125.7 million (2008: Baht 3,161.2 million) have been pledged as collateral to secure loans from financial institutions.
9. Inventories Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
Finished goodsWork in processRaw materialsSpare parts and suppliesGoods in transit
Less allowance for decline in valueNet
4,483,816363,320
3,015,9311,231,797
600,9129,695,776
(21,822)9,673,954
3,658,588255,560
2,018,6161,191,811
536,9687,661,543(242,308)7,419,235
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Annual Report 2009 109
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
The cost of inventories which is recognised as an expense and included in ‘cost of sale of goods’ for 2009 amounted to Baht 57,180 million (2008: Baht 40,482 million).
Inventories with a carrying value of Baht 1,959.3 million (2008: Baht 3,496.0 million) have been pledged as collateral to secure loans from financial institutions.
10. Other current assets Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
Value added tax receivableDeferred initial public offering costs Export incentive receivablePrepaid expensesAdvance paymentsOthersTotal
417,327294,704179,960155,56572,968
248,9551,369,479
669,292-
70,391220,778
9,381272,302
1,242,144
-294,704
---
6,711301,415
-----
5,6665,666
11. Investments in subsidiaries and associates
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
At 1 JanuaryAdditional investments Impairment Return of investmentAt 31 December
-----
-----
9,473,822824,058(16,103)
(659,711)9,622,066
2,804,9676,668,855
--
9,473,822
Indorama Ventures Public Company Limited and its Subsidiaries
2009 2008 2009 2008 (in thousand Baht)
2009 2008 2009 2008 (in thousand Baht)
2009 2008 2009 2008 (in thousand Baht)
110 Indorama Ventures PCL
Indo
ram
a Ve
ntur
es P
ublic
Com
pany
Lim
ited
and
its S
ubsi
diar
ies
St
atem
ents
of i
ncom
e
Fo
r the
yea
rs e
nded
31
Dec
embe
r 200
9 an
d 20
08
Inve
stm
ents
in s
ubsi
diar
ies
and
asso
ciat
es a
s at
31
Dec
embe
r 200
9 an
d 20
08 a
nd d
ivid
end
inco
me
from
thos
e in
vest
men
ts fo
r the
yea
rs th
en e
nded
wer
e as
follo
ws:
Con
solid
ated
fina
ncia
l sta
tem
ents
Subs
idia
ryC
hao
Pha
Ya
Her
itage
Com
pany
Lim
ited
Ass
ocia
tes
Tunt
ex T
extil
e (T
haila
nd)
Com
pany
Lim
ited
Tri O
cean
Tun
tex
Text
ile
(Tha
iland
) Com
pany
Lim
ited
Tota
l
Effe
ctiv
e ow
ners
hip
inte
rest
Pai
d-up
cap
ital
Cos
tIm
pairm
ent
Car
ryin
g am
ount
Div
iden
d in
com
e
2009
200
8
2009
2008
2
009
2
008
2
009
20
08
2
009
2
008
2
009
2008
(%)
(
in th
ousa
nd B
aht)
98.8
4
16.4
8
5.93
97.0
1
16.1
7
5.82
750,
000
1,20
0,00
0
175,
000
750,
000
1,20
0,00
0
175,
000
732,
500
200,
000
10,5
500
943,
000
732,
500
200,
000
105,
500
943,
000
(732
,500
)
(200
,000
)
(10,
500)
(943
,000
)
(732
,500
)
(200
,000
)
(10,
500)
(943
,000
)
- - - -
- - - -
- - - -
The
subs
idia
ry is
cur
rent
ly in
liqu
idat
ion
purs
uant
to th
e or
der o
f the
Cen
tral B
ankr
uptc
y C
ourt
of T
haila
nd in
Dec
embe
r 200
7. A
s a
resu
lt, th
e su
bsid
iary
is n
ot c
ontro
lled
by
the
Gro
up a
nd is
acc
ount
ed fo
r usi
ng th
e co
st m
etho
d.
- - - -
Annual Report 2009 111
Indo
ram
a Ve
ntur
es P
ublic
Com
pany
Lim
ited
and
its S
ubsi
diar
ies
St
atem
ents
of i
ncom
e
Fo
r the
yea
rs e
nded
31
Dec
embe
r 200
9 an
d 20
08
Con
solid
ated
fina
ncia
l sta
tem
ents
Effe
ctiv
e ow
ners
hip
inte
rest
Pai
d-up
cap
ital
Cos
tIm
pairm
ent
Car
ryin
g am
ount
Div
iden
d in
com
e
20
09
2008
200
9
200
8
200
9
2008
2009
20
08
2
009
2
008
200
9
2008
2
009
2008
Ret
urn
of c
apita
l
(%)
(
in th
ousa
nd B
aht)
Not
e
Subs
idia
ries
Indo
ram
a P
etro
chem
Lim
ited
Indo
ram
a H
oldi
ngs
Lim
ited
Indo
ram
a P
olym
ers
Pub
lic C
ompa
ny L
imite
d
Indo
Pol
y (T
haila
nd)
Lim
ited
Indo
ram
a P
olye
ster
Indu
strie
s P
ublic
Com
pany
Lim
ited
TPT
Pet
roch
emic
als
Pub
lic C
ompa
ny L
imite
d
Tota
l
4 4 4
100.
0097
.93
42.8
1
44.3
8
64.9
4
54.6
0
100.
0097
.93
42.8
1
44.3
8
97.0
1
50.5
6
4,72
7,82
077
4,46
8
1,38
2,19
8
700,
000
2,20
2,85
0
4,92
5,00
0
4,72
7,82
077
4,46
8
1,38
2,19
8
700,
000
824,
350
4,92
5,00
0
2,52
5,80
51,
951,
147
1,39
2,47
0
676,
217
1,47
3,99
5
2,27
8,24
610
,297
,880
2,52
5,80
51,
951,
147
1,39
2,47
0
676,
217
799,
683
2,12
8,50
09,
473,
822
- - -
(16,
103) - -
(16,
103)
- - - - - - -
- - -
(659
,711
) - -(6
59,7
11)
- - - - - - -
2,52
5,80
51,
951,
147
1,39
2,47
0
403
1,47
3,99
5
2,27
8,24
69,
622,
066
2,52
5,80
51,
951,
147
1,39
2,47
0
676,
217
799,
683
2,12
8,50
09,
473,
822
709,
172
394,
371
128,
928
- - -
1,23
2,47
1
- -
128,
927 - - -
128,
927
The
mar
ket
pric
e of
the
Com
pany
’s d
irect
inte
rest
at
Indo
ram
a P
olym
ers
Pub
lic C
ompa
ny L
imite
d w
as B
aht
7,69
2,33
2 th
ousa
nd a
s at
31
Dec
embe
r 20
09 (
2008
: B
aht
3,19
5,28
2 th
ousa
nd).
Dur
ing
2009
, the
Com
pany
pur
chas
ed a
dditi
onal
sha
res
of In
dora
ma
Pol
yest
er In
dust
ries
Pub
lic C
ompa
ny L
imite
d (“
IPI”)
repr
esen
ting
a 1.
7% e
quity
inte
rest
for a
cas
h co
nsid
-er
atio
n of
Bah
t 12.
0 m
illio
n an
d su
bscr
ibed
to th
e ca
pita
l inc
reas
e of
IPI f
or a
cas
h co
nsid
erat
ion
of B
aht 6
62.3
mill
ion;
and
pur
chas
ed a
dditi
onal
sha
res
of T
PT
Pet
roch
emic
als
Pub
lic C
ompa
ny L
imite
d re
pres
entin
g a
4.0%
equ
ity in
tere
st fo
r a c
ash
cons
ider
atio
n of
Bah
t 149
.7 m
illio
n.
Dur
ing
2009
, the
Com
pany
rece
ived
a d
ivid
end
in th
e am
ount
of B
aht 3
50.6
mill
ion
from
Indo
Pol
y (T
haila
nd) L
imite
d, w
hich
is u
nder
the
proc
ess
of li
quid
atio
n, th
at w
as a
c-co
unte
d fo
r as
a re
turn
of c
apita
l.
New
and
add
ition
al in
vest
men
ts d
urin
g 20
08 w
ere
acqu
ired
in e
xcha
nge
for c
ash
and
the
assu
mpt
ion
of d
ebt i
n am
ount
s ag
greg
atin
g B
aht 3
,466
.8 m
illio
n an
d th
e is
sue
of
33,1
07,1
02 o
rdin
ary
shar
es o
f the
Com
pany
at a
pre
miu
m o
f Bah
t 2,8
71.0
mill
ion.
At 3
1 D
ecem
ber 2
009,
a p
ortio
n of
sha
res
of In
dora
ma
Pol
ymer
s P
ublic
Com
pany
Lim
ited,
Indo
ram
a P
etro
chem
Lim
ited,
and
TP
T P
etro
chem
ical
s P
ublic
Com
pany
Lim
ited
has
been
ple
dged
as
colla
tera
l for
loan
s ob
tain
ed fr
om v
ario
us fi
nanc
ial i
nstit
utio
ns.
112 Indorama Ventures PCL
Indo
ram
a Ve
ntur
es P
ublic
Com
pany
Lim
ited
and
its S
ubsi
diar
ies
St
atem
ents
of i
ncom
e
Fo
r the
yea
rs e
nded
31
Dec
embe
r 200
9 an
d 20
08
12
Prop
erty
, pla
nt a
nd e
quip
men
tC
onso
lidat
ed fi
nanc
ial s
tate
men
ts
Land
and
land
im
prov
emen
ts
Bui
ldin
gs a
ndbu
ildin
gim
prov
emen
ts
Mac
hine
ry a
ndeq
uipm
ent -
text
ilepr
oduc
tion
Offi
ce fu
rnitu
re,
fixtu
res,
and
eq
uipm
ent
Tran
spor
tatio
n eq
uipm
ent
Mac
hine
ry a
ndeq
uipm
ent -
othe
rC
onst
ruct
ion
in p
rogr
ess
Tota
l(in
thou
sand
Bah
t)C
ost/r
eval
ued
At 1
Jan
uary
200
8A
dditi
ons
Acq
uisi
tions
thro
ugh
busi
ness
com
bina
tions
Tran
sfer
sD
ispo
sals
Dis
posa
l of s
ubsi
diar
yTr
ansl
atio
n di
ffere
nces
on
cons
olid
atio
nA
t 31
Dec
embe
r 200
8
and
1 Ja
nuar
y 20
09A
dditi
ons
Tran
sfer
sD
ispo
sals
Tran
slat
ion
diffe
renc
es o
n co
nsol
idat
ion
At 3
1 D
ecem
ber 2
009
Fina
nce
cost
s ca
pita
lised
Fina
nce
cost
s ca
pita
lized
du
ring
2008
(Not
e 25
) R
ates
of i
nter
est c
apita
lised
du
ring
2008
(% p
er a
nnum
) Fi
nanc
e co
sts
capi
talis
ed
durin
g 20
09 (N
ote
25)
Rat
es o
f int
eres
t cap
italis
ed
durin
g 20
09 (%
per
ann
um)
271
,800
1
05,6
16
763
,024
- -
(73,
644)
5,56
2
1,07
2,35
8 -50
,837
-(7
,669
)1,
115,
526 - - - -
2,43
9,51
3
22
,728
1,
526,
825
6
9,93
5
-
(140
,040
)5,
830
3,92
4,79
166
0,90
810
1,46
9 -(6
1,76
5)4,
625,
403 - - - -
7,74
9,84
649
,050
-61
,925
(1
,253
) - -
7,85
9,56
8
8,1
25 - - -
7,86
7,69
3 - - - -
11,0
41,4
5836
0,48
8 30
,256
,130
8
65,6
05
(285
,823
)(1
,831
,296
)13
9,28
4
40,5
45,8
462,
782,
067
1,11
4,10
8(8
,352
)(4
60,5
32)
43,9
73,1
37
1,42
2
4.8
- 6.
1 - -
233,
614
32,0
54
136,
325 -
(508
)
(27,
663)
408
374,
230
62,9
736,
892
(73)
(1,5
18)
442,
504 - - - -
165,
222
17,6
05
16,2
18 -
(3,6
54)
(19,
234) 26
176,
183
16,1
04-
(4,8
81)
6218
7,46
8 - - - -
885,
164
4,26
8,31
2 24
4,20
5 (9
97,4
65) - -
174,
859
4,57
5,07
527
3,75
4(1
,273
,306
) -(1
31,1
13)
3,44
4,41
0
59,8
89 5.2
113,
116
3.5
22,7
86,6
174,
855,
853
3
2,94
2,72
7 -(2
91,2
38)
(2
,091
,877
)32
5,96
9
58,5
28,0
513,
803,
931 -
(13,
306)
(662
,535
)61
,656
,141
61,3
11
4.8
- 6.1
113,
116
3.5
Annual Report 2009 113
Indo
ram
a Ve
ntur
es P
ublic
Com
pany
Lim
ited
and
its S
ubsi
diar
ies
St
atem
ents
of i
ncom
e
Fo
r the
yea
rs e
nded
31
Dec
embe
r 200
9 an
d 20
08
Con
solid
ated
fina
ncia
l sta
tem
ents
Land
and
land
im
prov
emen
ts
Bui
ldin
gs a
ndbu
ildin
gim
prov
emen
ts
Mac
hine
ry a
ndeq
uipm
ent -
text
ilepr
oduc
tion
Offi
ce fu
rnitu
re,
fixtu
res,
and
eq
uipm
ent
Tran
spor
tatio
n eq
uipm
ent
Mac
hine
ry a
ndeq
uipm
ent -
othe
rC
onst
ruct
ion
in p
rogr
ess
Tota
l(in
thou
sand
Bah
t)
Acc
umul
ated
dep
reci
atio
nA
t 1 J
anua
ry 2
008
Dep
reci
atio
n ch
arge
for t
he y
ear
Dis
posa
ls
Dis
posa
l of s
ubsi
diar
yTr
ansl
atio
n di
ffere
nces
on
cons
olid
atio
n
At 3
1 D
ecem
ber 2
008
and
1 Ja
nuar
y 20
09D
epre
ciat
ion
char
ge fo
r the
yea
rD
ispo
sals
Tran
slat
ion
diffe
renc
es o
n co
nsol
idat
ion
At 3
1 D
ecem
ber 2
009
Net
boo
k va
lue
Ow
ned
asse
tsA
sset
s un
der fi
nanc
e le
ases
Tota
l at 3
1 D
ecem
ber 2
008
Ow
ned
asse
tsA
sset
s un
der fi
nanc
e le
ases
Tota
l at 3
1 D
ecem
ber 2
009
14,8
874,
724 -
(11,
160)
259
8,71
022
,626
-(4
25)
30,9
11
1,06
3,64
8 -1,
063,
648
1,08
4,61
5 -1,
084,
615
618,
947
126,
715 -
(72,
904)
1,16
7
673,
925
170,
226 -
(3,7
67)
840,
384
3,25
0,86
6 -3,
250,
866
3,78
5,01
9 -3,
785,
019
5,17
3,82
721
2,70
5 (1
10) - -
5,38
6,42
2
1
26,1
55 - -
5,51
2,57
7
2
,473
,146
-2,
473,
146
2,35
5,11
6 -2,
355,
116
2,54
1,19
01,
344,
532
(4
,742
)(1
,296
,851
)(1
1,31
5)
2,57
2,81
42,
918,
577
(2,3
16)
(50,
012)
5,43
9,06
3
37,7
92,9
2118
0,11
137
,973
,032
38,3
63,1
6517
0,90
938
,534
,074
155,
640
26,4
39(1
,560
)(2
3,75
1) 88
156,
856
63,9
08(7
3)(3
48)
220,
343
217,
374 -
217,
374
222,
161 -
222,
161
75,9
7322
,042
(2
,765
)
(7
,769
)13
87,4
9425
,982
(5,8
21)
(111
)10
7,54
4
74,6
2014
,069
88,6
89
50,2
4729
,677
79,9
24
- - - - - - - - - -
4,57
5,07
5 -4,
575,
075
3,44
4,41
0 -3,
444,
410
8,58
0,46
41,
737,
157
(9,1
77)
(1,4
12,4
35)
(9,7
88)
8,88
6,22
13,
327,
474
(8,2
10)
(54,
663)
12,1
50,8
22
49,4
47,6
50
194,
180
49,6
41,8
30
49,3
04,7
3320
0,58
649
,505
,319
114 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
The gross carrying amount of fully depreciated property, plant and equipment that was still in use as at 31 December 2009 amounted to Baht 3,514 million (2008: Baht 3,168 million).
In June 2005, certain subsidiaries of the Company revalued their machinery and equipment related to textile production at appraised values at 31 May 2005 by applying the fair market value as specified in the appraisal report dated 2 June 2005 obtained from an independent qualified appraiser.
Certain property, plant and equipment with a carrying value of Baht 45,148.2 million (2008: Baht 49,085.1 million) have been pledged as collateral to secure loans from financial institutions.
Annual Report 2009 115
Indo
ram
a Ve
ntur
es P
ublic
Com
pany
Lim
ited
and
its S
ubsi
diar
ies
St
atem
ents
of i
ncom
e
Fo
r the
yea
rs e
nded
31
Dec
embe
r 200
9 an
d 20
08
13.
Inta
ngib
le a
sset
s
Con
solid
ated
fina
ncia
l sta
tem
ents
Cos
tA
t 1 J
anua
ry 2
008
Add
ition
sA
cqui
sitio
ns th
roug
h bu
sine
ss c
ombi
natio
nsTr
ansl
atio
n di
ffere
nces
on
cons
olid
atio
n A
t 31
Dec
embe
r 200
8 an
d 1
Janu
ary
2009
Add
ition
sTr
ansl
atio
n di
ffere
nces
on
cons
olid
atio
nA
t 31
Dec
embe
r 200
9
Acc
umul
ated
am
ortiz
atio
n an
d im
pairm
ent
At 1
Jan
uary
200
8A
mor
tisat
ion
char
ge fo
r the
yea
r R
ever
sal o
f im
pairm
ent c
harg
e Tr
ansl
atio
n di
ffere
nces
on
cons
olid
atio
n A
t 31
Dec
embe
r 200
8 an
d 1
Janu
ary
2009
Am
ortis
atio
n ch
arge
for t
he y
ear
Tran
slat
ion
diffe
renc
es o
n co
nsol
idat
ion
At 3
1 D
ecem
ber 2
009
Net
boo
k va
lue
At 3
1 D
ecem
ber 2
008
At 3
1 D
ecem
ber 2
009
Not
e 4
Rig
hts
acqu
ired
49,8
273,
776
9,38
1(8
4)62
,900
-(1
,262
)61
,638
11,9
752,
594 - 5
14,5
742,
996
(142
)17
,428
48,3
2644
,210
Softw
are
licen
ces
1,190
3,596
119,9
62 798
125,
546
8,341
(5,57
4)12
8,31
3
555
10,94
2(3
,556) 63
8,00
417
,044
(2,30
0)22
,748
117,
542
105,
565
Cus
tom
erlis
ts
-
-43
2,025
2,424
434,
449 -
(12,4
34)
422,
015 -
35,80
2 -20
136
,003
46,66
0(1
,055)
81,6
08
398,
446
340,
407
Tech
nolo
gylic
ence
-
-40
7,216
-
407,
216
-
-
407,
216 -
3,705 - -
3,70
514
,819 -
18,5
24
403,
511
388,
692
Tota
l
51,0
17
7,37
2
968,
584
3,13
81,
030,
111
8,34
1
(19,
270)
1,01
9,18
2
12,5
30
53,0
43
(3,5
56)
269
62,2
8681
,519
(3,4
97)
140,
308
967,
825
878,
874
Indorama Ventures Public Company Limited and its Subsidiaries
116 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
14. Other non-current assets Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
Deferred financing costsAdvance payment on purchase of machineryRefundable depositsOthersTotal
162,525
25,40947,19342,089
277,216
162,636
-5,082
55,088222,806
-
-
--
-
-
--
15. Interest-bearing liabilities
CurrentBank overdraftsShort-term loans fromfinancial institutions (a)Bank overdrafts andshort-term loansCurrent portion of long-termloans from financialinstitutions (b) Current portion of finance lease liabilities (c)
Non-currentLong-term loans from financial institutions (b) Long-term loan froma related partyFinance lease liabilities (c)
Total
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht) Note
5
24,776
9,979,671
10,004,447
4,643,396
24,53814,672,381
25,330,385
-73,374
25,403,759
40,076,140
21,866
11,183,283
11,205,149
3,264,924
73,46714,543,540
27,507,305
-77,399
27,584,704
42,128,244
-
-
-
162,600
-162,600
2,155,158
--
2,155,158
2,317,758
-
565,543
565,543
45,870
-611,413
1,195,217
109,822-
1,305,039
1,916,452
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
The periods to maturity of interest-bearing liabilities, excluding finance lease liabilities, as at 31 December were as follows:
Within one yearAfter one year but within five yearsAfter five yearsTotal
14,647,84319,885,2645,445,121
39,978,228
14,470,07318,518,6238,988,682
41,977,378
162,6001,708,348
446,8102,317,758
611,413723,402581,637
1,916,452
Annual Report 2009 117
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
Secured interest-bearing liabilities as at 31 December were secured on the following assets:
Current investmentsOther long-term investmentsTrade accounts receivableInventoriesProperty, plant, and equipmentShares of subsidiariesTotal
235,14432,706
3,125,6901,959,314
45,148,17110,198,34460,699,369
257,020100,118
3,161,2233,496,031
49,085,12810,033,40266,132,922
-----
2,207,0402,207,040
-----
958,283958,283
(a) Short-term loans from financial institutionsShort-term loans from financial institutions comprise the following:
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
Short-term loans, secured by property,plant and equipmentShort-term loans, secured by shares ofa subsidiaryRevolving loan (USD 62,430,195)(2008: USD 55,889,175) due inMay 2014, secured by tradeaccounts receivable and inventoriesRevolving loan (EUR 4,000,000)(2008: EUR 7,587,355) secured by property, plant and equipment Revolving loan secured by property, plantand equipment Liabilities under trust receiptsPacking credits Promissory note Call loansBill discounted and otherTotal
2,009,900
-
2,069,954
191,174
179,000597,186
2,368,346-
1,943,366620,745
9,979,671
2,834,334
565,543
1,950,404
373,309
-1,864,2461,532,4801,314,967
748,000-
11,183,283
-
-
-
-
-------
-
565,543
-
-
------
565,543
Under the terms of trust receipt agreements with banks, certain imported inventory has been released by the bank to the Group in trust. The Group is accountable to the banks for the inventory or its related sales proceeds until the inventory is fully paid for.
Although the Group has no current expectations it will repay the full amount of the USD revolving credit loan before the agree-ment expires in 2014, the borrowings have been classified as short-term debt on the Group’s balance sheets due to certain subjective provisions available to the bank that are included in the loan document.
All short-term loans bear interest at floating rates with the exception of the short-term loans secured by shares of a subsidiary which are interest-free.
Indorama Ventures Public Company Limited and its Subsidiaries
2009 2008 2009 2008 (in thousand Baht)
2009 2008 2009 2008 (in thousand Baht)
2009 2008 2009 2008 (in thousand Baht)
118 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
(b) Long-term loans from financial institutionsAll long-term loans are secured by property, plant and equipment and additionally (or except) as disclosed below and bear interest at floating rates except as disclosed below as follows:
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
Term loan, due in December 2013,secured additionally by inventoriesTerm loan, due in November 2015,secured additionally by guaranteeby a related partyTerm loan, due in March 2013, securedadditionally by guarantee by arelated partySyndicated term loan, due in August2012, secured additionally by landsublease rights, cash inflows and shares in a subsidiaryTerm loan, due in March 2015, securedby shares of a subsidiaryUnsecured loan, due in January 2014Term loan, repayable in monthly installments of Baht 17.1 million,with interest at the rate of fixed rateUnsecured loan, repayable in semi-annualinstallments of USD 1.1 millioncommencing in September 2010Term loan due in November 2015,secured additionally by a restrictedbank accountTerm loan, repayable in monthlyinstallments of Baht 3.8 million,with interest at 4% per annum for thefirst three years and a floating ratethereafter, secured by shares in TPTOther long-term loans
Less portion due within one yearNet
7,398,269
3,840,306
1,487,974
1,332,480
867,250866,311
853,660
535,200
499,316
485,01811,807,99729,973,781
(4,643,396)25,330,385
8,415,453
2,826,585
1,901,390
1,742,155
708,000993,030
1,024,800
560,200
647,005
530,88711,422,72430,772,229
(3,264,924)27,507,305
-
-
-
-
--
-
535,200
-
485,0181,297,5402,317,758
(162,600)2,155,158
-
-
-
-
--
-
560,200
-
530,887150,000
1,241,087
(45,870)1,195,217
The above loan agreements contain certain covenants relating to the declaration and payment of dividends, maintenance of financial ratios, acquisition of major fixed assets, additional indebtedness and share transfers.
As at 31 December 2009, the Company had unutilised credit facilities totaling Baht 13,710 million (2008: Baht 12,345 million).
Annual Report 2009 119
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
(c) Finance lease liabilitiesFinance lease liabilities as at 31 December were payable as follows:
Consolidated financial statements2009 2008
Principal Interest Payments Principal Interest Payments(in thousand Baht)
Within one yearAfter one year but within five years Total
24,538
73,37497,912
5,593
7,90813,501
30,131
81,282111,413
73,467
77,399150,866
7,656
13,21920,875
81,123
90,618171,741
The currency denomination of interest-bearing liabilities as at 31 December was as follows:
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
THBUSDEUR Total
15,685,20415,861,7738,529,163
40,076,140
15,568,83717,599,2618,960,146
42,128,244
1,205,018535,199577,541
2,317,758
1,356,252560,200
-1,916,452
16. Trade accounts payableThe currency denomination of trade accounts payable as at 31 December was as follows:
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
THBUSDEUR GBPLTLTotal
2,519,8363,131,5233,165,223
82,732104,644
9,003,958
716,7343,083,5022,944,159
9,161109,545
6,863,101
- - - - -
-
- - - - -
-
Indorama Ventures Public Company Limited and its Subsidiaries
2009 2008 2009 2008 (in thousand Baht)
120 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
17. Other current liabilities
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht) Note
Accrued operating expensesOther payablesAccrued initial publicoffering costsInterest payablePayable to Eastman Chemical Company OthersTotal
5
4
825,320381,073
213,269103,571
-247,674
1,770,907
666,246537,709
-335,231
709,89595,439
2,344,520
3,730-
213,2695,088
-168
222,255
400-
-10,051
-4
10,455
18. Share capital
AuthorisedAt 1 January- ordinary sharesReduction in par valuefrom Baht 10 to Baht 1Increase of new sharesIncrease of new sharesAt 31 December- ordinary shares- ordinary shares
Issued and paidAt 1 January- ordinary sharesReduction in par valuefrom Baht 10 to Baht 1Increase of new sharesAt 31 December- ordinary shares- ordinary shares
Par valueper share(in Baht)
10
1101
101
10
110
101
Number
335,154
3,351,544-
1,730,456
-5,082,000
335,154
3,351,544-
-3,351,544
Amount
3,351,544
--
1,730,456
-5,082,000
3,351,544
--
-3,351,544
2009
(thousand shares / thousand Baht)
Number
40,000
-295,154
-
335,154-
40,000
-295,154
335,154-
Amount
400,000
-2,951,544
-
3,351,544-
400,000
-2,951,544
3,351,544-
2008
The reduction in par value of the authorised share capital from Baht 10 to Baht 1 and the increase of authorised shares from 3,351,544 thousand shares (par value 1 Baht per share) to 5,082,000 thousand shares (par value 1 Baht per share) was approved in a shareholders’ meeting on 28 September 2009.
The increase in authorised share capital was approved in shareholders’ meetings held during 2008, as follows:
Annual Report 2009 121
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
10 June 20082 September 200817 September 2008Total
Increase in authorised share capital
(in thousand shares)217,50058,36419,290
295,154
The issue of shares during the year ended 31 December 2008 resulted in the increase in balances in share capital and share premium as following:
Increase in authorised share capital
(in thousand shares)2,525,805
676,2174,025,1357,227,157
Shares issued in acquisition of IRPTAShares issued in additional investment in IPLSubscription monies receivedTotal
19. Additional paid-in capital and reservesShare premium
Section 51 of the Public Companies Act B.E. 2535 requires companies to set aside share subscription monies received in excess of the par value of the shares issued to a reserve account (“share premium”). Share premium is not available for dividend distribution.
Revaluation surplus
Revaluation surplus recognised in equity relates to cumulative net changes in the surplus arising from the revaluation of machinery and equipment related to textile production. The revaluation surplus is not available for dividend distribution.
Currency translation changes
The currency transaction changes recognised in equity relate to foreign exchange differences arising from the translation of the financial statements of foreign operations to Thai Baht.
Differences arising from common control transactions
The differences arising from common control transactions represent the excess of the book values of certain subsidiaries over their cost as of the date of their acquisition and have been recorded as a reserve. It is non-distributable and will be retained until the respective subsidiaries are sold or otherwise disposed of.
Indorama Ventures Public Company Limited and its Subsidiaries
2009 2008 2009 2008 (in thousand Baht)
122 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Legal reserve
Section 116 of the Public Companies Act B.E. 2535 Section 116 requires that a company shall allocate not less than 5% of its annual net profit, less any accumulated losses brought forward, to a reserve account (“legal reserve”), until this account reaches an amount not less than 10% of the registered authorised capital. The legal reserve is not available for dividend distribution.
20. Segment information
Segment information is presented in respect of the Group’s business and geographic segments based on the Group’s man-agement and internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise interest or dividend-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses.
Business segments
The Group comprises the following main business segments:
Segment 1
Segment 2Segment 3
Manufacture and distribution of solid state polymerised chips, PET performs, closures and blown bottles (“PET”)Manufacture and distribution of purified terephthalic acid (“PTA”)Manufacture and distribution of fibers and yarns (“Fibers and yarns”)
Starting from 1 January 2009, management has decided to present three business segments compared to the four business segments previously reported. The “Polyester fibre & yarns” and “Wool yarns” business segments have been aggregated and reported as one segment under “Fibres & yarns”. In management’s view, these two business segments have similar production process and products and are under one management group, and furthermore, the wool yarns business segment is not considered sufficiently material to be reported separately. The 2008 comparative information has been disclosed accordingly.
Geographic segments
In presenting information on the basis of geographical segments, segment revenue is based on the geographic location of cus-tomers. Segment assets are based on the geographical location of the assets.
The following are the main geographical locations:
Segment 1Segment 2Segment 3Segment 4
ThailandNorth America
EuropeRest of the world
Annual Report 2009 123
Indo
ram
a Ve
ntur
es P
ublic
Com
pany
Lim
ited
and
its S
ubsi
diar
ies
St
atem
ents
of i
ncom
e
Fo
r the
yea
rs e
nded
31
Dec
embe
r 200
9 an
d 20
08
Con
solid
ated
fina
ncia
l sta
tem
ents
(
in th
ousa
nd B
aht)
Bus
ines
s se
gmen
t res
ults
2009
2
008
200
9
20
08
200
9
200
8
200
9
2008
200
9
2
008
PE
T
P
TA*/
**
Fi
bers
& y
arns
Elim
inat
ions
T
otal
Rev
enue
from
sal
e
of g
oods
Inte
rest
inco
me
Net
fore
ign
exch
ange
gain
Una
lloca
ted
reve
nue
Tota
l rev
enue
Cos
t of s
ales
Sel
ling
and
adm
inis
trativ
e
expe
nses
Dep
reci
atio
n an
d
amor
tizat
ion
Net
fore
ign
exch
ange
loss
Una
lloca
ted
expe
nses
Tota
l exp
ense
s
44,4
64,8
39
4,18
0
115,
597
-
44,5
84,6
16
38,3
55,4
03
2,76
3,31
4
887,
738
-
-42
,006
,455
40,9
69,1
42
8,79
5
-
-
40,9
77,9
37
36,4
93,0
60
2,09
3,51
1
726,
585
335,
434
-39
,648
,590
45,98
0,655
2,265
440,3
11 -46
,423
,231
37,78
9,156
1,419
,143
1,773
,575 - -
40,9
81,8
74
14,73
2,136
1,641 - -
14,7
33,7
77
13,30
6,735
564,1
54
567,1
51
206,1
40 -14
,644
,180
12,18
0,920
22,49
2
4,083
-
12,2
07,4
95
11,11
9,397
764,8
54
420,6
19 -
-12
,304
,870
6,652
,811
15,05
2
-
-
6,66
7,86
3
5,754
,182
411,8
25
272,8
49
(31,9
83)
-
6,40
6,87
3
(22,6
32,18
8)(1
0,597
) - -(2
2,64
2,78
5)
(22,5
93,58
4)
(1,00
6) - - -(2
2,59
4,59
0)
(9,42
6,378
)(2
3,747
) - -(9
,450
,125
)
(9,14
6,428
)
(286
,470) - - -
(9,4
32,8
98)
79,99
4,226
18,34
0
559,9
9131
3,018
80,8
85,5
75
64,67
0,372
4,946
,305
3,081
,932 -
12,79
772
,711
,406
52,92
7,711
(a)
1,741 -
3,675
,445
56,6
04,8
97
46,40
7,549
2,783
,020
1,566
,585
509,5
9169
5,001
51,9
61,7
46
(a) T
his
incl
udes
una
lloca
ted
amou
nts
rela
ted
to a
sub
sidi
ary
sold
dur
ing
2008
.
Indorama Ventures Public Company Limited and its Subsidiaries
124 Indorama Ventures PCL
Indo
ram
a Ve
ntur
es P
ublic
Com
pany
Lim
ited
and
its S
ubsi
diar
ies
St
atem
ents
of i
ncom
e
Fo
r the
yea
rs e
nded
31
Dec
embe
r 200
9 an
d 20
08
Con
solid
ated
fina
ncia
l sta
tem
ents
(
in th
ousa
nd B
aht)
2009
2
008
200
9
20
08
200
9
200
8
200
9
2008
200
9
2
008
PE
T
P
TA*/
**
Fi
bers
& y
arns
Elim
inat
ions
T
otal
Profi
t (lo
ss) b
efor
e in
tere
st a
ndin
com
e ta
xex
pens
es
Inte
rest
exp
ense
Inco
me
tax
expe
nse
Una
lloca
ted
item
s
Pro
fit (l
oss)
afte
r tax
Min
ority
inte
rest
s
Pro
fit (l
oss)
for t
heye
ar
2,57
8,16
152
6,25
031
4,55
5
-
1,73
7,35
6
-
1,73
7,35
6
1,32
9,34
769
2,01
4
3,80
3 -
633,
530 -
633,
530
5,44
1,35
786
4,76
1
236,
405 -
4,34
0,19
1 -
4,34
0,19
1
89,5
9756
0,45
131
,773
-
(502
,627
) -
(502
,627
)
(97,
375)
198,
161
2,96
1 -
(298
,497
) -
(298
,497
)
260,
990
206,
361
13,6
72
-
40,9
57-
40,9
57
(48,
195)
(44,
203) - -
(3,9
92) -
(3,9
92)
(17,
227)
(23,
747) - -
6,52
0 -
6,52
0
8,17
4,16
91,
544,
969
553,
921
56,5
96
6,01
8,68
31,
194,
586
4,82
4,09
7
*Inc
lude
s in
terc
ompa
ny re
venu
e on
sal
es to
oth
er b
usin
ess
seg-
men
ts:
To P
ET
To F
iber
s &
Yar
ns
**In
clud
es e
stim
ated
inte
rcom
pany
pro
fit (l
oss)
on
sale
s to
oth
er
busi
ness
seg
men
ts:
To P
ET
To F
iber
s &
Yar
ns
2009
200
8(in
thou
sand
Bah
t)
15,4
17,5
896,
692,
548
1,45
5,29
263
1,72
1
8,64
4,93
037
6,89
9
(294
,945
)(1
2,85
9)
4,64
3,15
11,
435,
079
49,2
4835
,774
3,12
3,05
046
6,75
4
2,65
6,29
6
Annual Report 2009 125
Indo
ram
a Ve
ntur
es P
ublic
Com
pany
Lim
ited
and
its S
ubsi
diar
ies
St
atem
ents
of i
ncom
e
Fo
r the
yea
rs e
nded
31
Dec
embe
r 200
9 an
d 20
08
Bus
ines
s se
gmen
t fina
ncia
l pos
ition
Con
solid
ated
fina
ncia
l sta
tem
ents
(
in th
ousa
nd B
aht)
2009
2
008
200
9
20
08
200
9
200
8
200
9
2008
200
9
2
008
PE
T
P
TA*/
**
Fi
bers
& y
arns
Elim
inat
ions
T
otal
Cas
h an
d ca
sheq
uiva
lent
sIn
vent
orie
sP
rope
rty, p
lant
and
equi
pmen
t U
nallo
cate
d as
sets
Tota
l ass
ets
Inte
rest
-bea
ring
liabi
litie
sU
nallo
cate
dlia
bilit
ies
Tota
l lia
bilit
ies
Cap
ital e
xpen
ditu
re
Dep
reci
atio
n
Am
ortis
atio
n
Gai
n/(lo
ss) o
ndi
spos
al o
f ass
ets
445,
741
4,77
1,18
8
18,6
16,7
51
-
23,8
33,6
80
14,6
14,9
38
-14
,614
,938
2,67
9,40
7
837,
195
50,5
43 77
284,
746
3,62
3,02
2
17,0
36,2
81
-
20,9
44,0
49
14,8
83,3
48
-14
,883
,348
4,10
6,19
3
687,
794
38,7
91
(552
)
772,
334
2,94
1,45
4
25,4
52,6
02-
29,1
66,3
90
18,5
20,6
12
-18
,520
,612
411,
648
1,74
3,34
3
30,2
32 206
765,
379
2,55
6,19
4
27,3
06,7
65-
30,6
28,3
38
21,4
37,9
57
-21
,437
,957
61,7
45
554,
038
13,1
13
(33)
47,0
231,
988,
552
5,43
5,96
6 -7,
471,
541
5,84
7,78
5 -5,
847,
785
712,
876
419,
875
744
762
101,
666
1,24
2,24
7
5,29
8,78
4 -6,
642,
697
4,77
8,33
1 -4,
778,
331
686,
564
272,
070
1,13
9
429
-(2
7,24
0) - -(2
7,24
0)
(1,2
24,9
54) -
(1,2
24,9
54) - - - -
-(2
,228
) - -(2
,228
)
(887
,844
) -(8
87,8
44) - - - -
1,26
5,09
89,
673,
954
49,5
05,3
1913
,815
,741
74,2
60,1
12
37,7
58,3
81
14,0
35,9
1651
,794
,297
3,80
3,93
1
3,00
0,41
3
81,5
19
1,04
5
1,15
1,79
17,
419,
235
49,6
41,8
3011
,555
,219
69,7
68,0
75
40,2
11,7
92
11,8
49,3
4152
,061
,133
4,85
5,85
3 (a
)
1,51
3,54
2
53,0
43
(156
)
(a) T
his
incl
udes
una
lloca
ted
amou
nts
rela
ted
to a
sub
sidi
ary
sold
dur
ing
2008
.
126 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Geographic segments
21. Costs of sales
(in thousand Baht)
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht) Changes in inventories of finishedgoods and work in processRaw materials and consumables usedDepreciation and amortisationOthersTotal
(1,191,579)58,371,9992,995,5087,489,952
67,665,880
(515,318)40,996,8221,445,9166,250,841
48,178,261
-----
-----
22. Selling expenses Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht) DistributionDepreciation and amortisationInsurance expenseTravelling expenseOthersTotal
3,865,42586,42441,40637,228
239,1694,269,652
2,403,33465,87121,65422,32240,019
2,553,200
------
------
23. Administrative expenses Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht) Professional feesPersonnel expenseDepreciation and amortisationOthersTotal
164,912187,894
-299,167651,973
136,374158,30154,79816,801
366,274
10,311--
1,18511,496
5,972--
4666,438
Consolidated financial statements
Revenue from sale of goods Segment assets Capital expenditure
ThailandNorth AmericaEuropeRest of the worldTotal
2009
11,916,52412,437,63930,368,90625,271,15779,994,226
2008
6,063,55212,547,68325,500,3539,220,256
53,331,844
2009
43,799,12513,167,05617,293,931
-74,260,112
2008
41,265,70310,927,46617,574,906
-69,768,075
2009
1,430,0402,255,015
118,876-
3,803,931
2008
1,246,0433,539,386
70,424-
4,855,853
One subsidiary acquired in 2008 recorded depreciation and amortisation expense in administrative expenses during a period in which the subsidiary was not producing goods for sale.
Annual Report 2009 127
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
24. Employee benefit expenses
ManagementWages and salariesContribution to defined contributionplans and social securityOthers
Other employeesWages and salariesContribution to defined contributionplans and social securityBonusStaff welfareOthers
Total
97,458
1,16325,280
123,901
1,666,987
81,540167,42775,840
317,0222,308,816
2,432,717
45,825
1,2365,983
53,044
1,090,549
68,13728,28044,099
142,2611,373,326
1,426,370
-
-1,3001,300
-
-----
1,300
-
---
-
-----
-
Provident funds
The defined contribution plans comprise provident funds established by a subsidiary of the Company for its Thai employees. Membership to the funds is on voluntary basis. Contributions are made monthly by the employees at the rate of 2% of their basic salaries and by the Company at the rate of 2% of the employees’ basic salaries. The provident funds are registered with the Min-istry of Finance as juristic entities and are managed by a licensed Fund Manager. Total expense recognised by the Thai entities for contribution plans for the year ended 31 December 2009 amounted to approximately Baht 0.6 million (2008: Baht 0.5 million).
Employee retirement schemes
A U.S. subsidiary has established a 401(k) plan that allows eligible employees to contribute up to 60% of their compensation, with the Company matching 50% of employee contributions up to 6% of their compensation. The plan also allows discretionary profit sharing contributions to be made by management. Total expense recognised for the plan for the year ended 31 December 2008 amounted to approximately USD 0.1 million (Baht 1.6 million) (2008: USD 0.1 million (Baht 1.7 million) for the year ended 31 December 2009.
Two subsidiaries in Europe have established defined benefit plans that provide pension benefits for their employees upon retire-ment. The plans entitle a retired employee to receive an annual payment equal to 1/60 of final salary for each year of employ-ment. Total expense recognised for the plan for the year ended 31 December 2009 amounted to EUR 1.4 million (Baht 64.9 million) (2008: EUR 0.4 million (Baht 18.6 million)).
One subsidiary in Europe has established defined contribution plan that provide pension benefits for its employees upon retire-ment. The benefits calculations are based on the annual salary. Total annual contribution by the employer to the plan is defined by the annual and risk premiums charged by theinsurance company. Total expense recognised for the plan for the year ended 31 December 2009 was GBP 0.3 million (Baht 15.5 million) (2008: GBP 0.3 million (Baht 15.8 million).
Indorama Ventures Public Company Limited and its Subsidiaries
2009 2008 2009 2008 (in thousand Baht)
2009 2008 2009 2008 (in thousand Baht)
2009 2008 2009 2008 (in thousand Baht)
128 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
The following information below relates to the defined benefit plans operated by the two European subsidiaries:
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
(1) Total pension costCurrent service costInterest costTotal periodic pension cost
The expense is recognized in thefollowing line items in the statementof income:Cost of salesAdministrative expensesTotal
(2) Change in present value of definedbenefit obligationDefined benefit obligation at beginning of yearDefined benefit obligation assumedupon acquisition of subsidiaries(Note 4 (a)(ii))Current service costInterest costActuarial (gain) lossTotal defined benefit obligation at endof period
(3) Less fair value of pension plan assetsat end of year
(4) Liability recognized in thebalance sheet (5) Principal actuarial assumptions at endof period Discount rateExpected long-term rate of returnon plan assetsFuture salary increase
53,78311,20864,991
64,991-
64,991
51,612
119,56953,78311,208
(10,326)
225,846
(107,534)
(118,312)
5.20%
5.20%3.50%
17,3681,279
18,647
18,647-
18,647
-
28,340 17,368
1,2794,625
51,612
-
(51,612)
5.90%
5.90%3.50%
---
---
----
-
-
-
-
--
---
---
----
-
-
-
-
--
Annual Report 2009 129
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
25. Finance costs Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht) Note
Interest expense:Related parties Financial institutions
Capitalised as part of construction in progressNet
5
12
-1,714,6481,714,648
(113,116)1,601,532
7131,528,0581,528,771
(61,311)1,467,460
49,1287,436
56,564
-56,564
2,41518,20420,619
-20,619
26. Income tax expense Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
Current tax expenseCurrent yearAdjustments for prior yearsTotal
523,93730,017
553,954
51,4411,200
52,641
33-
33
31-
31
The current tax expense in the consolidated statement of income is less than the amount determined by applying the Thai cor-poration tax rate to the accounting profit for the year, principally because a significant portion of the Group’s profit was derived from promoted activities (see Note 27) which are not subject to tax, and unutilised tax losses brought forward from the previous year have been utilised during the year to set-off against the current year’s tax charge.
Deferred income tax liabilities recorded in the accounts of subsidiaries located in jurisdictions outside Thailand and not included in the consolidated financial statements amounted to Baht 960.2 million as at 31 December 2009 (2008: Baht 998.9 million).
27. Promotional privilegesBy virtue of the provisions of the Industrial Investment Promotion Act B.E. 2520, the Company and certain subsidiaries incorporated in Thailand have been granted privileges by the Board of Investment at various times relating to their manufacturing of worsted wool yarn, wool top, Purified Terephthalic Acid (PTA), polyethylene terephthalate resin, PET preforms and closures and amorphous resin (“promoted operations”). The privileges granted include:
(a) exemption from payment of import duty on machinery approved by the Board of Investment;
(b) exemption from payment of income tax on net profit from promoted operations for a period of eight years from the date on which income is deemed to first derive from such operations;
(c) a 50% reduction in the normal income tax rate on the net profit derived from promoted operations for a period of five years, commencing from the expiry date in (b) above;
(d) a five-year carry forward period for losses for tax purposes from promoted operations during the period in (b) above;
Indorama Ventures Public Company Limited and its Subsidiaries
2009 2008 2009 2008 (in thousand Baht)
130 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
(e) income exclusions and additional deductions in computing the taxable income for promoted operations during the period in (b) above;
(f) exemption from income tax on dividend paid to the shareholders from the profit of the promoted operation during the corporate income tax exemption period; and
(g) double deduction of the cost of transportation, electricity and water supply for corporate income tax purposes for a period of ten years, from the date on which income is deemed to first derive from promoted operations.
As promoted companies, the subsidiaries in Thailand must comply with certain terms and conditions prescribed in the promotional certificates.
Summary of revenue from promoted and non-promoted businesses:
Consolidated financial statements2009 2008
Export salesLocal salesTotal revenue
Promotedbusinesses
20,178,46019,159,41839,337,878
Non-promoted
businesses
11,257,40210,555,19521,812,597
Total (a)
31,435,86229,714,61361,150,475
(in thousand Baht)
Promotedbusinesses
6,012,093 9,461,644
15,473,737
Non-promoted
businesses
4,293,789 2,194,077 6,487,866
Total (a)
10,305,882 11,655,721 21,961,603
(a) excluding revenues from foreign subsidiaries and inter-company eliminations.
28. Basic earnings per share
The calculations of basic earnings per share for the years ended 31 December 2009 and 2008 were based on the profit for the years attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding dur-ing the years (for 2009, after giving effect to the reduction in par value (Note 18)) as follows:
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht / thousand shares) Profit attributable to equity holdersof the Company (basic)Number of ordinary shares outstandingat 1 JanuaryEffect of shares issued on:9 July10 October17 October8 DecemberWeighted average number ofordinary shares outstanding (basic)
Earnings per share (basic) (in Baht)Par value per share (in Baht) (see note 18)
4,824,097
3,351,544
----
3,351,544
1.44
1
2,656,296
40,000
104,28013,1143,324
196
160,914
16.51
10
1,172,934
3,351,544
----
3,351,544
0.35
1
96,568
40,000
104,28013,1143,324
196
160,914
0.6010
Annual Report 2009 131
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
29. Financial instruments
Financial risk management policies
The Group is exposed to normal business risks from changes in market interest rates and currency exchange rates and from non-performance of contractual obligations by counterparties. The Group does not hold or issue derivative financial instruments for speculative or trading purposes.
Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an ac-ceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Group’s risk management process to ensure that an appropriate balance between risk and control is achieved.
Interest rate risk
Interest rate risk is the risk that future movements in market interest rates will affect the results of the Group’s operations and its cash flows. The Group is primarily exposed to interest rate risk from its borrowings (see Note 15).
The effective interest rates of loans to related parties as at 31 December and the periods in which the loans mature or reprice were as follows:
2008CurrentShort-term loans to related partyTotal
5.8212,800212,800
--
--
212,800212,800
Separate financial statementsEffective interest
rate(% per annum)
Within 1 year
After 1 year but within 5
yearsAfter 5 years Total
2.4-5.1
2009Non-currentLong-term loans to relatedpartiesTotal 2008Non-currentLong-term loans to relatedpartiesTotal
--
--
--
--
1,262,6281,262,628
911,023911,023
1,262,6281,262,628
911,023911,0235.6
(in thousand Baht)
Consolidated financial statements
Effective interest
rate(% per annum)
Within 1 year
After 1 year but within 5
yearsAfter 5 years Total
(in thousand Baht)
Indorama Ventures Public Company Limited and its Subsidiaries
2009 2008 2009 2008 (in thousand Baht / thousand shares)
132 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
The effective interest rates of loans from related parties as at 31 December and the periods in which the loans mature or reprice were as follows:
Separate financial statementsEffective interest
rate(% per annum)
Within 1 year
After 1 year but within 5
yearsAfter 5 years Total
(in thousand Baht)
2008Non-currentLong-term loans from a related partyTotal
5.8 --
109,822109,822
--
109,822109,822
The effective interest rates of interest-bearing financial liabilities as at 31 December and the periods in which those liabilities mature or re-price were as follows:
Consolidated financial statements
Effective interest
rate(% per annum)
Within 1 year
After 1 year but within 5
yearsAfter 5 years Total
(in thousand Baht)
2009CurrentBank overdraftsShort-term loans from financial institutionsLong-term loans from financial institutionsFinance lease liabilitiesNon-currentLong-term loans from financial institutionsFinance lease liabilitiesTotal
5.2 to 8.2
2.0 to 5.2
2.0 to 5.92.7 to 6.2
2.0 to 5.92.7 to 6.2
24,776
9,979,671
4,643,39624,538
--
14,672,381
-
-
--
19,885,26473,374
19,958,638
-
-
--
5,445,121-
5,445,121
24,776
9,979,671
4,643,39624,538
25,330,38573,374
40,076,140
2008CurrentBank overdraftsShort-term loans from financial institutionsLong-term loans from financial institutionsFinance lease liabilitiesNon-currentLong-term loans from financial institutionsFinance lease liabilitiesTotal
5.0 to 7.2
2.0 to 7.5
2.0 to 7.85.0 to 7.5
2.0 to 7.85.0 to 7.5
21,866
11,183,283
3,264,92473,467
--
14,543,540
-
-
--
18,518,62377,399
18,596,022
-
-
--
8,988,682-
8,988,682
21,866
11,183,283
3,264,92473,467
27,507,30577,399
42,128,244
Annual Report 2009 133
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Separate financial statementsEffective interest
rate(% per annum)
Within 1 year
After 1 year but within 5
yearsAfter 5 years Total
2009CurrentLong-term loans from financial institutionsNon-currentLong-term loans from financial institutionsTotal
2008CurrentShort-term loans fromfinancial institutions Long-term loans from financial institutionsNon-currentLong-term loans from financial institutionsTotal
3.4 to 5.1
3.4 to 5.1
nil
3.4 to 5.1
3.4 to 5.1
162,600
-162,600
565,543
45,870
-611,413
-
1,708,3481,708,348
-
-
613,580613,580
-
446,810446,810
-
-
581,637581,637
162,600
2,155,1582,317,758
565,543
45,870
1,195,2171,806,630
Foreign currency risk
The Group is exposed to foreign currency risk relating to purchases and sales which are denominated in foreign currencies. The Group primarily utilises forward exchange contracts with maturities of less than one year to hedge certain financial assets and liabilities denominated in foreign currencies. The forward exchange contracts entered into at balance sheet date also relate to anticipated purchases and sales, denominated in foreign currencies, for the subsequent period.
As at 31 December, the Group and the Company were exposed to foreign currency risk in respect of financial assets and li-abilities denominated in the following currencies:
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht / thousand shares)
United States DollarsCash and cash equivalentsOther investmentsTrade accounts receivableInterest-bearing liabilitiesTrade accounts payableGross balance sheet exposure
Not
678
1516
86,327347,837
4,864,721(15,861,773)(3,131,523)
(13,694,411)
178,694-
5,414,462(17,599,261)(3,083,502)
(15,089,607)
--
-(535,199)
-
(535,199)
--
-(560,200)
-
(560,200)
Indorama Ventures Public Company Limited and its Subsidiaries
134 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Consolidated financial statements
Separate financial statements 2009 2008 2009 2008
(in thousand Baht)
EuroCash and cash equivalentsOther investmentsTrade accounts receivableInterest-bearing liabilitiesTrade accounts payableGross balance sheet exposure
Pounds SterlingCash and cash equivalentsOther investmentsTrade accounts receivableTrade accounts payableGross balance sheet exposure
Lithuanian LitasCash and cash equivalentsOther investmentsTrade accounts receivableTrade accounts payableGross balance sheet exposure
678
1516
678
16
678
16
Note
772,491235,144
1,650,759(8,529,163)(3,165,223)
(9,035,992)
101,020-
814,796(82,732)
833,084
45,581-
93,810(104,644)
34,747
370,816215,923
1,285,388(8,960,146)(2,944,159)
(10,032,178)
15,82735,286
835,794(9,161)
877,746 10,063 5,811 21,366 (109,545)
(72,305)
---
(577,541) -
(577,541)
----
-
----
-
---
- -
-
----
-
----
-
The net fair value of forward exchange contracts at 31 December 2009 was Baht 1,275.5 million (net asset transactions) (2008: Baht 1,076.6 million).
Credit risk
Credit risk is the potential financial loss resulting from the failure of a customer or counterparty to settle its financial and contractual obligations to the Group as and when they fall due.
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. At the balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. However, due to the large number of parties comprising the Group’s customer base, management does not anticipate material losses from its debt collection.
Liquidity risk
The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.
As at 31 December 2009, current liabilities exceeded current assets by Baht 2,219.4 million in the consolidated financial statements (2008: Baht 4,943.8 million) and by Baht 596.6 million in the separate financial statements (2008: Baht 588.8 million). Management views that working capital positions in 2009 and 2008 are due to a significant degree to the financing of the various acquisitions in 2008 (principally, property plant and equipment and other long term assets - Note 4), by short and
Annual Report 2009 135
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
medium term debt. Management believes that the Group and parent company will continue to experience improved cash flows in 2010 from the synergies related to the integration of the acquired companies into the Group, from utilization of the proceeds of the initial public offering (see Note 32), from the operations of the acquired companies and from the completion of construction of a significant factory by a subsidiary and commencement of its operations at full capacity in the early 2010. Management uses available lines of credit (Baht 13,710 million as at 31 December 2009) for re-financings, as necessary.
Fair values
The fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
The fair value of trade and other accounts receivables is taken to approximate the carrying value.
The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.
The fair value of forward exchange contracts is based on their listed market prices, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price at the reporting date for the residual maturity of the contract using a risk-free interest rate (based on government bonds).
The fair value of non-derivative financial liabilities, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.
As at 31 December 2009 and 2008, the financial assets and liabilities have fair values that do not differ significantly from the amounts recorded in the balance sheet.
Capital Management
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as result from operating activities divided by total shareholders’ equity, excluding minority interests. The Board of Directors also monitors the level of dividends to ordinary shareholders.
30. Commitments with non-related partiesConsolidated
financial statements 2009 2008
(in million Baht)
Capital commitmentsContracted but not provided forBuildings and other constructionsMachinery and equipmentTotal
34854
402
1,15153
1,204
Indorama Ventures Public Company Limited and its Subsidiaries
2009 2008 2009 2008 (in thousand Baht)
136 Indorama Ventures PCL
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
Consolidatedfinancial statements
2009 2008(in million Baht)
Non-cancellable operating lease commitmentsWithin one yearAfter one year but within five yearsAfter five yearsTotal
Other commitmentsSold receivables with recoursePurchase orders and letters of creditsfor goods and suppliesService commitmentForward and swap contractsBank guaranteesBills discountedTotal
126397508
1,031
-
54311
1,2851,3961,4264,661
138352372862
12
14,249360
1,9031,448
37318,345
Other commitments
Certain subsidiaries have executed long-term purchase agreements committing them to purchase agreed quantities of raw ma-terials for periods up to three years, at prices linked to the market prices of the underlying commodities.
31. Contingent liabilitiesOn 18 December 2009, Eastman Chemical Company ("Eastman") filed a complaint in the Delaware District Court, USA against four subsidiaries of the Company alleging the infringement of certain patents owned by Eastman, a breach of the technology license agreement between Eastman and the defendants and the misappropriation of Eastman’s confidential and proprietary trade secret information. No damages were specified.
The defendants are defending themselves against the claims. The subsidiaries have appointed legal counsel to defend their interests. At this time, the outcome of the proceedings or the total amount of possible damages, if any, cannot be reasonably estimated. Management believes that the outcome of the proceedings will not have a material adverse effect on the Company's consolidated financial position, results of operations, or cash flows.
32. Events after the reporting perioda) Pursuant to the shareholding restructuring plan for the exchange of shares in IRP for shares in the Company (see Note 1), the Company successfully concluded the tender offer on 1 February 2010. The tender offer resulted in the increase in the combined direct and indirect shareholding of the Company in IRP from 69.29% to 99.08%. The shares of IRP were delisted on 5 February 2010 from the Stock Exchange of Thailand.
b) On 1 February 2010, the Company received the proceeds for the initial public offering of ordinary shares of 400 million shares at an issue price of Baht 10.20 per share. The issued and paid-up capital of the Company increased from Baht 3,351,543,910 to Baht 4,334,271,047 as a result of
Annual Report 2009 137
Indorama Ventures Public Company Limited and its Subsidiaries
Notes to the financial statements
For the years ended 31 December 2009 and 2008
the initial public offering and the exchange offer (described in paragraph (a)). The costs of the initial public offering have been deferred (see Note 10) and will be deducted from share premium.
On 3 February 2010, the Company registered the increase in issued and paid-up capital with the Ministry of Commerce, Thai-land and the Securities and Exchange of Thailand approved the listing and trading of the shares of the Company. The first trading day of the shares was 5 February 2010.
c) On 25 February 2010, the Board of Directors proposed for the dividend payment of Baht 0.33 per share, amounting to Baht 1,430.3 million. This dividend payment is subject to the approval by the shareholders of the Company.
33. Thai Accounting Standards (TAS) not yet adopted
The Group has not adopted the following revised TAS that has been issued as of the reporting date but are not yet effective. The revised TAS are anticipated to become effective for annual financial periods beginning on or after 1 January in the year indicated.
TAS Topic Year effectiveTAS 24 (revised 2009) Related Party Disclosures (formerly TAS 47) 2011
Management is presently considering the potential impact of adopting and initial application of this revised TAS on the consolidated and separate financial statements.
34. Reclassification of accounts
Certain accounts in the 2008 financial statements have been reclassified to conform to the presentation in the 2009 financial statements, as follow:
Selling expenses, administrative expenses and management benefits expenses are now disaggregated.
Comparative figures have been reclassified accordingly.
The reclassification has been made to comply with the classification set out in the Pronouncement of the Department of Business Development Re: Determination of items in the financial statements B.E. 2552 dated 30 January 2009.
Indorama Ventures Public Company Limited and its Subsidiaries
รายงานประจำาปี 2552 145