Ratcliffe’s Ineos could sell off assets as chemicals sector struggles
Ineos is reportedly considering selling off parts of its business, as the chemicals giant attempts to shore up its finances amid a wider industry downturn.
The firm founded and chaired by Jim Ratcliffe has held preliminary talks about selling off parts of its vinyls business Inovyn, Europe’s largest producer of PVC, a plastic widely used in construction, automotives, and wiring.
The assets could be worth hundreds of millions of pounds, according to the Financial Times.
The firm has also reportedly been talking to credit firms about refinancing bonds which are due to mature next year as it seeks to bolster its balance sheet.
In recent weeks, shareholders have injected €200m of new equity into the business, the FT reported, while the firm has raised another €300m linked to its inventory.
The refinancing efforts come amid growing concerns about the future of Europe’s chemicals industry and Ineos’ own challenging financial position.
The overall group is heavily indebted, with S&P Global estimating in a recent report that its adjusted debt to EBITDA stood at 6.5-7X last year. Anything over six times is regarded as “highly levered”.
S&P lowered its credit ratings on both Ineos Group Holdings and Ineos Quattro, the two subsidiaries through which the wider firm issues debt.
“The decreased creditworthiness of the parent…translates into a modestly lower ability to provide timely support,” analysts at the credit ratings agency wrote.
Bonds in the firm have faced heavy selling pressure over the past year, largely due to concerns about the outlook of the European chemicals industry.
The industry is battling high energy prices, significant overcapacity, and a surge in cheap imports from China, which has led Ineos to file 10 anti-dumpling cases with the European Commission last year.
Sell-off follows job cuts
In recent months the company has been forced to close two plants in Rheinberg and cut a fifth of jobs in Hull. Only government intervention prevented a further closure at the firm’s ethylene plant in Grangemouth.
At the European Industry Summit in Antwerp, held earlier this month, Ratcliffe warned that the European chemicals industry was “in the process of shutting down”.
“Energy prices in Europe remain around four times higher than in the United States. Rising carbon costs and weak trade defence are driving investment away,” he said.
“These conditions are unsurvivable for Europe’s chemical industry.”
“INEOS continually reviews its portfolio and capital structure to ensure the business remains strong, resilient and well-positioned for the long term,” a company spokesperson said.
“In challenging market conditions for the global chemicals industry, it is prudent management to explore refinancing options. We have recently secured additional equity and financing support, demonstrating the confidence of our shareholders and lenders in the underlying quality of our assets and operations,” they continued.