Indorama Ventures : Management Discussion and Analysis Quarter 2/2023

Ref. No. IVL 001/08/2023

11 August 2023

The President

The Stock Exchange of Thailand

Subject: Submission of Quarterly Reviewed Financial Statements and the Management Discussion and Analysis of Indorama Ventures Public Company Limited for the second quarter ended June 30, 2023

We are pleased to submit:

1. Consolidated and Company only Quarterly Reviewed Financial Statements for the second quarter of 2023 (a copy in Thai and English)
2. Management Discussion and Analysis (MD&A) for the second quarter of 2023 (a copy in Thai and English)
3. Company's performance report, Form 45 for the second quarter of 2023 (a copy in Thai and English)

Please be informed accordingly.

Sincerely yours,

Mr. Aloke Lohia

Group CEO

Indorama Ventures Public Company Limited

Company Secretary

Tel: +662 661 6661

Fax: +662 661 6664

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2Q23 Executive Summary

2Q23 Performance Highlights

• Revenue of US$ 4B, a decline of 1% QoQ and 27% YoY
• Reported EBITDA of US$ 321M, an increase of 7% QoQ and a decrease of 68% YoY
• Operating cash flows of US$ 491M
• Net Operating Debt to Equity of 0.95x
• Reported EPS of THB 0.04

2Q23 Summary Financials

Table 1: Reported Financials of Consolidated Business

• Combined PET includes Integrated PET, Specialty Chemicals and Packaging.

1Consolidated financials are based upon elimination of intra-company or intra-business segment transactions. 2Total of each segment may not always tally with consolidated financials due to holding segment.

3Volumes exclude PX and ethylene being captive.

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Overview 1st Half 2023

IVL posts 2Q23 Reported EBITDA of US$ 321M, an increase of 7% QoQ and a decrease of 68% YoY. Average Brent crude oil price for the quarter declined to $78, resulting in an inventory loss of US$ 48M.

The macroeconomic environment remains challenging. Europe continues to face economic slowdown, primarily driven by inflationary pressures and interest rate hikes. Rising interest rates have dampened housing demand globally. China's recovery has remained slower than expected, with the PMI index for manufacturing growth lower than anticipated in 2Q23, keeping petrochemical industry demand subdued.

Overall group sales volumes increased by 4% sequentially, with operating rates increasing from 72% in 1Q23 to 76% this quarter. On a YoY basis, overall volumes have declined by 7% as industry inventory levels correct from the highs of 2022. Industry wide destocking has persisted across all three business segments.

Although overall IVL volumes have seen an uptick, revenue for the quarter has remained flat QoQ at US$ 4B. China's slower than expected economic recovery has dampened petrochemical demand, and coupled with ongoing capacity additions has put pressure on industry margins.

Globally lower natural gas prices have reduced IVL's variable costs by US$ 26M QoQ, net of hedging losses of US$ 29M. Lower gas prices in the US maintained our shale gas advantage for North America operations.

Management Actions

Given the volatile macroeconomic climate, management has taken several actions to address and safeguard earnings against the temporary headwinds. In the short term the priority is on cash conservation, as mentioned at the Capital Markets Day earlier this year, with a target of US$ 500M in 2023. As of 1H23, we have achieved 80%, or US$ 400M, primarily through the reduction of working capital and capital expenditure.

Gross working capital declined by 9 days in 1H23 with operational improvements, translating to a US$ 276M reduction. We continue to work towards working capital optimization and expect to have further improvements in 2H23.

We have reassessed our capital expenditure plan for 2023 to reduce capex by US$ 139M over what was committed at our Capital Markets Day earlier this year. This is through reduction of both maintenance capex by US$ 64M and growth capex by US$ 75M. We expect to maintain the same discipline in 2024 to improve our FCF.

Management focus is on maintaining healthy liquidity levels, and a disciplined capital allocation strategy cognizant of the higher interest rate environment.

In light of the economic challenges and cost pressures in Europe, we are implementing measures to improve the competitiveness of our portfolio in the region. We are underway with our plans to optimize the footprint of the Fibers segment, which will include a 10% reduction in manpower and $25 million reduction in fixed cost, and result in a shift of the manufacturing base to our low cost Asian sites. In the same vein, we are conducting an evaluation across all business segments to assess 'make or buy' decisions in order to maximize profitability, with a focus on Europe. We are leaving no stone unturned when it comes to our operations and our teams are taking action to maximize COMA and volumes in our local markets, while assessing expansion opportunities in high growth markets.

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There is continued drive to deliver on the Project Olympus targets to unlock efficiencies in procurement, sales, and operational excellence, while investment in digital improvements will unlock latent value for the organization. To date, Olympus has delivered run rate efficiency gains of $481M.

For the long term effectiveness of the business, we continue to strengthen the organizational structure of the company. We see a vast amount of unlocked potential in our people. We are simplifying the organization in order to optimize efficacy and productivity of our teams and we are centralizing the organization for a leaner and more agile structure which in turn will increase speed of decision making and enhance collaboration across the company by removal of silos.

Outlook

We remain concerned about the outlook for the year. We believe that the global economic environment remains subdued in 2023 with weak activity in manufacturing, substantial interest rates hikes, fears of a US recession but surprisingly high labor costs, overall impacting demand slowdown and cost increases. While destocking is more or less completed across most of our businesses, the demand slowdown will persist and put a dampener on any meaningful recovery in macroeconomics.

IVL recovery of earnings will come from a determined cost-conscious approach and using the low demand phase to push forward with our asset optimization plans. We will stringently review our capital allocations to conserve cash and lower our financial costs.

We believe that we have consumed most of our high cost inventories in 1st half 2023 and lowered our carry over stock by GWC reduction of 9 days. Therefore we expect to benefit in the second half due to higher utilization rates, higher sales volume and lower utility prices.

We anticipate that the stimulus plans in China will bring some life to the petrochemical chain and we are already seeing the global automotive industry finally in recovery.

Overall, as we move through the year we expect contributions from management actions and the factors mentioned above to reflect improvements over our 1st half results and also position ourselves for a mid-cycle 2024 outlook.

ESG Journey

IVL continues to move strongly ahead on our ESG ambitions and while continuing to make investments in ESG related activities, below were the specific achievements in 2Q23:

• IVL signed a non-binding MOU with Carbios, a biotech company developing biological solutions to reinvent the lifecycle of plastics and textiles, to form a JV for the construction of the world's first PET bio-recycling plant to be located in France.
• #1 constituent (100th percentile) in the FTSE4Good Index Series. IVL has scored 4.5 (out of 5) compared to commodity chemicals sub sector average score of 3 and Basic Materials Industry average of 2.4 (as of June 2023).
• We completed the first biodiversity risk assessment for IVL in June 2023; developing our biodiversity strategy by understanding both our impacts and dependencies on the ecosystem.

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• In July 2023, IVL and Sumitomo Mitsui Banking Corporation (SMBC) successfully signed Thailand's first sustainability-linked Trade Finance facility of US$ 50M to support Indorama Ventures' day-to-day contributions to its ambitious sustainability commitment.

Corporate Strength

We operate with a balanced and disciplined approach on cash flow allocation to dividends, debt servicing, maintenance capex and growth capex. Some of our corporate policies and actions are as follows:

• Natural hedge on Forex with global assets and a manufacturing footprint in 35 countries
• With the rise in benchmark rates and growth capex, our finance cost went up to US$ 103M in 2Q23. Management is actively reviewing working capital optimization and curbing discretionary capital spending to lower the net debt.
• Maintaining average net debt to equity at around 1x across cycles (2Q23: 1.18x)
• Maintain liquidity in the form of cash and cash under management plus unutilized credit lines (2Q23: 1.8 US$B)
• ESG linked debt proportion increased to 26% of net debt in 2Q23 (2022: 20%)

2Q23 Performance by Business Segments

Combined PET (CPET)

CPET achieved Reported EBITDA of US$ 194M including inventory loss of US$ 29M, a growth of 37% QoQ and a decline of 69% YoY.

After a period of heavy destocking which began at the end of 2022, volumes improved by 2% QoQ, much lower than what is typical for high season in 2nd quarter. Western markets continued to face feedstock price disparity, lowering our cost competitiveness to Chinese imports, and thus impacting our volumes and margins.

Lower energy costs benefited conversion costs by US$ 19M, net of hedging losses. Europe performance was aided by normalization of energy prices.

Poor domestic China demand amid PET capacity additions put pressure on PET spreads. Integrated PET benchmark spreads in 1Q23 were at $201/t and have hovered at similar levels this quarter, well below historical 5-year average. The US PET business continued to get the benefit of cost-plus contracts, while normalizing freight rates negatively impacted spreads for our European and Brazilian businesses.

The Packaging vertical realized 10% higher volumes QoQ and a growth of 6% YoY with Vietnam and Myanmar leading the growth.

Specialty Chemicals saw a decline in profitability due to lower volumes in our specialty product NDC in the US.

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