INEOS Capital interview with Andy Currie

I think Tom, historically that is pretty fair. As you know, in our early days, particularly in the first 5 to 10 years of INEOS, we were always looking at possible orphaned assets from what we call blue majors or other blue chip majors that were available, unloved, probably undermanaged, and that became our target area. I think it's fair to say that was the case. Since the big acquisition of Innovene, of course, in December '05, times have moved on. We've been through some pretty difficult market conditions, of course, but our emphasis these days is, as you know, much more on running the day-to-day business, getting it more and more efficient, ensuring it's soundly financed for the future, but with the occasional acquisition, and they have been very much strategic. Bolton acquisitions, for instance, the Seal Sands chlor-alkali plant will be a great example of that, where essentially we were able to take over an asset which was struggling, frankly, change its cost base, improve its efficiencies, and generally turn it around using the whole expertise that we had in group. Perhaps another example more recently relevant would be the acquisition of the Tessenderlo chlor-vinyls business by Kerling, which again is going through that same type of process as we speak today. So, I think in recent times, what we have done in that area has been, in terms of acquisition growth, has been very much strategically focused.

Well, I think in that case, as I mentioned, the great benefit is we have expertise in house. We have lots of people with a great variety of skills at how to run these operations efficiently. Case of nitriles, obviously, as we say many times, we are the largest producer in the world. We have pretty well our technology all over the world in many plants, so we have a lot of core expertise in the plants and the technology, and we can then bring that to bear on how to run these plants very efficiently and very effectively. And indeed that is a good example of that. And I think that's probably the big benefit that we get from that.

I think, essentially we're in many spaces now in the chemical sector, of course, and bulk polymer sector, for that matter. And I suppose the primary benefit is just robustness of earnings, robustness of sales, really, particularly when times are difficult, because of course, being in commodities, you inevitably have to deal with quite sharp cycles, and so having a wide variety of businesses, of applications, of end markets brings with it a natural protection, if you like, in those bad times. And we've seen that, really. Obviously, the '08 '09 sort of major downturn, sort of almost meltdown in many ways, was the ultimate test of that. And I think in those days, our position with nearly a quarter of our sales into the sort of consumables arena was very valuable, because even in those days, people would keep buying soap powders, cosmetics, these types of things. Indeed, foods, etc., with all the packaging that goes into them, that was very valuable.

No, that's probably in general terms, that's pretty fair. Although, having said that, if you look at our recent track record, our profitability has been moving more and more towards 50/50 between North America and Europe. Where if I go back to, say, 5 or 6 years ago, just after the Innovene transaction, we were probably two-thirds to 70% in Europe. So, you're right, it's not ideally balanced across the world, but it's moving in a good direction. And obviously, US these days with shale gas is a very interesting market. We can probably come on to that. But also, we are keen to increase our exposure to Asia and our earnings in Asia, and that really is part of our underlying strategy going forwards. But you're right, it's not ideally balanced, but it's by no means too extreme.

Well, I think today, INEOS overall, if you take INEOS group and actually also Kerling group, similarly, one of our challenges we see is to get our debt down. We made lots of progress in INEOS group, particularly, as you know, our refinancing now is thankfully completed as of April. So, our next challenge really is just to work at the portfolio, really use the earnings, but key thing, get our debt down, get our leverage down, really, in essence, to a lower level, and at the same time, look to fund growth, and of course, really have a steady dividend policy as well, of course.

Well, our current main thrust is, apart from those small opportunities around acquisitions, we're really looking at the US Gulf, particularly US Gulf, but the US market generally, to see how do we take advantage of this recent arrival of the shale gas phenomenon, and the fact that you now have this major renaissance of the Gulf Coast petrochemical industry and very low-cost ethane feedstock coming into the market. And of course, we already have a very nice position there in our O&P US business, but also in some of our other derivative businesses. And one of our challenges is how do we as INEOS take advantage of that? And that will be a focus of growth. And the other major focus will be Asia, and particularly China. And I think everyone's very familiar, of course, with our phenol project, but there are others coming behind. And I think that will not be in the O&P arena, that will be intermediates, where we clearly have very strong positions in markets with very strong technology positions. So, we have something to bring really to the table with the Chinese, which is very important.

Inevitably, by definition, joint ventures do bring a degree of complication. Inevitably, two sets of shareholders, even with good alignment, you still have more complexity. So, you need to believe the benefits outweigh the disbenefits that come with that. But I think if you take our suite of major joint ventures, you've obviously got the refining joint venture, where clearly we have a massive partner, one of the largest companies in the world, together with us in the refining industry, which is very challenged today. But they bring their upstream capability of sourcing to the table, their obviously financial muscle, and they also, of course, have a very large trading capability in the whole arena. So, that's where we see a very natural fit. We see that as significantly outweighing the disbenefits of a joint venture. And I suppose if you take Styrolution, similarly so, there we've really put together two sets of assets to create the largest Styrenics business in the world. There's obviously a lot of synergy possibilities on simplifying the business, reducing cost, taking the best of both worlds, I think, from the two partners. And in BASF, of course, we have another very large, very capable partner. So, again, fits very well. And even in our smaller joint venture, which PQ, probably less well known to many, but where we are a minority stakeholder, albeit a large one, again, this is putting our inorganic assets together again to take out synergies and cost simplicity. And that one is well down the track and has been very successful. So, I think, Tom, it does work. It isn't as straightforward as 100% ownership, but in terms of financing and what's possible, it's been very much on our agenda that we can achieve these joint ventures, and we see we can get a lot of benefits from them.

Well, I must say I've kept my allegiances below the parapet or below the surface for quite some time, and I can say today, I can just about put my nose over the parapet and say Sheffield Wednesday, who have now reached the glorious heights of the Championship as of next year. So, glorious days again, but somewhat behind the rest of the pack, but in recovery mode, Tom.