Financial Times: John Reece talks about 2011 performance

Even though we've seen some softening in the third quarter, by any standards it's a very good year. And then on top of that, of course, we managed to complete the deal with PetroChina for the refining business, which is hugely transformational for the group. You know, group leverage last year end was 4.4 times, it's now running about three and a half times. We've paid them a billion dollars of bank debt, so that's a very, very significant transaction. We're delighted to get it done.

I think from my point of view, thinking about liquidity and cash, 2008 obviously was very difficult. We had a huge drop in the oil price, we had customers just closing their plants down, and we still had a business including refining with a pretty significant annual capex bill. We did our best to mitigate that, but when you take the biggest business — the thing about refining is everything's ten times the size. So the working capital swings are ten times the size, the capex is ten times the size. If you take that out of the group into a separate box, that makes a huge difference, and that's what we've done in 2011. That's why I say it's a transformational deal.

I don't think so. I think, you know, why is INEOS successful? I think one of the key reasons — you're selling commodity chemicals, the products are the same as everybody else's, so you can only control your costs and your volume if you're going to be competitive. And we are essentially in Europe and North America, and in some cases we're competing with Far East manufacturers. I think we have to continue to be diligent on fixed costs. We took 200 million euros out of fixed costs between 2009 and 2010, and we haven't let that come back. And that's, you know, one of the reasons that we continue to be successful.

I hope not. I mean, we are a GDP-related business. What we saw at the end of 2008, which I remember well, was the order book just collapsed, and that was because car companies stopped producing, there was huge destocking in the chain, and I think the nadir was probably Q1 2009. We're not seeing that now. What we're seeing is a slowdown that's largely affecting the businesses that do business in Asia. So Q3 has been slower, and we'll probably see something similar in Q4, but nothing like 2008-2009. I don't see that at all, and our liquidity is good.

Well, as I say, we are a GDP business. It's commodity chemicals, and, you know, as you know, everything we make ends up as either consumables or durables. But we've been stress-tested, if you like, in the worst recession that we've seen in 30 years, and we're still here. And our financial position is better today than it was going into that in 2008. So, yeah, we have to ride the economic cycles, no question of that, but I think we're in good shape to do it.

I think the general picture is that we'll certainly see a slow Q4, we'll see a slow Q1, and then things will start to pick up. And none of the businesses have seen anything different to that really. One or two of them, like oxo alcohols, are not really seeing much of a downturn at all. It's the ones that are more focused on Asia, like nitriles and ABS, where the slowdown is probably the most severe. So I think 2012 might be a year of kind of standing still on the headline, a bit down. But if you look at our numbers, reduced capex, we've obviously got the benefit of reduced tax in Switzerland, we'll still throw off some cash and pay down some debt, and that's the objective.

I think, again, it's a bit ironic because it's been the area of slowdown, but I think it's the Far East. But one advantage of the PetroChina deal is that we've got a good connection now in China, and we are looking to widen that because there is interest in the other INEOS products. So it'll be quite interesting to see what we can manage to achieve there. The US, because of its cost position, which is very good as you know, we'll also, I think, continue to be delivering very good performance. I think 50 percent of this year's EBITDA is coming from the US, and I would expect that to remain the same going forward.

In my role, it's really cash and liquidity. So we're, you know, we're very focused. We're running a leveraged group, we have to make sure that we've got enough cash and facilities. It is a cyclical business, and we've got some good procedures now. After 2009 we improved the cash forecasting quite a lot. We look at it every week in detail, so I'll probably sleep a bit better than I did then. I think once you get into 2012, we are focused on achieving that refinancing that I talked about, and that will be a function of the credit markets, and it's difficult to call at the moment as you've seen with what's going on in Greece. The credit markets are much more volatile than the chemical markets, but you have to believe they will improve. There's a lot of liquidity coming into the US high-yield market, and therefore, you know, we need to be thinking about refinancing certainly Q2 next year.

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