Growth, Successes and New Horizons
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GROWTH, SUCCESSES AND NEW HORIZONS ANNIVERSARY SPECIAL Chemical major celebrates 20 years and looks to the future Challengers for the America’s Cup 2021 20TH ANNIVERSARY STRATEGY was simple: to find unloved assets, invest in their facilities, lower the cost base and rejuvenate them. The formula was to prove hugely successful - the acquisition of non-core businesses from chemical BUILDING majors including Dow, Dupont, ICI, BP and BASF helping INEOS achieve phenomenal growth. The foundations were laid and momentum was building. A LEGACY The purchase of the acrylics business in 1999 and chloralkali business of ICI in 2001 had now propelled INEOS to the second largest chemicals manufacturer in the UK. It had sales of around £1bn and around 2,500 employees – one of whom was Tom Crotty, now INEOS’s director of public affairs. “I think the fact we were a private company really made a difference,” notes Crotty. “Petrochemicals is a cyclical business and we were always able to take the long view; we’re not beholden to shareholders or analysts looking at our quarterly results. “Early on, we developed a system for managing our businesses that we’ve applied consistently. It’s a simple approach where we integrate new businesses into the group and apply a very straightforward focus on costs.” With more than 20,000 employees spread across 171 sites Each business operated independently and had its own board – a rarity for a in 24 countries, and sales in excess of $60bn, INEOS has large petrochemical producer, he notes. clearly come a long way since its humble beginnings “We have a very decentralised structure that means we don’t carry the overheads that are typical for a company of our size. Every business is responsible rying to choose a single defining Above - In just corner with INEOS,” says Ratcliffe. “Last for itself and that avoids having moment in the history of INEOS two decades, year was tremendously successful - one of unproductive spend. It also makes us INEOS has grown is no mean feat. It could be the our most active and profitable. We’ve had much more agile and efficient.” T to become one acquisition that literally tripled the size of of the world’s record profits of $7bn, record turnover of Just a few years in and INEOS was the business overnight, or when it emerged largest chemical $60bn, 85% of our businesses beat budget, growing rapidly. Yet it was the move to from the worst economic downturn in companies 50% of our businesses beat their all-time buy Innovene, BP’s olefins, derivatives history with the renewed confidence of records, and we have five businesses at, and refining subsidiary, for $9bn that its investors and support of the banks. or approaching, $1bn of EBITDA. We’ve really took the business to the next level. Perhaps it was the tense negotiations never seen numbers like that.” The deal in December 2005 instantly with the unions as it saved its ailing Ratcliffe’s background in chemical positioned INEOS among the world’s Grangemouth facility, or its $1bn plan to engineering and a stint in venture capital leading players, creating a combined build a fleet of tankers capable of crossing paved the way for the management buyout business with a turnover of around the Atlantic full of low-cost feedstock. of Inspec - the business he helped found - $33bn, with 68 manufacturing facilities All have been significant – each an and on 4 May 1998, INEOS was born. capable of producing over 30m tonnes important part of the jigsaw which has The name was a portmanteau, an of petrochemicals. helped establish INEOS as one of the amalgam of two words from Latin and Ratcliffe admits it was a major world’s leading chemical companies. Greek that roughly translate as “new milestone. “We gambled somewhat In the space of just two decades, dawn” or “beginning”. but you’re only going to get one INEOS has become a major The philosophy of the new business opportunity like that in your life. It manufacturer of petrochemicals, specialty chemicals and oil products. Today, it is “You never know what’s around the corner with INEOS. ranked the world’s fourth largest chemical This year has been tremendously successful - one of our company in terms of sales, among the most active and profitable” Top 10 oil and gas operators in the North Sea, and its chairman Jim Ratcliffe now heads the UK rich list. “You never know what’s around the Jim Ratcliffe, Chairman, INEOS 2 was transformational for INEOS. It venture with PetroChina to become Before long, INEOS had cemented its transformed us from being a very serious known as Petroineos. position as a Top 10 player in the North chemical entity to being one of the very That same year, plans were unveiled Sea with the addition of the oil and gas largest chemical entities worldwide.” about the formation of a new styrenics assets from Denmark’s DONG Energy, Yet with the highs come the lows, JV with German major BASF. The new gaining access to three major fields in and shortly afterwards in 2008, the venture would be called Styrolution, with Norway, Denmark and Shetland. global economic downturn sent anticipated annual sales of around €5bn. “It was fortuitous that we were in the shockwaves throughout the industry It would combine their global business right place at the right time to make and hit INEOS hard. activities in styrene, polystyrene (PS), these acquisitions. It worked well for us,” As the oil price lurched from $140/ acrylonitrile butadiene styrene (ABS), says Crotty. “Many of the assets were bbl down to $40/bbl in the space of styrene-butadiene block copolymers (SBC) quite new – and of very high quality. six months, it stripped value from the and other styrene-based copolymers. We brought in some very good people business and triggered several banking Yet it was perhaps another and that gave us a lot of the subsurface covenants, forcing some tense discussions development in 2012 that most took the expertise we were looking for.” with lenders. Over the next 12 months, industry by surprise. This was soon followed by the the banks took €846m from the company With the US riding the shale wave and acquisition of the Forties Pipeline System in fees and penalties. North Sea gas supplies waning, INEOS (FPS) from BP – a 235-mile link between “It didn’t change the way we’d run wanted to test the water and see whether 85 North Sea oil and gas assets and the our business but it was a turning point those advantaged feedstocks could be mainland that delivered almost 40% of in the way we related to our lenders,” transported from the other side of the the UK’s supplies. notes Crotty. “When the downturn hit, Atlantic over to European shores. With more of its assets UK based and our EBITDA halved overnight and we Not for the first time in INEOS’s the government now far more supportive could see we were about to trigger some history, some said it was impossible. They of business, INEOS decided to move its of our banking covenants. It wasn’t a cash were wrong. “At INEOS, we headquarters back to Britain in 2017. problem but an accounting problem.” The $1bn project would see a fleet never rest on our There has since been more expansion To resolve the situation, difficult of purpose-built ships transport ethane laurels. When we and investment, including a commitment negotiations started with a consortium from the US to INEOS sites in Norway achieve a target, to increase the capacity of its existing of over 230 banks and investors, and and the UK - a 3,800 mile (6,116km) we always look crackers. It also unveiled some other, eventually a new five-year business plan “virtual pipeline”. ahead to the next slightly less conventional, plans too. was drafted. It was to be a real sea change for one – and that’s Ratcliffe and his team not only “We wanted to get all the lenders the company, helping to transform its what keeps took their first tentative steps into the together in London and New York so we existing crackers into some of the most us hungry” automotive industry with the development could talk to them face to face,” he says. “We competitive in Europe. of its own off-road vehicle in February wanted to tell them how about our business “We also saw our Dragon Ship concept 2017, but INEOS also acquired British works and how we planned to get out of as the perfect opportunity to really dig clothing brand Belstaff a few months the downturn really quickly. Banks don’t Grangemouth out of a hole,” concedes Tom Crotty, later in October, bought a football club usually work like that but Jim insisted.” Crotty. “At that point, the union had Director of public in the Swiss league in November, and It paid off and INEOS succeeded in refused to engage in negotiations, we affairs, INEOS sponsored Sir Ben Ainslie’s America’s renegotiating all its debt to levels that were were running the cracker at half rates Cup sailing team in April 2018. better than before the downturn, he adds. because we didn’t have enough ethane, Yet despite this eclectic mix of projects, “It worked so well that we’ve done it and our pension costs had risen to 50% of it was a more traditional announcement every year since to tell all our lenders salary. We needed to see changes to make that really dominated the headlines.