Indorama has kept the promise to its shareholders and is now on track to be the world's top PET manufacturer.

Very few companies in Thailand can claim the success that Indorama Polymers Plc (IRP) has accomplished in just 12 years, growing from a small start-up into the world's second largest polyethylene terephthalate (PET) manufacturer with operations across the world and potential to grow further.

"We have managed to achieve targets we had set to be achieved in 2010," said IRP chief executive officer Aloke Lohia.

"We had set a target of being in the top five PET producers in the world by 2010 and we achieved that in 2007. We had aimed to list the firm on the Stock Exchange of Thailand to be able to have access to the financial markets that would help us increase our business size and we listed ourselves in 2005."

IRP started its operations as Indopet (Thailand) Ltd in 1995 and changed its name on Nov 19, 2004, ahead of its listing in 2005.

From the outset, the firm looked for opportunities and acquisitions. Its first international acquisition was in 2003 of StarPet, a sick PET producer in the United States with a production capacity of a mere 50,000 tonnes per year. Organic growth also started to push the firm towards becoming one of the world's leading PET producers.

Today, IRP is about to expand its capacity to 1.5 million tonnes a year, once its AlphaPet plant with a capacity of 400,000 tonnes per year comes online in the second quarter of next year. This will make it a clear challenger for the position of the world's leading PET producer.

"We are on our way to becoming the world's largest, as the largest player M&G Group (in Italy) has a reported capacity of 1.7 million to 1.8 million tonnes," said Mr Lohia.

Mr Lohia aims to keep the company's focus on the PET segment, despite many analysts being pessimistic about the industry and recommending a "hold" or "sell" on IRP shares.

"The market is getting us wrong and are categorising us as petrochemical company," he said. In his view, the firm is more a bridge between petrochemical firms and fast-moving consumer goods (FMCG) companies such as Pepsi Cola, Coca-Cola and Nestle'.

"If you look at the recessions in the past, you would see that the FMCG segment is one that is least impacted and they are our end customers," he said.

Mr Lohia admits that the steep plunge in oil prices, which surprised even the most dependable forecasters, has taught a lesson to IRP and its management. He expects IRP to take a major hit in its fourth-quarter earnings from the inventory it kept in anticipation that oil prices would continue to rise.

Yet he remains optimistic and says internal research and CMAI (Chemical Market Associates Inc) research shows that the industry is poised to pick up and that the firm's current valuations do not reflect realities on the ground or earnings potential over the next two years.

IRP shares hit a peak of 10.80 baht a few months ago but are now trading at 3.46 baht - down nearly 68% although the company's earnings remain intact and its cash flow is adequate for future acquisitions.

Mr Lohia claims that an annual revenue of US$1.5 billion shows that customers may have already depleted their PET stocks and are now back in the market reordering.

"If you look at the charts for November you will see that the demand for the products are back at the levels we saw in June/July, which were among the highest for us," he said.

Despite the fall in oil prices, IRP sources say that the company's margins are intact at around $250 per tonne. This is up from $231 per tonne during the third quarter and $228 per tonne over the first nine months of the year - and far above $220 per tonne for 2007.

Mr Lohia claims that even with a margin of $200 per tonne, his firm can make money as it now has the scale to sell high volumes at low cost. He says the massive expansion of the firm's US plant demonstrates the extent of IRP's success in the developed world.

"Today StarPet [IRP's first international acquisition] has increased its capacity by five times and we have managed to price products at 60-70% below competitors," he said. "AlphaPet will have a capacity of 400,000 tonnes when it starts production, and the price per tonne for AlphaPet will
be even lower than those of StarPet."

He added that, although AlphaPet has yet to start operating, its production has partially been sold out due to announced closure of Wellman Inc and Invista, two of the largest PET producers in the United States.
"From being nobody in the US, today we are one of the key suppliers to the major FMCG companies and are one of the most reliable ones, as we are the only PET firm there that is expanding while competitors are shutting down," he said.

News reports had suggested the biggest problems faced by these companies were liquidity and higher costs - aspects of the business that Mr Lohia sees as IRP's strengths.

"Businesses like ours are based on being the lowest-cost producer and once we lose that we are not going to survive," he said. He added that, despite the gloomy global outlook, the firm was still running near full capacity.

Another element he highlighted in the company's strategy is being close to the customer. He said this was one of the main reasons for expanding across the globe, especially in developed markets, where the demand for PET products is higher.

AlphaPet, which Mr Lohia describes as his biggest achievement to date, is in the compound of BP (British Petroleum) in Decatur, Alabama. The 432,000-tonne plant is next to a PTA plant to enable piped supply and save on inward freight of a key raw material. A long-term supply deal has also been concluded with the PTA supplier.

AlphaPet's land lease agreement and plant suppliers' agreements have all been completed and the total project cost will be up to $172 million, which is being phased over 2008 and 2009 and will be funded through sanctioned long-term loans and internal cash. As on Sept 30, 2008, the actual capital expenditure was around $87.4 million (2.97 billion baht) and loans of $56.8 million have been partially drawn for the project.

The key now, though, is for IRP is to look at the more expensive form of PET, known as "special grade", used in beer bottles. The demand for the special grade is high in Europe and the US.

"As one of the world's largest, we are under a lot of pressure to look at this segment, although at times it may not be a commercially viable project."

However, he said the firm has yet to make any commitment to this segment.

"I would only steer the company in the direction that is going to yield higher results for it and this is a promise I made to my stakeholders when we went public and I continue to abide by it," he said, adding that he had no plans at any point of diluting shareholders to gain access to size.

Yet Mr Lohia expressed regret that the market has not valued the company according to his achievements.

Although the company has grown in just over a decade to record $1.5 billion in annual sales revenue coming from five countries for its PET business alone, company shares are trading below their value on going public in 2005.

"Today we produce 1.5 million tonnes per year and the company has a better financial position than in the past but our valuations are lower than when we went public and our capacity was less than 200,000 tonnes per year," he said.

But despite a 68% drop in the share price he says he is not going to buy any shares after IVL - a company that owns 70% of IRP and in which he holds a 95% stake - on Oct 13, 2008, purchased a 3.94% stake held by its long-term financial supporter, Deutsche Investitions- und Entwicklungsgesellschaft mbH (DEG) at 10.30 baht a share.

This is a 197.7% premium to the current price of the shares, just a month later. The book value of IRP is about five baht a share while its par is one baht.

"Can we undertake a treasury stock? Sure we can. But do you think that is the job of the company?" he asked rhetorically. "Should not the company use the excess cash it has on hand to look for opportunities across the world to expand and invest in the future?"