Mexico-based chemicals producers Orbia is focusing on reducing future costs as the broader polyvinyl chloride (PVC) industry faces weakening market dynamics.
Orbia said Friday it would focus on maintaining strict discipline on fixed costs, working capital, and capital investments to weather the turbulent global economic landscape.
The company is targeting $250mn in savings by 2027, with cumulative savings of $160mn by the end of 2025. The company also expects $75mn of divestments by the end of the year in its building and infrastructure segment.
Plants and related infrastructure in Europe were the primary targets of the optimization, according to company officials on the first-quarter earnings call.
Orbia chief executive Sameer Bharadwaj said the company could revise capital expenditures lower from its initial $400mn target provided earlier this year should market conditions further deteriorate.
Short-term operating costs currently face lower levels with falling ethane prices, a critical feedstock to manufacture ethylene for PVC production.
The focus on cost management was spurred by sluggishness in the global PVC market. Chinese and US PVC producers drove export prices lower as a means of moving excess capacity, which Orbia expects to continue.
"PVC pricing is as low as it gets" Bharadwaj said. He added producer margins would be squeezed further if product prices continue to decrease.
Orbia posted a $41mn profit during the first quarter, down from the $106mn profit a year earlier.
Orbia's polymer solutions segment, which includes PVC production, reported $6mn loss during the three-month period because of lower global prices for vinyls and a force majeure at its Coatzacoalcos, Veracruz, plant that was lifted in mid-April. Orbia made a $24mn profit during the same period a year ago.
The building and infrastructure segment, inclusive of PVC products, posted a $3mn profit for the quarter compared to a $33mn profit a year earlier.
