Ineos Quattro - Making Hay While The Sun Shines - Model Update - Positioning

All,

Please find below our updated analysis on Ineos Quattro here.

Timing is everything. At the start of the year, the outlook for Ineos Quattro was widely questioned. This led to additional equity contributions from shareholders and extensions to several trade receivables securitisation facilities to address liquidity concerns. Shortly thereafter, the Middle East conflict escalated. Today, liquidity concerns have effectively disappeared and, with EBITDA materially exceeding even the most bullish expectations, the key question is no longer whether earnings are strong, but how long current conditions can persist.

Investment Rationale:

- We are closing our 5% short position in the Ineos Quattro 6.75% 2030 bonds at 88. This trade has been painful, having initiated the short in March at 75. We materially underestimated both the duration of the Middle East conflict and the extent to which supply disruptions from the region would boost European styrene margins and volumes.

- For context, management has indicated that EBITDA in April alone was approximately $170m, versus around $700m for full-year 2025. The impact has been even more pronounced at Ineos Quattro and across the wider group. As long as the Middle East conflict continues to disrupt feedstock flows into Asia and distort European supply dynamics, Ineos Quattro is likely to continue generating excess returns.

- That said, Ineos Quattro remains a highly GDP-sensitive business. While near-term supply dislocations are supportive today, any negative impact on longer-term economic growth would weigh on earnings beyond FY26. We are therefore covering our short at this level and will continue to monitor developments closely.

Projections:

- Forecasting at this point is inherently difficult, but we have attempted to frame a plausible FY26 EBITDA outcome. Any estimate is highly dependent on the eventual resolution of the Middle East conflict (hopefully sooner rather than later) and the subsequent reopening of trade flows from the Middle East into Asia and Europe.

- Ineos Quattro reportedly generated approximately €170m of EBITDA in April alone. Based on recent peak-quarter performance, we estimate Q2 and Q3 EBITDA of €350–400m per quarter.

- We assume a de-escalation of the conflict over the summer, allowing trade flows to normalise in Q4. Under these assumptions, we estimate FY26 EBITDAR in excess of €1bn, implying year-end leverage of approximately 5.0x.

- However, given April’s performance, even these assumptions may prove conservative.

- The core issue remains unchanged: unless Ineos Quattro can translate this unexpected earnings windfall into a meaningful reduction in absolute net debt, leverage is likely to revert to 6.0x or higher once supply chains normalise.

We will continue to monitor Ineos Quattro and the wider Ineos Group, but given the uncertainty over geopolitical issues, we will not be taking an active position now. 

Happy to discuss. 

Tomás

E: tmannion@sarria.co.uk
T: +44 20 3744 7009
www.sarria.co.uk