Ineos appears to be in an increasingly difficult financial position which could mean a long strike at Grangemouth refinery.

Ineos pursued an ambitious growth strategy primarily by aggressive acquisition funded by low cost debt, shown below.
Source:
http://www.ineos.com/index.php
http://www.ineos.com/pdf/INE_FF_2008_08_web.pdf (84 pages)

2001
INEOS acquires Crosfield and forms INEOS Silicas.
INEOS acquires ICI Chlor-Chemicals and forms INEOS Chlor.
INEOS acquires ICI Klea and forms INEOS Fluor.
INEOS acquires Dow Chemicals’ global ethanolamine and USA/Canadian
GAS/SPEC™ gas treating amines businesses.
INEOS acquires a majority shareholding in EVC.
INEOS acquires Phenolchemie and forms INEOS Phenol.

2003
INEOS acquires Methanova and forms INEOS Paraform.

2004
Formation of INEOS Enterprises.
INEOS Enterprises acquires Sulphur Chemicals Business from Rhodia.

2005
EVC is fully owned by INEOS.
EVC Films renamed INEOS Films.
INEOS acquires from Cytec the former Amino resins business of Surface
Specialties UCB and forms INEOS Melamines.
Innovene established.
NOVA Innovene joint venture established.
EVC Compounds renamed INEOS Compounds.
INEOS acquires BASF's US and Canadian Polystyrene Business.
INEOS Phenol acquires Cumene Plant in Port Arthur (500 ktpa) from
Chevron Phillips.
INEOS acquires Innovene from BP.

2006
INEOS renames Innovene and forms INEOS Nitriles, INEOS Olefins, INEOS
Olefins & Polymers USA, INEOS Oligomers, INEOS Polyolefins, INEOS
Refining and INEOS Technologies.
Creation of INEOS ChlorVinyls joint management board.
INEOS acquires the EO/EG business from BP in Köln.
INEOS Enterprises acquires White Salt Business from Salt Union.

2007
INEOS Fluor agrees joint venture with Zhejiang Xing Teng Chemical Company
Limited to produce HF.
INEOS ChlorVinyls completes sale of E-PVC Business to Vinnolit.
INEOS acquires Borealis AS and 50% of the Noretyl Cracker.
INEOS acquires 51% of ABS Business from LANXESS and forms INEOS ABS.
Expanded INEOS NOVA styrenics joint venture launched.

2008
INEOS acquires Hydro Polymers and the remaining 50% share of the Noretyl
Cracker from Norsk Hydro.

Ineos has to be able to pay the interest on the debt to continue operating. The chart below shows some recent financial numbers. The year 2006 shows an earnings before interest and tax (EBIT) of EUR922m, net financing costs of EUR728m and an after tax profit of EUR115m which is a very low 0.4% margin on sales.

The financial position shows severe deterioration in Q3 2007 with net financing costs almost equal to EBIT and an extremely disappointing after tax profit of a miniscule EUR1m.

click to enlarge
Source
http://www.finanzaonline.com/forum/attachment.php?attachmentid=830206&d=... Dec 11, 2007

This increased financial risk is reflected in the market price of the Ineos bond INEGRP 7.875% 15-02-2016 shown below. In early 2007 the bond price was about EUR100. In late 2007 it has fallen to about EUR83. The early April 2008 price of the bond has fallen even more to EUR74, representing a high yield to maturity of over 13%/year.
http://www.jyskebank.dk/finansnyt/obligationer/virksomhedsobligationer/a...
http://www.jyskebank.dk/_jb/commoninc/bin.asp?id=223656&src=200803mnedss...

click to enlarge
Source
http://www.finanzaonline.com/forum/attachment.php?attachmentid=830206&d=... Dec 11, 2007

Ineos should be lodging their 2007 financial statements with Companies House which will probably provide further cause for the falling bond price.
http://www.companieshouse.gov.uk/

Ineos had significant difficulty with their loan facility early in 2007.
http://uk.reuters.com/article/UK_SMALLCAPSRPT/idUKL022462420070502

LONDON, May 2 (Reuters) - Chemicals group Ineos [INEO.UL] said on Wednesday it was asking lenders to change the terms of its loan facility to allow a bond buyback and to cut the interest margins on the debt.

Credit analysts at Royal Bank of Scotland said that despite the bond buyback they retained an "underweight" recommendation on Ineos bonds due to disappointing fourth-quarter earnings.

"We feel Ineos has yet to demonstrate sustained earnings momentum and the bond buyback exercise announced this afternoon does not justify any material spread tightening," they wrote in a note to clients.

Fortunately, Ineos found a solution to its refinancing.
http://us.ft.com/ftgateway/superpage.ft?news_id=fto052120071614317039
http://us.ft.com/ftgateway/superpage.ft?news_id=fto052120071614317039&pa...

Ineos, the UK chemicals group, has narrowly avoided a showdown with creditors by pulling a controversial restructuring of more than EUR6bn of high-yield loans at the eleventh hour.

It had looked unlikely that the company would be able to push through its loan restructuring after a group of investors claimed to have marshalled enough support to block the move by an initial deadline of last Thursday. The protest over Ineos's loan restructuring is one of the first tangible signs that investors might give no more ground in Europe's risky high-yield loan markets.

The highly leveraged position of Ineos means that it will seek to increase its profit margins by all means possible including increasing prices to customers and cutting costs. One area of cost reduction is employee pensions. Ineos wants to change the pensions from defined benefit (or final salary scheme) to defined contribution for which the retirement payout is linked to the fortunes of the stock market, unlike the final salary scheme which is linked to employee’s salary at the time of retirement and also the employee’s longevity.
http://www.timesonline.co.uk/tol/news/uk/scotland/article3819055.ece
http://www.finance-glossary.com/terms/final-salary-scheme-(defined-benefit-scheme).htm?id=549&ginPtrCode=00000&PopupMode=

If Ineos is unable to increase its profitability then it will not be able to generate sufficient free cash flow to maintain all the plant and equipment and ensure proper operation of their assets. For example, Ineos needs a further £750m to invest in the Grangemouth refinery.
http://www.guardian.co.uk/business/2008/apr/27/oil.transport

What is extremely unfortunate, in the case of Ineos, is that the assets, including essential infrastructure, affected by the strike are critical to the economic prosperity of the UK. The Grangemouth refinery strike has affected not only petrol and diesel prices/supply but has also shut down 700,000 barrels of oil production from the North Sea. Gordon Brown and his Labour Party desperately need to exercise some strong leadership immediately.

Let’s hope that the Ineos employees at Runcorn chlorine plant don’t strike because then Britain might run out of drinking water in three days. Wonder how Gordon Brown would respond to a drinking water crisis?
http://business.timesonline.co.uk/tol/business/movers_and_shakers/articl...