Alpek SAB de CV

BMV:ALPEKA

Earnings Call Transcript 2018-Q4

[Operator]

Good morning, everyone, and welcome to Alpek's Fourth Quarter 2018 Earnings Conference Call. With us this morning, we have from Alpek, José Valdez, CEO; José Carlos Pons, CFO; and Hernan Lozano, our IRO, who will discuss the company's performance, answer any questions that you might have.

As a reminder, today's conference is being recorded and will be available on the company's website, www.alpek.com.

I will now hand the call over to Mr. Lozano. Please go ahead, sir.

[Hernan Lozano, executive]

Thank you, operator. Good morning, and welcome. We very much appreciate everyone's participation today. This call will be divided into 2 parts.

First, Pepe Valdez, our CEO; and José Carlos, our CFO, will provide a general overview of Alpek's 2018 performance and the outlook for 2019. Afterwards, we will have a Q&A session.

Before we get started, let me remind you that the information discussed in today's call may include forward-looking statements regarding the company's future financial performance and prospects, which is subject to risks and uncertainties. Actual results may differ materially, and the company cautions not to rely unduly on these forward-looking statements. Alpek undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

I will now turn the call over to Mr. Pepe Valdez.

[Jose de Jesus Valdez Simancas, executive]

Thank you, Hernan. Good morning, everyone, and thank you for joining us today. 2018 was a great year for Alpek, marked by record operating results and the execution of multiple strategic initiatives.

However, there was a significant difference in macro conditions during the fourth quarter. The Brent crude oil price decreased for the first time after 5 consecutive quarters of sequential increases. The price dropped 28% from September to December, driving down petroleum-based feedstock prices.

The sudden shift in oil and fixed oil price trends caused temporary distortions of demand margins as well as inventory losses. That weighed on our performance at the end of the year.

In contrast, previous quarters benefited from a rising oil price environment. Keep in mind that buyers tend to destock or grow down their inventories in anticipation of lower prices.

Despite the oil-related slowdown at the end of the year, all our business segments posted a strong annual EBITDA growth as better-than-expected results during the first 3 quarters more than offset so far fourth quarter performance. In particular, the Polyester segment achieved an extraordinary turnaround after a very challenging 2017.

Global polyester margins continued a gradual recovery, supported by improving operating measure as capacity growth accelerated over the past few years. Results also benefited from a midyear spike in Asia reference polyester margins, which reached their highest level in the last 2 decades.

We believe that some of the underlying factors that drove such high margin levels were the Chinese waste paper ban that contributed to higher domestic [indiscernible] demand and certain environmental regulations that resulted in several plant shutdowns or reduced operating rates.

During 2018, Asian reference margins rallied faster than utilization rates and decreased shortly after their midyear spike. However, after the correction, they stabilized above the levels observed in previous years. The polyester volume that we sell outside of our core North American market has a high correlation to these Asian margin dynamics.

EBITDA growth in the Plastics & Chemicals segment was driven mainly by our polypropylene business, which benefited from higher margins as the favorable propylene supply mix was complemented by a tight propylene supply-demand balance in North America.

However, domestic feedstock supply constraints in propylene, ammonia, sulfur and others continue to weigh on this segment's performance. We are actively engaged with the new Pemex administration, the administration in Pemex and at the same time seeking opportunities through multiple fronts to mitigate these effects.

Furthermore, I'm very pleased with our team's accomplishments during 2018 as we engaged in multiple highly relevant endeavors. This was a transformational year for Alpek supported by record CapEx of $826 million.

Next, I will focus on 3 key develops. The Suape -- first the Suape/Citepe acquisition in Brazil; second, the M&G bankruptcy and Alpek's handling of the situation in Corpus Christi, Mexico and Brazil, all of which have had favorable outcomes; and finally, the construction and sale of our cogeneration assets in Mexico.

After almost 2 years of negotiations, we completed the Suape/Citepe acquisition from Petrobras for a total amount of $435 million. This transaction represents an important milestone for our footprint in the Americas and will provide synergies that reinforce our company's integrated polyester platform.

It is important to note that the Suape/Citepe site is the only PTA-integrated facility in South America. The acquisition increased over aggregate polyester installed capacity by approximately 26% amid a favorable inflation point in the global polyester industry. We were pleased by the business better-than-expected initial contribution, amplified by this year's spike in global polyester margins.

The first months of operation and effective work with our team in Brazil has been useful as we fine tune our plant to reach the assets full potential, which involves increasing productivity as well as capturing synergies in logistics and feedstock supply among others.

The Suape/Citepe acquisition has played a very key role in Alpek's favorable outcome associated to M&G Brazil, as we were able to extend our PTA supply contract to this entity, which was acquired with [indiscernible].

Looking back, the M&G bankruptcy is among the most challenging events that our company has faced. Besides being Alpek's largest PTA customer, we have made significant investment in the Corpus Christi project.

In Mexico, we engaged M&G and its creditors to tailor a temporary solution which allowed PET production to resolve when we determine a definitive restructuring plan. In addition to the $100 million secured loans that we acquired from Inbursa in 2017, Alpek provided $60 million in secured financing as the process advanced during 2018. We expect the definitive restructuring plan to be approved and implemented shortly.

In the United States, M&G USA Corporation filed for bankruptcy and received approval to sell certain assets including the Corpus Christi plant. We opted to engage in this process as a joint bidder, and we are very glad to be part of the JV that acquired the project after obtaining regulatory approvals from BSPC.

Corpus Christi Polymers LLC or CCP is the name of the entity that were sworn to acquire complete and operate the Corpus Christi project. The new company is sold in equal shares by Alpek, Indorama and Far Eastern, all of which hold a strong credential in the global polyester industry.

CCP acquired the integrated PTA/PET plant under construction in Corpus Christi. This is the second M&G intellectual property and a desalination/boiler plant providing water and steam to the site for an aggregate amount of $1.199 billion in cash and other capital contributions.

Alpek made total contributions of $266 million in cash and $133 million noncash for its share of the acquisition. Our $133 million noncash contribution is associated to the secured claim with M&G arising under the original agreement. We will also obtain $67 million in cash for the remainder of our secured claim subject to certain conditions. This transaction implies a total recovery of $200 million from the $435 million Corpus Christi related asset impairment that Alpek recognized in third quarter '17.

The total contributions made for the acquisition do not include the necessary funding for the plant's completion. The cost to complete the site and a precise time line are to be determined. However, it is important to note that these costs will be shared equally by 3 partners.

We are excited to now have full access to the site, and next step for Alpek and its JV partners is to work together towards completed construction of the plant as quickly and efficiently as possible. A dedicated joint construction team has yet to be appointed and potential contractors have yet to be evaluated and selected.

As planned originally, the most likely start of the scenario is for the plan to begin PET production before PTA, although precise timing for both steps is unknown at this time.

Once the Corpus Christi plant construction is finished, CCP will be run by a board of independent managers as the sole manufacturer providing conversion services for Alpek, Indorama and Far Eastern. Each partner will independently procure this raw material and will also independently sell and distribute the corresponding share of approximately 366,000 tons of integrated PET and 122,000 tons of excess PTA. We look forward to benefiting from this incremental and highly competitive integrated PET/PTA capacity in a relatively short-term horizon.

Next, I am happy that we reached a final agreement with ContourGlobal to sell our 2 power cogeneration plants in Mexico for $801 million. The following are some of the key takeaways from this transaction, which is the largest divestment in Alpek's history.

First and foremost, we fulfill the strategic objective of securing a reliable and competitive supply of the steam and power for our Mexican facilities. It is important to note that Alpek will continue to be a lossmaker of the cogeneration plant, which will be owned and operated by a world-class player. Competitive pricing for overall space is achieved through long-term supply contracts that are based on a combination of natural gas, cost plus formulas or discounted CFE reference price. Having secured the steam and power supply, we believe that these assets may be better suited for the balance sheet structure that allows for higher leverage.

From a financial standpoint, this transaction implies realizing an attractive return on our cogeneration investment as well as strengthening our balance sheet and credit metrics even further. Also, the impact to Alpek's consolidated EBITDA is relatively small as power cogeneration accounts for approximately 3% of 2018 EBITDA. We estimate close to $700 million in net after-tax proceeds from the sale. This amount is due in full upon closing, which is expected before the end of the second quarter.

After closing, the planned use of the proceeds is the combination of investment in the strategic growth project, paying down debt, which increased following the Suape/Citepe acquisition, and dividends, which were deferred in 2018. The amount for each line item has yet to be determined.

Most importantly, we gain financial flexibility as we engage in strategic growth project such as Corpus Christi, and as we explore attractive opportunities such as potential capacity expansion in Brazil, Mexican integration to certain feedstocks and opportunistic M&A, among others.

For now, the priority is to start commercial operation at the Altamira cogeneration plant as soon as possible. We've recently moved from the construction phase in the conditioning stage. Simultaneously, we continue to advance with the signing of long-term power contract amid a favorable Mexican power tariff environment.

From a project execution standpoint, we feel confident that we will be ready for closing of the transaction before the end of the second quarter.

Looking ahead, we will continue to move forward along 3 strategic priorities. First is strengthening our core business. This includes all goals and supply related initiatives that will enhance our competitiveness and ensure profitability throughout industry cycles. Second, profitable growth. Our focus is to deliver the expected returns from recent investments such as the Suape/Citepe acquisition, power cogeneration and the Corpus Christi project. At the same time, we maintain a disciplined, strategic and opportunistic approach towards M&A.

And third, reinforce our product sustainability. This involves working together with our customers to support their sustainability objectives. For PET, our largest product, we are expanding our recycling content offering and working on technical development that allow for lighter-weight packaging, among others. This high recyclability and lower energy consumption versus solid material are key attributes that we will continue to promote actively.

As announced earlier today, our 2019 guidance is based on a lower-price environment and lower margins for certain products that benefited from nonrecurring events last year.

Even though we expected this to weigh up profitability versus 2018, record-breaking results, we maintain a positive view for underlying industry dynamics in most of our products, supported by stable supply-demand balance outlook.

As a final remark, I'm happy to see that Alpek recovered much faster than expected in 2018, and I'm also confident that the capital allocation decisions that we made throughout this time will provide a solid platform for future growth.

At this point, I would like to turn the call of over to José Carlos.

[José Pons, executive]

Thank you, Pepe. Good morning to everyone. Alpek posted record volume, sales, EBITDA and CapEx in 2018 as a result of multiple internal and external factors. Consolidated volume increased 10% year-over-year to 4.4 million tons and sales totaled $7 billion, up 34% versus 2017, driven mainly by a rising oil price environment and the Suape/Citepe acquisition.

Between May and December, the acquired entities in Brazil contributed to 403,000 tons and $494 million to consolidated volume and sales, respectively. Moreover, a combination of higher volume, sales and margins boosted EBITDA growth, especially in our Polyester segment.

When comparing 2018 and 2017 EBITDA, it is important to take the following considerations. 2018 consolidated EBITDA includes a net gain of $259 million from 3 extraordinary items. First, a $220 million noncash gain on business combination associated with -- to the Suape/Citepe acquisition. Second, a $41 million noncash inventory gain. And third, a $2 million net loss from others such as nonrecurring legal fees and expense.

In contrast, 2017 consolidated EBITDA includes a net loss of $79 million as the $130 million onetime charge associated to M&G accounts receivable was partially offset by inventory gains and others. Adjusting from extraordinary items, Alpek's comparable consolidated EBITDA was $804 million in 2018, up $74 million versus $462 million in 2017.

Comparable 2018 Polyester EBITDA more than doubled to a record $529 million, boosted by the year-over-year recovery in global polyester margin, the integration of Suape/Citepe and a rising oil price environment during the first 3 quarters of the year.

Moreover, comparable 2018 Plastics & Chemicals EBITDA was $275 million, up 20% versus 2017, driven by polypropylene and expandable polystyrene. This is the second highest annual EBITDA figure in the segment's history.

Moving down the P&L, 2018 profit related to the controlling interest was $697 million, including a net benefit of $356 million from the following 2 items. First, the $220 million noncash gain on business combination associated to the Suape/Citepe acquisition that benefited the results. And second, $136 million net benefit associated to the Corpus Christi project that was subject to a full asset impairment in 2017.

The net benefit is comprised of $195 million noncash gain in operating income, which corresponds to the present value of the total recovery, less $59 million in deferred income tax. In contrast, we posted a loss related to the controlling interest of $319 million in 2017, including $481 million in losses related to the M&G provisions and impairments.

Regarding our balance sheet and certain cash flow items, net debt was $1.83 billion at the close of 2018, up $569 million versus 2017. This includes record CapEx of $826 million. Our net leverage ratio improved consistently during the year. Net debt to EBITDA came down from 3.3x at the close of 2017 to 1.7x in 2018, or 2.2x when adjusted for the $220 million gain in business combination. We have a solid financial position that is supported by strong cash generation.

Finally, I would like to share some insights on our view for 2019. Our estimates are based on a $68 per barrel average Brent price compared to a $71 per barrel average in 2018, and the current price closed to $64 per barrel.

As referenced, we used an average exchange rate of MXN 20.60 per U.S. dollar and assumed a slight contraction in GDP growth versus 2018 for Mexican to U.S.

In this context, we expect sales to increase 4% year-over-year as a result of 8% estimated volume growth being partially offset by lower oil and feedstock price. Consolidated 2019 EBITDA is estimated to be $918 million, including a $200 million gain from the planned sale of our cogeneration asset.

Adjusting for the extraordinary gains, comparable 2019 EBITDA is expected to be $85 million lower than 2018. The Plastics & Chemicals segment accounts for the majority of this reduction due to multiple factors, such as feedstock supply and temporary feedstock price disconnection that benefited our polypropylene and EPS businesses in 2018.

The lower oil price environment is also expected to weight on 2019 profitability. Consolidated 2019 CapEx is estimated to be $310 million for both maintenance and strategic projects. This includes investments in the Corpus Christi project, the last tranche of the Altamira cogeneration power plant and the recycle PET acquisition in the United States announced in January among others.

Regarding dividends, we plan on proposing a dividend payment in our upcoming shareholders meeting. As in previous years, the figure will be disclosed at that event.

From a financial standpoint, our 2019 guidance involves positive free cash flow generation and a net leverage ratio below 2x at the close of the year.

This concludes my remarks, and I would now like to open the call for questions. Operator, please instruct the participants on how to place their questions.

[Operator]

[Operator Instructions] And we'll take our first question Nikolaj Lippmann with Morgan Stanley.

[Nikolaj Lippmann, analyst]

I just have 2 quick questions, if I may. First, can you provide a bit more color on your outlook for the polypropylene market in this year and maybe even next? And could you remind us the degree to which you depend on supplies -- raw material supplies from Pemex and the kind of flexibility you might have there to get supplies from other sources? So that's question number one. Question number two, I'm not sure are you in a position to share the EBITDA you expect to generate from, say, South America. But any kind of color you could give on that would be very helpful.

[Jose de Jesus Valdez Simancas, executive]

Nikolaj, let me answer the first question. In terms of the supply from Pemex, we mentioned that this was a big factor last year, which became even more critical at the end of the year. Production in [ especially well ] in refineries, production in -- and in the chemical operation Pemex, it was a very limited, it was a record low last year. And we are working very hard with the new administration to improve their supplies. And so far I would say that we are being partially successful. First of all, important for us that we perceive a lot of interest in the new administration to significantly improve the utilization rate of the refineries, and also of the petrochemical plants. And so we believe that there's going to be a recovery from last year in most of all the problems we mentioned, the propylene, the ammonia and so forth in particular. So we believe there will be a recovery but it's going to take some time. But at least I would say, the trend seems to be positive, which is good for us. At the same time, of course, we have made -- we have taken measures to improve our supply from other sources. And I think particularly in the case of propylene, we have signed -- agreed to a long-term contract that is going to increase in an important way our supply of propylene from the U.S. So we are going to be in good shape in regards to at least the volume of this product. Your first question, you were asking for me to give color on, what color? I'm sorry because I couldn't understand...

[Nikolaj Lippmann, analyst]

Yes, Pepe. If I may just a follow-up question. So if you see things perhaps improving in relationship to Pemex, should we think of Caprolactam as something that could contribute more over the course of '19 than '018? Would it be more of a material market given the -- I think, you'll have some supply issues there as well and you mentioned ammonia.

[Jose de Jesus Valdez Simancas, executive]

Yes. Well, we have supply issues in ammonia and sulfur as well, yes. And as I say -- yes...

[Nikolaj Lippmann, analyst]

Do you think that Caprolactam could be a meaningful turnaround in '19?

[Jose de Jesus Valdez Simancas, executive]

I think it will be, but it will not be at the beginning of the year. Caprolactam, part of the issues we have is basically the ammonia plant in Mexico has been shut down for the last 1.5 years. And the basic reason for that shut down is that there has been -- there is a shortage of natural gas in the South of Mexico, so since they don't have gas, the ammonia plants are not running. There -- the expectation, as we say, is that sometime probably in May -- April, May, the new natural gas line that mean, built by TransCanada for CFE will be ready, and there's going to be a compression change to reverse the flow of the Cempoala Cosoleacaque pipeline. So we believe that there should be enough or much better situation in terms of supplying natural gas to the South of Mexico starting, again, May, June time frame. And in the meantime -- and then based on that, assuming that happens, then we expect some time, hopefully in the third quarter, the ammonia plants will be restarted, third quarter. So this is the situation, the latest situation that we're facing. But again, we're working very hard right now, again together with Pemex, so that Pemex has a, let's say, a facility to import, a terminal to import ammonia. So we're working very hard with them to make some improvements in that facility, so that we can import significant quantities of ammonia in the meantime that Pemex starts its ammonia plant. That will be very, very helpful for us because we can import ammonia at very competitive prices in that terminal. So in terms of again, of Caprolactam, that's the situation, we -- I mean, if it is the turnaround as you call it, it's got to depend on how fast we can get the solution on supply, first, coming from imports and second, with the start up of Pemex plant. But we certainly believe that by the second half of this year, we will -- Caprolactam business will be much stronger than what it has been over the last months.

[Nikolaj Lippmann, analyst]

My second question. Could you share or share a sense of the range perhaps of how much you expect to generate from your South American business -- embedded into the -- embedded in the guidance?

[Jose de Jesus Valdez Simancas, executive]

Well, I will really -- yes, I will share with you something. We don't like to split the numbers, but I do believe that we are going to be generating the EBITDA we expected in our original investment project. We were expecting to reach a certain approval rate. I think we are aiming at -- well, we were aiming to reach in 3 years from now. So we're going to be a little bit ahead of the curve that we have originally planned for the project. So what I'm trying to say is, we are working very hard, and we believe significant improvement in efficiencies are going to be made, and we believe it's going to be on the high range of our expectations when we first announced the project.

[Operator]

And we'll take our next question from Gabriel Barra with UBS.

[Gabriel Barra, analyst]

I have 2 questions. The first one is regarding capital allocation. How should we think in terms of capital allocation throughout 2019? Should we expect a bit more M&A activity? Or could we think something more related to dividends? And the second one, regarding the CapEx for Corpus Christi, is there any update regarding how much was spent to complete the construction for Corpus Christi plant? And how much of this amount is included in the 2019 CapEx guidance.

[Jose de Jesus Valdez Simancas, executive]

Okay. I will ask José Carlos to answer your question, Gabriel.

[José Pons, executive]

Thank you. Gabriel, with respect to capital allocation for 2019, yes, as we have disclosed in our guidance, we are expecting to invest around $319 million of CapEx, mainly divided into maintenance and in strategic projects -- some ongoing projects, as the Corpus Christi investment, also, the acquisition of the company of recycling in the U.S. And in terms of dividends, as also indicated in our previous comments, basically we are still evaluating the amount and the timing for dividends. We are going to propose a dividend in the shareholders' assembly or shareholders' meeting, and we will give you information as soon as we're available. Pepe, there's a question regarding CapEx for the Corpus Christi plant, would you like to answer that or would you like me to answer?

[Jose de Jesus Valdez Simancas, executive]

Well, on that front, it's a similar amount to what we have been describing before. We just have to finalize the -- some of the engineering to give a more precise number. But it is in the range of the number we have been discussing before, in the range of $600 million to $700 million that's the latest estimate we have. I mean, of course, we have to divide that by 3. And I don't recall exactly now how much is in the budget this year, but I think it is around $70 million, $80 million. I don't know José Carlos you probably can...

[José Pons, executive]

Yes. This is $70 million, yes, we have 7-0 for this year.

[Operator]

And we'll take our next question from Andre Hachem with Itaú.

[Andre Hachem, analyst]

I basically have 2 questions pertaining to the guidance. My first question is related to the EBITDA guidance. Could you guys give us a breakup on how much you're expecting from each of the 2 divisions and how much from Plastics & Chemicals and how much from the Polyester? My second question is related to the cogeneration plant. Could you detail us how much of the -- how much did you generate in terms of EBITDA last year? And if you're incorporating any of these results for the first half of this year, inclusive if those completed, in the 2019 guidance.

[Jose de Jesus Valdez Simancas, executive]

José Carlos, why don't you answer that question?

[José Pons, executive]

Okay, thank you. As we indicated, our guidance for 2019 is $918 million. That includes some extraordinary results from the sale of the cogen. And if you go into that then we have around $500-plus-million of EBITDA in Polyester and close to $200 million in terms of the Plastic & Chemicals. And could you repeat your second question, please?

[Andre Hachem, analyst]

It's in regards to the operational results, you mentioned $200 million extraordinary gain related to the sales acquisition, but until the sale is closed, as I understand, it will still be accretive results, right? I think that Cosoleacaque generates around $30 million in EBITDA last year, so it probably generates some results for this year. At the Altamira, I'm not sure if it's already started, but it should start earlier this year. So there could be some results from that operation in offset. So how much of their EBITDA generation is included in the current guidance for 2019? Not really into the sales, but the operations per se.

[José Pons, executive]

Yes. Thank you. So basically, if I repeat your question, it's how much of our EBITDA is going to be generated from the cogen operation. And basically, what we can say is that around $20 million were included in our 2018 results and a little bit lower amount in 2019 will be generated from the months that we will operate those assets until we actually perform the sale.

[Operator]

We'll take our next question from Gilberto Garcia with Barclays.

[Gilberto Garcia, analyst]

Can you provide some, I guess -- I believe it's unclear that you are still looking at the CapEx number, but a rough estimate of timing for the start-up of the Corpus Christi plant? And if you have some estimate on what is the potential impact to margins of these new capacity coming into the market?

[Jose de Jesus Valdez Simancas, executive]

Gilberto, I -- I mean, the estimate, let's say, the rougher estimate for the start-up of the Corpus Christi plant will be middle of next year for the PET line and then middle of 2020 -- 2021 for the PTA plant. So it's going to be PET first in sometime middle next year and then PTA in middle of 2021, those are the estimates. And well, again, yes, when we start PET, they're going to have to replace the imports in North America. Today, we have a significant amount of imports coming into North America. And with the start of the capacity in Corpus, we're going to have the opportunity of replacing some of those imports, plus hopefully, the market will continue to grow and capture the additional growth of the market, so that will be the estimation.

[Operator]

We will take the next question from Vanessa Quiroga with Crédit Suisse.

[Vanessa Quiroga, analyst]

The Brazil operations, if you can provide at what utilization rate those facilities are operating at the end of 2018 in each of PTA and PTE, if possible? And if you expect additional efficiency gains and generalize more -- higher profitability for those assets going forward? And the other question is regarding an update on that trends in pricing and margin that you're seeing in most important products for you.

[Jose de Jesus Valdez Simancas, executive]

Okay. Your first quarter was regarding Brazil, right?

[Vanessa Quiroga, analyst]

Yes.

[Jose de Jesus Valdez Simancas, executive]

So in Brazil, we did have some very good months in the operation of the plant. Last year, we actually had a record, I think it was around August and September, we produced actually slightly higher than the nominal capacity of the plant. We had a month where we produced 58,000, 59,000 tons. But unfortunately, after that, we have had shutdowns, given the fact that there was a lot of backlog maintenance in the plant. There was like 11 months of backlog of maintenance. So in the last part of the year, we have been really working to take care of or to improve the reliability of the plant. As I say on a day-to-day basis, we can -- we have been able to produce more than the nominal capacity, but then we have shutdowns for different reasons. Just this month, well last month January, and we finished like this week -- last week, we made a very long shutdown of the PTA facility in Brazil to correct a lot of the -- or to improve the reliability of the plant, which as we started the plant like 4, 5 days ago, and it's operating great. So we are very confident we're going to be operating the plant at very close to the capacity 640,000 tons per year. So we feel comfortable about that. In terms of efficiency improvements, we've seen a lot of opportunities to improve cost and in some cases to improve quality, and we are capturing those synergies, as we call them, faster than we anticipated. We have been able to -- our improving curve has been faster than we thought, and we believe that probably at the latest, by the end of this year, beginning of next year, the plan will be, let's say, competitive with any long-scale facility. So we are very confident, again, but also not only in terms of the capacity -- of reaching capacity but also in terms of the efficiency, productivity and cost of the plant. We believe we're going to be in good shape.

[Vanessa Quiroga, analyst]

That's great. And regarding the industry pricing and margin trends that you're seeing globally for Polyester?

[Jose de Jesus Valdez Simancas, executive]

Okay. For Polyester or for all the products?

[Vanessa Quiroga, analyst]

Yes. For the main product, Polyester and...

[Jose de Jesus Valdez Simancas, executive]

Let me talk about the 3 main products, okay, which will be Polyester -- I mean PTA/PET and polypropylene and EPS, okay? Well, look, '19 -- and I will talk to more about capacity utilizations that we expect, which are normally very correlated to the margins. We expect PTA and PET having reasonably attractive capacity utilizations in the 85% sort of range on a global basis for '19. After '19, in 2020, we see some reduction of capacity utilization, particularly in China. But in the rest of the countries it stays relatively similar. In PTA, by the way the capacity utilization is not only '19 but we see the base stay at the 85% range of the -- perhaps 2022, okay? So the next 2, 3 years look very similar, and '22, we are assuming a new project come in China and reduce the capacity utilization a little bit. So PTA looks okay for the next 2, 3 years, PET looks okay for this year. Perhaps next year, again as I mentioned, it's mostly in China situation, we could see some reduction in PET, also of course, the Corpus Christi facility. And then polypropylene, again I think we see reasonably good utilization rates up until I would say '21, '22. And EPS, we see it, again, very steady for the next 3, 4 years at around 85%. So we see -- we think that based on that, we could extrapolate and say that the margins should be relatively -- at least for '19, relatively similar to what we are seeing now at the end of the year, I mean, in general, better margins than historically. In China, the margins, as we start this year, are like $30, $40 higher than they were in the 2012-2017 time frame, so $30, $40 higher in China. And in Asia, it is actually even better than that. In Asia, we are seeing margins which are probably $60 to $70 higher than the average -- than the 2012-2017 time frame. So again, as we have mentioned and José mentioned before, we believe that the margins of this sort of timing are going to stabilize at higher than historical data. Obviously, not as high as '18, which was sort of a record year.

[Operator]

And we'll take our next question from [ Rodrigo Lugo ] with GBM.

[Unknown Analyst]

Just one question regarding the U.S. antidumping PET case. Do you have any updates or any new developments? Because we -- well, we understand that your aim with Corpus Christi additional volume -- well, in some part was to replace those imports from the PET antidumping duty countries. And we've heard there was a negative determination, so we were wondering if there was any new developments or any update on what would you try to do if the determination came as negative?

[Jose de Jesus Valdez Simancas, executive]

Well, we are planning, as we mentioned before, to appeal that decision. We do not agree or understand with the decision that was taken at the end of the process. As you are familiar, the process when there is -- normally, there was a very clear determination that there was adopting and then the issue at the last minute was regarding whether it was damaged or not. So we, again, are analyzing the documents and our idea is that we're going to appeal that decision.

[Unknown Analyst]

Okay. Do you have, well, any time frames or any dates that we should be looking out?

[Jose de Jesus Valdez Simancas, executive]

For -- time frame for?

[Unknown Analyst]

Yes. For any, I don't know, decisions or determinations regarding this appeal.

[Jose de Jesus Valdez Simancas, executive]

Okay. I will get back to you on that. I am not sure exactly where we are and what the timing of this process will be. I will ask Hernan follow-up on this question.

[Hernan Lozano, executive]

Absolutely, Pepe. We'll follow-up with [ Rodrigo].

[Operator]

[Operator Instructions] With no questions in the queue, I'd like to turn the conference back over to Mr. Lozano for any additional or closing remarks.

[Hernan Lozano, executive]

Thank you. I would just like to thank everyone for participating in today's call, and please feel free to contact us if you have any follow-up questions or comments. Have a great day.

[Operator]

Ladies and gentlemen, that does conclude today's conference. Thank you all for joining us.