Victrex Regulatory News (VCT)

13 January 2020

Victrex plc

Investment to create a joint-venture for PEEK manufacture in China

Development of PEEK polymer capacity in China sets the stage for further regional growth opportunities and further differentiates Victrex's range of PEEK & PAEK grades

Victrex plc today announces the creation of a joint-venture between its subsidiary, Victrex Hong Kong Limited, and Yingkou Xingfu Chemical Company Limited, to build and operate a new PEEK polymer manufacturing facility in Liaoning, China, subject to certain performance conditions, including finalising land purchase and permit applications. Victrex, which will be the majority partner and lead the joint-venture, will benefit by further differentiating and complementing its portfolio of PEEK and PAEK grades, in anticipation of a range of significant long-term growth opportunities across several end markets in China, as well as aligning with China's 'Made in China 2025' initiative, where specifying domestically produced PEEK in certain applications is expected to gain momentum.

Victrex already has an established relationship with its joint-venture partner through its monomer supply chain, with Yingkou Xingfu having significant experience of developing and operating chemical facilities in China which meet international quality, process and environmental standards.

Today's announcement builds on Victrex's recent appointment of a General Manager for China and an increased commercial presence, as well as its strong technical service offering to customers, which includes its existing Technical Centre in Shanghai. The investment sets the stage for Victrex to serve some of its regional customers from a local facility and in a more diverse way. Victrex will also oversee the management of process know-how and intellectual property during development of the polymerisation process.

Victrex's share of the overall investment, the majority of which comprises capital investment during construction, is expected to total £32m funded in cash, with approximately £28m of capital expenditure and £4m of start-up costs, with commissioning of the facility anticipated in early 2022. The new plant will eventually be capable of producing up to 1,500 tonnes* per annum. Establishing a new PEEK polymer plant in China is in line with Victrex's record of investing in capacity ahead of demand, with an expectation that future capacity increases will be more gradual, rather than larger multi-year investments.

Jakob Sigurdsson, Chief Executive of Victrex, said: "This investment is in line with our record of not only investing ahead of demand, but in complementing and further differentiating our range of PEEK and PAEK grades, as well as setting the stage for specific geographic growth, whereby we can capitalise on the significant opportunities in China and the Asia Pacific region by having a competitive manufacturing presence there.

"Alongside the Made in China 2025 initiative, some of our increasingly diverse application areas mean our customers require a quality and differentiated PEEK offering. Whilst we already manufacture a range of PEEK and PAEK grades, this will enhance our portfolio, making us even better positioned in a region where we have seen strong growth in recent years and continue to see attractive opportunities, aligned to our know-how and strong technical and application development capabilities.

"Overall, we believe this is a good entry point to a China manufacturing operation, working with an established partner and offering an attractive returns profile."

The joint-venture will establish Victrex Hong Kong Limited as the majority partner with a 75% share, with leadership being assumed by Victrex once the facility is operational. The investment follows on from Victrex commencing a debottlenecking project at its main Hillhouse UK facilities in FY 2020, which will add up to 1,000 tonnes per annum of nameplate capacity when completed.

This announcement is a class 2 transaction made in requirement with the UK Listing Rules.

Notes

1/ *1,500 tonnes is based on anticipated annual nameplate capacity

2/ The gross asset value of the joint-venture is approximately £29.5m

3/ No profits are attributable to the assets of the joint-venture and formation of the joint-venture is not anticipated to materially affect expectations for the Group prior to operational completion

4/ Victrex will hold three of the four Board seats as part of the joint-venture, with Richard Armitage, Victrex Chief Financial Officer, chairing the joint-venture

Enquiries:

Victrex plc:

Andrew Hanson, Director of Investor Relations & Corporate Communications

+44 (0) 1253 898121

About Victrex:

Victrex is an innovative world leader in high performance polymer solutions, focused on the strategic markets of automotive, aerospace, energy (including manufacturing & engineering), electronics and medical. Every day, millions of people use products and applications which contain our materials - from smartphones, aeroplanes and cars to oil and gas operations and medical devices. With over 40 years' experience, we develop world leading solutions in PEEK and PAEK based polymers, semi-finished and finished parts which shape future performance for our customers and our markets, and drive value for our shareholders. Find out more at www.victrexplc.com or follow us on LinkedIn and Twitter @victrexir

About Yingkou Xingfu:

Yingkou Xingfu is a well-established manufacturer of Speciality Chemicals in China and has been a valued partner to Victrex for nearly a decade in its monomer supply chain. They bring monomer manufacturing capability as well as a proven track record of building high quality chemical plants that meet international quality, process and environmental standards.