01 August 2002 15:15 [Source: ICIS news]
LONDON (CNI)--Shell admitted Thursday that action has to be taken at its Basell polyolefins joint venture with BASF to ensure "adequate profitability" in current market conditions.
Basell, which is trading in a particularly tough environment for polypropylene and other products, made an operating loss of Euro244m (about $240m) last year on sales of Euro6.60bn. Shell said today that Basell was in profit in the second quarter this year having reached breakeven in the first three months of 2002.
Chairman of Shell's committee of managing directors Philip Watts said that Basell is cutting 10% of capacity to push up operating rates. Basell has sold 800 000 tonne/year of capacity thus far and mothballed or closed a further 1m tonne. Staff cuts of 20% are planned, 18% have been achieved, and 35% of product grades are in the process of being rationalised.
Merger savings for 2003 of Euro250m per annum were targeted when the joint venture was established in 2001. Watts said that savings of Euro220m would be achieved by the end of this year. The savings are split between fixed and variable costs with fixed costs reduced by 9%, he added.
Watts was speaking here at a press conference held to announce Shell's second quarter financial results.
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