12 August 2002 00:00 [Source: ICB Americas]After losing 244 million ($237 million) last year, Shell is confident that Basell, its joint venture with BASF and the European market leader in polyolefins, is now well on its way to achieving "adequate" profitability. Basell broke even in the first quarter this year and turned a profit in the second quarter. It is on track to achieve annualized savings of 250 million by the end of 2003, James Smith, Shell Chemicals' vice president, technology, portfolio and sustainable development, told a London press briefing.
The joint venture has now completed a program of closures and mothballings of 1 million metric tons of annual capacity, and another 800,000 tons has been divested. It also plans to reduce the number of product grades by 35 percent by the end of next year. During 2002, it will cut its staff by 10 percent to around 7,000.
Basell hopes to further trim its operational costs by integrating its, Shell's, and BASF's ethylene crackers more with its production units.
Shell Chemicals is itself continuing with its goal of becoming the world's best performer in petrochemicals, in terms of profitability, by 2005. In the second quarter, it recorded underlying earnings of $132 million, more than twice those of a year ago and its highest quarterly earnings since the third quarter of 2000. Sales were up 9 percent compared to the second quarter of last year, and unit cost improvements outpaced their 3 percent target.
"We will continue to enhance our operational performance by getting utilization rates higher than, and costs lower than, the industry average," says Mr. Smith.
Following a major reduction in its chemicals assets in the late 1990s, it will focus on organic growth rather than expanding through acquisitions. "We do not see a need for more rationalization," says Mr. Smith. "Instead, we will continue to improve our strengths because growth will come through these strengths. We are not thinking about buying anyone."
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