12 March 2008 12:53 [Source: ICIS news]
LONDON (ICIS news)--Margins had held in the first quarter of 2008, Borealis said on Wednesday but the Vienna, Austria-based polyolefins producer warned of future volatility.
“Margins are holding up reasonably well and our margins are in good shape,” chief financial office Dan Shook said at the group’s full-year financial press conference. Shook, however, stressed the need to be prepared for some softening.
Borealis reported on Wednesday sharply lower fourth-quarter 2007 operating profits against the backdrop of higher feedstock but weaker product prices and comparisons with a strong year earlier quarter.
“Business conditions in 2008 are more challenging than in 2007,” CEO Mark Garrett said. “There is no doubt we are facing more difficult waters. There is a storm on the horizon.”
“We expect that there will be increased volatility in the next few years and our job is to manage through that. We have to manage through the cycles we don’t have a choice,” he said.
Garrett said, however, that the upgrading of production facilities and the focus on higher value polyolefins business for infrastructure, automotive and packaging applications would help underpin the company.
A new 333,000 tonne/year Borstar PP plant serving the advanced packaging market came on stream at ?xml:namespace>
A 350,000 tonne/year low density polyethylene (LDPE) plant in Stenungsund,
Borstar is the Borealis proprietary polyolefins technology.
The Borealis giant 1.5m tonne/year joint-venture ethane cracker is due on stream in 2010, alongside two Borstar technology enhanced PP plants with a combined 800,000 tonne/year capacity and a Borstar enhanced PE plant of 540,000 tonne/year capacity.
The dimerisation technology has yet to be proven but a pilot plant was producing material and the Ruwais dimerisation plant expected on stream in 2010, Garrett said.
The Borouge joint venture plants will triple Borstar polyolefins production capacity to 2m tonnes.
With these units the most advanced technology polyolefins would be coming off the world’s cheapest feedstock, Garrett said.
Borealis intends to grow its €2m base chemicals business, the CEO added.
The base chemicals division was created in 2007 following the absorption of the former OMV-held Agrolinz Melamine (AMI) business. It includes phenol & acetone, feedstock & olefins, melamine and plant nutrients businesses for the group.
The AMI operations were in the black in 2007, Garrett said, following two years of losses.
Meanwhile, the group’s fourth-quarter sales grew 13% year on year to €1.6bn but operating profits, including restructuring charges, were 74% lower at €28m.
Average quarterly PE prices were down 1% from the third quarter of 2007 and level in PP.
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