InterviewBorealis aims high over next five years

13 March 2008 17:31  [Source: ICIS news]

LONDON (ICIS news)--Vienna-based polyolefins producer Borealis aims to be a significantly more profitable company in five years’ time, said CEO Mark Garett on Thursday.

 

The company planned to continue its “value creation through innovation” strategy and would build on significant new low-cost feedstock capacity increases in Abu Dhabi, Garrett told ICIS news in an interview.

 

The CEO’s announcements come in the wake of a 74% fall in fourth-quarter operating profits, announced on Wednesday, though its earnings for the whole of 2007 were 28% higher year on year.

 

The Borouge joint venture in which the company has a 40% stake was adding 2.1m tonnes of polyolefins capacity, due on stream in 2010, which Garrett said would produce significant cash flows.

 

Borealis would see profits from the venture flow directly to its bottom line, he added.

 

The new Borealis CEO - he took over in January - said that scrap and build with incremental capacity underpinned the strategy for Europe, coupled with continued attention to productivity.

 

“You might see a Borealis that has a similar sales line but a very different profits line [in a few years],” he said.

 

“We have to continue to support the significant investment in Abu Dhabi,” Garrett said “and we have to make sure we drive the production efficiency of our assets in Europe”.

 

Borealis expected increased market volatility in Europe over the years to come but is driving efficiencies and upgrading its petrochemicals production base.

 

It brought a 330,000 tonne/year Borstar technology PP plant on stream in Burghausen Germany, at the end of last year and is adding 350,000 tonne/year of new low density polyethylene capacity (LDPE) capacity in Stenungsund, Sweden, destined for the more specialised Scandinavian wire and cable and advanced packaging markets.

 

In its base chemicals business it has lifted phenol and other product capacities in Finland. Safety and efficiency plans are progressing at its newly acquired AMI melamine and plant nutrients business based in Austria.

 

“Productivity gains are endless,” he added, with projects at the local and group-wide level.

 

The considerable need for infrastructure replacement in western Europe and new demand in eastern Europe would help drive demand for Borealis products in segments like wire and cable, he said.

 

Borealis makes much of the fact that it produces more specialised polypropylene (PP) and PE products, although less than 50% of its turnover is derived from these more performance-oriented materials.

 

Garrett stressed, however, that the Borealis wire and cable offering was all about purity in production and compounding.

 

The polymers are produced “almost in clean room conditions”, he said. This is especially important for materials used in high voltage conditions, he added.

 

PP continued to replace polycarbonate in automotive applications, he said, adding that in pipe it was a question of making sure the standards are maintained.

 

“I think Borealis’ reputation for product quality combined with our ability to bring new products to the market through our [research and development] R&D centres is the story,” he said.

 

Garrett said he expected the significant new capacity additions at Ruwais in Abu Dhabi to be brought on stream by the Borouge joint venture as planned in 2010.

 

Borouge was using, as yet, not fully proven dimerisation technology to produce propylene feedstock for the 500,000 PP plant planned in Ruwais. The technology, however, was being tested in a pilot scale unit in Schwechat, Austria, Garret said.

 

The personnel on the Schwechat unit would transfer to Abu Dhabi to work on the world-scale plant, he said.

 

Borealis is still developing its strategy for its new base chemicals businesses that comprise the firm’s cracker-based operations, phenol and acetone, melamine and plant nutrients lines. A six-quarter “transformation” programme is designed to help integration and lift profitability.

 

In June last year, Borealis raised phenol capacity at its plant in Finland by 28% to 195,000 tonnes/year and raised acetone capacity to 115,000 tonnes/year. A new 80,000 tonne/year melamine plant will be built in Ruwais to meet growing global demand.

 

Phenol is tight in Europe and demand has been growing but there is more than sufficient capacity to produce the co-product acetone.

 

Garrett said he believed that one of the keys for the market was that phenol should no longer be priced the traditional way and that the link to feedstock benzene may no longer be logical.

By: Nigel Davis
+44 20 8652 3214

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