InterviewBorealis to focus on existing projects for rest of 2010 - CEO

12 August 2010 14:30  [Source: ICIS news]

Borealis CEO Mark GarrettLONDON (ICIS)--Borealis will focus on its existing projects before looking at any new investments as it prepares for a tougher second half of the year, the Austria-based polyolefins major’s CEO said on Thursday.

Mark Garrett said the company was focused on its current projects in Europe and the Middle East and that there were no new investments planned for the near future.

“The second half won’t be as strong as the first half. We won’t see the rising price environment that we have enjoyed in the first six months. However, our goal is still to come in with a substantial improvement in performance over last year,” Garrett added.

On Borealis’s second-quarter results, Daniel Shook, the group’s chief financial officer (CFO), said earnings exceeded expectations, but he added that the conditions during the quarter had been a lot more favourable than in the same period of last year.

“If you break it down, conditions were better and we did see margin improvements across the industry,” he said.

Earlier on Thursday, Borealis announced that its net profit more than doubled in the second quarter to €92m ($118m) from €35m during the same period last year on improved margins and higher polyolefins prices.

Sales revenues in the second quarter soared by 41.3% year on year to €1.61bn. Operating profits came in at €126m, up from €27m in the April to June period last year.

Shook said that from a volume perspective, the group was largely flat year on year. However, Borealis reported a shift back to durable products, used in the infrastructure and automotive sectors, which helped its profit margins.

Shook expected the polyolefin market to be more difficult in the second half compared with the first.

“We see a more stabilising-towards-decreasing environment rather than the increasing environment in the first half of the year,” he said.

Shook added that Borealis saw improved volumes in its base chemicals, in particular in melamine and fertilizers, and viewed the plant nutrient industry as having potential for further investment.

Borealis said that over the next three years, €45m would be invested into melamine and plant nutrients production at Linz, Austria, while at the same time the firm would aim to increase internal efficiency and profitability at the site.

“We certainly believe the fertilizer, the plant nutrient area, is growing, in particular in the geography that we are sitting in. Our plant [in Linz] sits on the Danube River which flows through a large part of eastern Europe,” said Garrett.

“If you look at per-hectare productivity in farms, eastern Europe has a long way to go to get to western Europe or North American levels – which have basically maxed out what they can produce…. For growing food demand, eastern Europe is a logical place to produce and an area of interest for us,” he added

In its results announcement, Borealis added that it had achieved major milestones for the Borouge 2 project in Abu Dhabi with the starting up of a new ethane cracker as well as a polyethylene (PE) plant, while contracts were signed for the Borouge 3 project, for which land has been allocated and levelled.

The company also started up and inaugurated a new 350,000 tonne/year low density polyethylene (LDPE) plant in Stenungsund, Sweden, in June.

Garrett said that plant had made on-spec film grades, adding that it would eventually start to manufacture wire and cable rope, but he could not give a timescale.

In April, Borealis aimed to raise up to €200m in a bond issue to help finance its projects in the Middle East and Europe.

The seven-year bond – Borealis’s first such corporate bond transaction – was placed with Austrian private and institutional investors.

Shook said that the bond issue had been very successful.

"Over the past year we have looked at various areas of financing, the bond was just the next step," he said, adding that, on a needs basis, it would consider taking a similar action in the future. Borealis was looking at a number of different options for additional funding to cut its debt, Shook said. 

Additional reporting from Hilde Ovrebekk

($1 = €0.78)

For more on Borealis visit ICIS company intelligence
To discuss issues facing the chemical industry visit ICIS connect

By: Franco Capaldo
+44 (0)20 8652 3214

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly

Get access to breaking chemical news as it happens.
ICIS Global Petrochemical Index (IPEX)
ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index