InterviewBorealis Q3 earnings exceeded expectations - CEO

04 November 2010 13:06  [Source: ICIS news]

Borealis CEO Mark GarrettLONDON (ICIS)--Borealis CEO Mark Garrett said on Thursday that the group’s third-quarter earnings had exceeded expectations, which had been lowered by the expected negative effect of start-up costs incurred for the company's Borouge 2 project and for its low density polyethylene (LDPE) plant in Sweden.

Earlier on Thursday, Austrian-based plastics producer Borealis reported that its third-quarter net profit rose by 14.8% to €54.0m ($76.1m) compared with the same period last year, while sales for the third quarter grew by 24.1% year on year to €1.59bn.

“We really expected the third quarter to be much softer,” said Garrett.

“We currently get no sales [from Borouge 2] because we are doing all the performance testing; we are slowly filling up the supply chain but product won’t get to customers until the December/January timeframe, so we won’t see any sales benefits until then,” the CEO added.

Garrett said that the Borouge 2 project, which is an Abu Dhabi, United Arab Emirates (UAE)-based joint venture with the UAE’s stated-owned Abu Dhabi National Oil Company (ADNOC), was now on track and the expanded plant was starting up as planned, with all olefin and polyolefin units operational.

He added that the group’s LDPE plant at Stenungsund in Sweden was manufacturing wire and cable rope and that product was with major customers for testing. However, Borealis was still working to deliver consistent operability, he said.

Meanwhile, Garrett reiterated that Borealis would focus on its existing projects in Europe and the Middle East before looking at any new investments. However, he added that the group expected to make significant additions to monomer and polymer capacity between now and 2015.

“Our intention is to keep a strong balance sheet. You won’t see us leverage up the balance sheet and overstretch on acquisitions; we want to focus on getting Borouge 2 started up, on getting the product from our LDPE in Sweden out into the market, as well as focus on Borouge 3,” Garrett said.

Borealis's Borouge 3 project - also part of the joint venture with ADNOC - was on schedule, with land preparation activities almost completed, and plant start-up and performance testing forecast to begin in early 2014, he said.

In addition, Borealis's chief financial officer (CFO), Daniel Shook, said earnings from the company's polyolefins business had improved as a result of a stabilisation of prices, while its plant nutrient and melamine businesses had delivered improved financial performances, driven by a favourable market environment.

“The polyolefin business continues to perform well, a little down over last year… but margins continue to be good and we are also seeing good performances in some of the key segments like infrastructure,” Shook said.

Looking ahead, Garrett said the global economy was still volatile and that the positive trend in the polyolefins business would not be a steady upswing, so the group was continuing to follow market developments closely. However, he added that so far the fourth quarter was stable with third-quarter earnings.

Garrett also said that better-than-expected pricing for crude had supported polyolefin prices, which were forecast to increase in November and December.

($1 = €0.71)

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



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