09 August 2012 12:53 [Source: ICIS news]
LONDON (ICIS)--Borealis’s management on Thursday said the Austria-based plastics producer will weather the eurozone debt crisis that has impacted its European polyolefins business and will not be forced into a knee-jerk reaction.
CEO Mark Garrett said the Polyolefins business will have to make the most of the current market environment, adding that he remains confident for the group’s full-year performance thanks to its Base Chemicals business and Borouge, Borealis’s joint venture with United Arab Emirates (UAE) state-owned Abu Dhabi National Oil Co (Adnoc).
Earlier on Thursday, Borealis announced its second-quarter net income fell by 33% year on year to €112m ($138m), as its Polyolefins business was badly impacted by difficult market conditions, as the group’s sales in the second quarter fell by 1.6% year on year to €1.87bn.
The group’s Base Chemicals business and Borouge continued to perform well in the second quarter of 2012, contributing significantly to its net profit, it added.
The company said its European Polyolefins business delivered lower results in the second quarter, largely because of “weak economic sentiment in a decreasing price environment with the oil price decreasing rapidly from above $125/bbl”, and Garrett does not have high expectations for a big improvement in the market in the second half of the year.
“We expect it [the polyolefins business in the second half] to be similar [to the first half]. We are very happy we have Borouge and our Base Chemicals business,” he said.
Garrett said he would be happy if the company breaks its target of €400m net profit in 2012.
“We would like this year and next year to break that barrier because we are also building Borouge 3 [expansion project at Ruwais, Abu Dhabi, in the UAE] and incurring a lot of additional costs in the process [which include] project costs and the build up of the market and sales organisation, and build up of the supply chain,” he said.
“We don’t expect to see a big kicker in our profits until Borouge 3 comes on line,” Garrett added.
Daniel Shook, the company's CFO, said: “You hope to run an organisation that doesn’t need to make knee-jerk reactions. We continue to stress the organisation has to be as efficient as possible, we have to drive the innovations but we have to weather the storm.”
“We are confident that our positioning and the things we have done over the past decade, in terms of getting our assets into shape, scrapping and building, driving innovation and differentiated products, means we are positioned to weather it,” he added.
Shook said the group’s diversification into base chemicals and fertilizers, which continue to perform well, as well as Borouge, gives Borealis a strong position going into the future.
Borealis announced last month the appointment of Alfred Stern as its new executive vice president for Polyolefins, with effect from 1 July 2012. Garrett said the new leadership is reviewing the whole business in order to get the most out of it under current economic conditions.
($1 = €0.81)
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