Borealis Q3 sales, profit sharply down, second wave adds to ‘uncertain’ outlook

LONDON (ICIS)–Borealis’ third-quarter sales and profit fell sharply year on year as an improvement in selling prices in Asia and the  US could not offset the pandemic-induced downturn, the Austrian polyolefins and fertilizers major said on Wednesday.

CEO Alfred Stern warned the outlook for coming quarters remains uncertain as Europe battles the second wave of the pandemic, which has already prompted partial lockdowns in major economies.

The firm’s joint venture Borouge, located in Abu Dhabi and which destines most of its product to developing economies in Asia, did not capitalise on China’s recovery and sales remain lower than in 2019, although improved from the second quarter.

Borealis (€/m)	Q3 2020	Q3 2019	Change
Sales	1,635	1,965	-16.8%
Net profit	163	207	-21.3%

Key points:

– Despite increasing polyolefins sales volumes, integrated margins were lower in the third quarter, year on year; polyolefins global supply is abundant, and demand has taken a hit from the second-quarter lockdowns.

– The fertilizers division, which had been enjoying a good run in past quarters, also posted lower financial metrics due to a “less favourable” market environment.

– “However, polyolefins sales volumes increased versus the same quarter of the previous year despite less auspicious market conditions,” said the producer.

– “Third-quarter Borouge performance also showed improvement over the previous quarter, but remains below 2019 levels due to lower polyolefins prices and the significantly weaker market environment.”

– Borealis’ sharply reduced profit in the second quarter – together with the pandemic-induced downturn, it also had to deal with an outage at its Stenungsund cracker in Sweden – has caused net profit to nearly halve in the January-September period, year on year, to €378m.

– Borealis is privately owned and does not publish specific financial metrics for each division; the company is now under the majority ownership of OMV after the Austrian energy and petrochemicals major acquired a stake from Abu Dhabi’s investment fund Mubadala earlier in the year.

– With the transaction, valued at €4.7bn, OMV became owner of a 75% stake; Mubadala owns the remaining 25%.

Outlook:

– Borealis said it was still committed to large investments in the polyolefins sector, like its joint venture Baystar in Texas, US, with France’s major Total and Nova Chemicals, with projected production capacity of 1.1m tonnes/year of polyethylene (PE) when the project is completed by 2021.

– It added it would remain committed to an expansion in Abu Dhabi to build Borouge 3; with it, the total capacity at Borouge will be 4.5m tonnes/year of different polyolefins grades .

– The company also aims to go ahead with a propane dehydrogenation (PDH) plant in Belgium.

– “While we do see some price improvements, particularly in Asia and the US, the outlook remains uncertain given the high volatility of feedstock prices, but also due to the rise in the number of coronavirus cases, especially in Europe,” said Stern.

ICIS will publish an interview with Borealis’ CEO and CFO Mark Tonkens on Friday(6 November)