Borouge targets developing Asia, Middle East and Africa – CEO
LONDON (ICIS)–Borouge is looking to developing markets in Asia, the Middle East and Africa to drive growth, the CEO of the Abu Dhabi-based producer said following its initial public offering (IPO) last year.
Expanding footprints in high-growth markets and diversifying its polyolefins portfolio are priorities as Borouge looks to increase polyethylene (PE) capacity by an additional 1.4m tonnes/year by 2025, according to CEO Hazeem Sultan Al Suwaidi.
“We operate in an industry environment with steady demand growth, and we continue to target the largest and fastest growing geographies in Asia, the Middle East and Africa – where there is significantly stronger growth potential than in developed markets,” he said.
Borouge is a joint venture between Austria-based producer Borealis – itself owned by oil major OMV and Emirati sovereign fund Mubadala – and the Abu Dhabi National Oil Corporation ADNOC.
The two companies announced plans in mid-2022 to float a 10% stake in the business which is made up of production company Borouge ADP and sales and marketing entity Borouge Pte, on the Abu Dhabi Securities Exchange.
Valued at $2bn, the float was 42 times oversubscribed, leaving ADNOC with a 54% stake in the business and Borealis with 36%.
The IPO underlined the demand for pure-play chemical stocks in low-cost regions and the international appetite for access to positions in Gulf players with links to the government. This has emboldened ADNOC to move forward with the listing of its gas business, expected later this month.
“Going public was a strategic step in our value creation strategy, and that of our major shareholders,” Al Suwaidi.
Maintaining above-margin profitability for polyolefins is another priority, with Borouge guiding in its 2022 full-year results for $200/tonne above-cycle margins for PE and $140/tonne for polypropylene (PP) this year.
“At the same time, we have been effective in maintaining our above-benchmark pricing premia, as well as diversifying and differentiating our product portfolio. This remains a key priority for us in the years ahead,” Al Suwaidi said.
Like many of its heavily polyolefins-exposed peers, Borouge saw profitability dip in H2 2022, with a 2.49% increase in net income for the first six months of the year followed by a 22.3% drop in Q3 and a 17.3% decline in Q4.
Overall profits for the year dropped 7.8% compared to 2021, to $1.53bn, with Al Suwaidi citing challenging market conditions.
Aside from targeting high-growth regions and defending pricing, Borouge has launched a series of efficiency and revenue enhancement measures that it projects will drive an additional $400m in earnings before interest, taxes, depreciation and amortisation (EBITDA) in 2023.
The measures, which are expected to drive an 15% EBITA margin uplift from 2024, include rationalising packaging operations and other logistics reforms, reducing fixed and variable costs and a shift in the company’s product and regional sales mix.
“Activity in Borouge’s core Asia-Pacific and Middle East markets remains stronger than in developed markets, with economic growth rates ahead of developed economies,” the company noted in its results statement.
In keeping with the aggressive growth path Borouge has been on since its inception, with polyolefins capacity increasing tenfold between 2001 and this decade, it started up its PP5 polypropylene unit last year, expanding capacity by 25%.
“PP5 is a critical milestone in Borouge’s 2030 strategy, and positions us amongst the top five polyolefin producers in Asia-Pacific and Middle East.” Al Suiwaidi said.
Work on the expansion of the Borouge 4 plant is also underway, and on track to come onstream in 2025, according to Al Suwaidi.
“The Borouge 4 plant is on track in progress. This is a major growth step for Borouge which will bring another 1.4m tonnes of PE on stream by 2025. It is in our strategy to focus in high-value sustainable products to our customer,” he said.
The Gulf region is increasingly looking towards sustainability and circularity trends as a means of economic diversification, with the subject dominating discussions at last year’s GPCA summit in Riyadh, Saudi Arabia, in December.
As the weather is extremely favourable for cheap solar power and low-cost energy, the region has strong fundamentals for the development of large-scale hydrogen capacities which can be used to decarbonise parts of the transport sector and to power crackers.
The shift will also drive changes in the polyolefins market, Al Suwaidi said, in terms of the materials required in a lower-carbon economy and end-market demand for circular products.
“A transition to cleaner energy sources will drive the development of renewables, increasing the demand for energy storage and transport infrastructure. Therefore, while polyolefin demand will not change as a result of the energy transition, consumption requirements will,” he said.
“For the UAE’s leadership, sustainability and economic growth do not exist in siloes. I believe both to be complimentary,” he added.
Interview article by Tom Brown.
(Clarification: recasts ownership in sixth paragraph, Borealis headquarters)
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