Borealis aims to ‘recalibrate’ fertilizers strategy, no plans for divestment - exec

04 October 2018 09:26 Source:ICIS News

LONDON (ICIS)--Borealis is aiming to “recalibrate the strategy” at its struggling fertilizers operations after separating the division into a different legal entity, an executive at the Austrian polymers and fertilizers major said this week.

Rainer Hofling, CEO of Borealis’ newly created Fertilizers and Melamine division, said he has been brought in to build on the strengths of the division and make it profitable again.

He may face an uphill battle to achieve that, however. While Borealis’ polymers business has consistently posted growth in sales and profits, fertilizers have been dragging the company’s overall performance down for years.

The privately-run firm, however, does not make public specific financial metrics for the division.

Its fertilizers operations stand at around 20% of sales. In 2017, Borealis’ total sales stood at €7.56bn, up 3% year on year.

Melamine operations have remained profitable over the last years. Melamine is produced with urea and ammonia, hence the inclusion of those operations together with fertilizers.

Borealis’ fertilizers story fully kicked off in 2014, after acquiring several assets in France, Belgium and Bulgaria, among others, in what at the time seemed like a recovery in the industry.

Management would insist on Borealis' intention to keep expanding further into the sector, especially in eastern Europe.

However, the recovery in prices for fertilizers globally only started at the end of 2017 and throughout 2018.

Despite it all, Borealis’ management has repeatedly ruled out a divestment for the division. However, corporate history shows that carving out certain operations, creating separate legal entities, is normally the preliminary step to a divestment.

Hofling has been the CEO of the division since 1 October. He spoke to ICIS in the third day of his tenure, a reason for him not to give much away on his plans to make Borealis’ fertilizers operations profitable again.

The executive said he has a proven record of an ability to turn around struggling business, a reason why the company’s board would have called him into his new role.

“We decided to separate the business so management can focus on this [recovery in fertilizers]. Borealis has a full commitment to the fertilizers and melamine business,” said Hofling, pictured right.

“Now there will be a dedicated management team [for fertilizers] who will only focus on this so nobody will be distracted in anything else. We need to recalibrate the strategy and have a good plan to implement [for the operations turnaround].”

The division, he went on to say, has a “very good” distribution network across Europe in which to build on the division’s recovery.

“But I can’t give you the solution now – we need to analyse the situation in depth.”

Asked whether the company could envisage new melamine plants given the better health of that market, Hofling would not comment.

He would not give an update either on Borealis’ declared intention to study the construction of a melamine plant in Algeria after signing a memorandum of understanding (MoU) with that country’s producer Asmidal, almost two years ago.

Melamine prices in Europe have consistently increased over the past two years on the back of healthy demand as the region's economy recovery gained full steam.

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Top picture: Borealis' fertilizers and melamine production facilities in Linz, Austria
Pictures source: Borealis 

Additional reporting by Katherine Sale

Interview article by Jonathan Lopez

By Jonathan Lopez