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MOSCOW (MRC) -- Borealis (Vienna,
Austria) has reported a net profit of EUR64 million (USD76 million) for the
second quarter of 2020, down 80% year on year (YOY), and says its major growth
investment projects will suffer delays of between “a couple of weeks and a few
months” due to the COVID-19 pandemic, reported Chemweek.
The company’s 625,000-metric
tons/year steam cracker at Stenungsund, Sweden, is also expected to remain
offline until the fourth quarter of this year, it says, following a fire in May
that saw the unit shut down and force majeure declared.
Borealis says the
lower earnings were driven mainly by a negative inventory value development due
to lower oil prices, a reduced advantage from the use of light feedstock versus
naphtha, and the unplanned cracker outage in Sweden. Net sales of EUR1.53
billion were down from EUR2.14 billion a year earlier, while total sales
including its Borouge joint venture with Abu Dhabi National Oil Co. (Adnoc)
declined 26% YOY to EUR1.89 billion.
The company says polyolefins sales
volumes remained “relatively stable, even during the pandemic,” while the
contribution from its fertilizer business was at the same level as a year
earlier. Borouge recorded higher sales volumes YOY, but weaker polyolefin prices
in Asia impacted earnings negatively, it says.
In an exclusive interview
with CW this morning, Alfred Stern, CEO, and Mark Tonkens, CFO, discussed the
progress of the company’s major growth projects, a positive outlook for the
remainder of 2020, and the impending change in its ownership structure. The
polyolefins industry in Europe has been impacted by COVID-19 and the oil price
plunge since the end of the first quarter, but certain segments of the company’s
portfolio are performing well, Stern says. This includes healthcare, parts of
its consumer packaging business, and its fertilizers segment, “but our
automotive business has not been spared the challenges experienced by many
players in this industry,” he says. The resilience program launched by Borealis
earlier this year to reduce costs and investments is helping to maintain
positive results and strong cash flow during the pandemic, he says.
The
company expects net profit to increase in the second half of 2020 compared to
the first half, partly due to the “substantial inventory devaluation” it
incurred in the second quarter that “will not happen” in the next six-month
period, Tonkens says. Sales volumes in the quarter remain encouraging at almost
the same level as last year despite the pandemic, while its light feedstocks
advantage which “vanished” earlier in the second quarter is now returning, he
says. “In June we started to see that coming back, to an extent,” he notes,
adding that the company has built its feedstocks business to be flexible, “so we
can react to different conditions.”
Borealis’ strong product portfolio
during “a deep crisis like this” has been supported by a “good strategic set up”
and the company’s ability to shift quickly from sectors with lower demand
towards higher demand segments, Stern says.
The company remains committed
to and continues to progress construction at its three major growth projects—the
Kallo, Belgium, propane dehydrogenation (PDH) plant; its Baystar 50/50 JV with
Total in the US; and the PP5 Borouge polypropylene (PP) project at Ruwais, Abu
Dhabi—but the impact of the pandemic means “there will be a slide” in their
schedules, according to Stern. “We are looking at delays ranging from a couple
of weeks to a few months on these projects,” he says. The 750,000-metric
tons/year PDH plant at Kallo was originally due online mid-2022 before that
later shifted to nearer the end of the year, while the Baystar steam cracker and
Borstar polyethylene (PE) plant are expected online in early 2021 and early
2022, respectively. Stern told CW in May it was “unrealistic” to expect the
projects to be completed on time due to current circumstances.
Borealis
expects to reach the next milestone before the end of this year on a potential
USD4-billion PDH and PP project in India, in partnership with BASF, Adnoc, and
the Adani Group, when it will then decide “how we can further proceed,” Stern
says. The companies signed an agreement last year to carry out a joint
feasibility study to evaluate the proposed complex at Mundra, India. Earlier
this year Borealis pulled out of a proposed USD6.8-billion development for an
integrated ethane cracker and PE project in Atyrau, Kazakhstan. “That was a pure
business decision,” he says, based on the results of a feasibility study and a
longer-term view that the opportunity was “not sufficient to invest such a huge
amount.” Borealis said in May the company would reduce its 2020 capital
expenditure by 25% to EUR750 million from the original plan.
On the
agreed change in ownership arrangements by the company’s two shareholders,
Mubadala (Abu Dhabi) and OMV (Vienna), for OMV to increase its share to 75% from
36% at present, Stern says the transaction is still expected to complete in the
fourth quarter of this year. The ongoing focus on sustainability by both
Borealis and OMV is expected to lead to “more opportunities on how we can work
together,” in a circular economy, he says.
Stern also says that Borealis
“is not in a rush” to find a potential partner or partners for its fertilizer
business, but that “if the opportunity arises, then we would still be
interested.” The fertilizer market in Europe “would benefit from more
consolidation,” he says.
As MRC informed earlier,
Borealis has maintained its cracker in Stenungsund (Sweden) offline longer than
initially anticipated, after it was shut following a force majeure declaration
at the site on May 11, 2020. Sources said that the unit has been offline longer
than initially expected with no confirmed startup date. The Stenungsund cracker
has an ethylene capacity of 625,000 tonnes and a propylene capacity of 150,000
mt/year.
Ethylene and propylene are feedstocks for producing polyethylene
(PE) and polypropylene (PP).
According to MRC's DataScope report,
PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000
tonnes. High density polyethylene (HDPE) accounted for the main decrease in
imports. At the same time, PP imports into Russia rose in the first six months
of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer
(homopolymer PP) accounted for the main increase in imports.
Borealis is
a leading provider of innovative solutions in the fields of polyolefins, base
chemicals and fertilizers. With headquarters in Vienna, Austria, Borealis
currently employs around 6,500 and operates in over 120 countries. |
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