The flood of first half figures published over the past week has painted a somewhat subdued picture of the industry’s performance in 2019 thus far. Borealis, however, would seem to be bucking the trend, recording a solid second quarter and first half year, according to the results published 5 August.
The company announced a net profit of €328m for the second quarter of 2019, compared to €293m in the same quarter of 2018.
The solid result was due to ‘a mix of different things happening’, said CEO Alfred Stern during a telephone interview. There are three key drivers shaping these results, he added.
“We are still seeing good integrated polyolefin margins in Europe – below those of last year but still at an acceptable level. Second, the results in the Borealis fertiliser business have improved due to the lower cost of feedstock, a better market environment and our ability to increase our production volumes. And third, the weaker polyolefin markets in Asia were able to be offset by the first two factors mentioned,” Stern summed up.
In the second quarter, net debt was reduced by €279m. The company’s financial position remained strong, with a net gearing ratio of 22% at the end of the second quarter of 2019.
Borealis also saw ‘good developments’ in its recycling activities, with both the market and demand showing improvement. The company is collaborating with customers on new applications and products and is continuing to invest in this area. The main focus, said Stern, is on mechanical recycling, as this keeps the energy in the system. Polyolefins are clean, recyclable materials, so: “We try to keep the polymer chains intact for as long as possible,” said Stern. “It costs more energy to break the chains.”
To arrive at a circular economy, however, more than one technology may be needed. Stern mentioned, as an example, the partnership with OMV, the Austrian oil and gas company with a 36% stake in Borealis. The two companies are exploring a chemical recycling loop in which plastic waste is recycled into synthetic crude in the OMV ReOil pilot plant and reused in the refinery for processing into feedstock able to be used by Borealis.
The company is investing in projects elsewhere as well, said Stern, pointing to, among others, the collaboration with Total Petrochemicals and Nova Chemicals on the construction of a new 625,000 metric ton-per-year polyethylene unit in Pasadena, Texas, with an anticipated start-up in 2021; the new propane dehydrogenation (PDH) plant, currently under construction at Kallo, Belgium, and scheduled for start-up mid-2022; and the construction of a fifth polypropylene unit at Borouge, which will come on stream in Q3-2021.
For the second half of 2019, the company foresees pressure on integrated polyolefin margins in Europe, but it remains confident that fertilizers will continue on a positive trend. And while major uncertainties at the global level make predictions difficult, Stern said he would expect significant growth in the longer term.
“Increasing population levels, increasing consumption across the globe translates into higher demand. Polyolefins - PP and PE - are really the most sustainable materials to meet this demand. We will continue to see growth in the future.”