Borealis, the Austrian chemicals producer in which the Abu Dhabi Government owns a majority stake, returned to profit in the second quarter after one of the toughest periods in its history.
The firm yesterday announced its profit was half that from the second quarter last year amid a severe downturn in the chemicals sector. Borealis also warned that the tough times are likely to continue for years as new plants in the Middle East and Asia flood the market with products.
Net profits were €35 million (Dh185.1m), which was an improvement from the previous two quarters. Borealis, which operates plants in Europe and in Abu Dhabi through a subsidiary, lost €21m over the first half, after a €56m loss in the first quarter. Mark Garrett, the chief executive of Borealis, said the results reflected the firm's new focus on cost management.
"The market environment continues to be extremely challenging and we do not expect real demand to recover before the end of 2010," Mr Garrett said. "Additional capacities coming on stream in the Middle East will put a lot of pressure on our margins."
Borouge, the firm's Ruwais-based joint venture with the Abu Dhabi National Oil Company (ADNOC), "continues to contribute positively to the result", Borealis said. Gains from the Borouge plant were weighed down by losses in Borealis's melamine and fertiliser businesses in Europe, but the outlook for olefins, the raw materials for plastics produced by Borouge and some of Borealis's plants in Europe, has improved slightly.
In May, Borealis announced it would raise prices for polyethylene and polypropylene, two common olefins, after months of steady declines.
The firm's results compared favourably with major chemicals firms. Saudi Basic Industries Corporation saw profits drop by 76 per cent in the second quarter, while BASF, the German chemicals giant, fell 74 per cent. DuPont, the US firm, saw profits fall 61 per cent. The International Petroleum Investment Company, owned by the Abu Dhabi Government, controls 65 per cent of Borealis, with the remainder held by OMV, the Austrian oil firm.
Over the next decade, Borealis's focus will increasingly shift to Abu Dhabi. It will provide technology and construct part of the first stage of Chemicals Industrial City, a major development in Taweelah being built by Chemaweyaat.
In Ruwais, Borealis is investing to boost production at Borouge, in which it holds a 40 per cent stake. Borouge produces 600,000 tonnes of raw materials for plastics from low-cost natural gas supplied by ADNOC, and has plans to increase production more than seven-fold in two stages by 2013. The first stage will be completed by the middle of next year and raise production to 2 million tonnes. A second expansion, approved this year, will take capacity to 4.5 million tonnes. At that point, the Abu Dhabi plants will be responsible for a little more than 50 per cent of Borealis's production, Mr Garrett said in an interview this year. "Borouge will be by far our most important site," he said.
cstanton@thenational.ae
