Global recovery lifts Borealis plastics profits

The company predicts tougher conditions in second half of the year.

The global economic recovery pushed up first-quarter profit at Borealis, the Austrian chemical and plastics maker that is majority-owned by the Abu Dhabi Government, the company said yesterday, while warning that conditions were unlikely to remain rosy later this year. Borealis made a net profit of ?54 million (Dh254.1m) in the first quarter, well above the ?38m profit it recorded for all of last year and the ?56m loss in last year's first quarter.

The boost in profits, driven by an increase in chemical and plastics prices plus delays to the start-up of competing production capacity, will give the company a cash cushion as it looks at a tough second half, said Mark Garrett, the chief executive. "We cannot expect the positive upwards trend to continue throughout 2010," Mr Garrett warned in a statement. The petrochemicals sector globally continues to suffer through a prolonged downturn made worse by the start-up of vast new plants in the Gulf that have flooded the market with excess supplies and driven down prices.

Higher-cost producers in Europe and the US have reacted to the downturn by permanently closing some older plants. On a visit to Abu Dhabi last week, Mr Garrett said his main goal was to get the company through this year and into next, when an expansion of its Ruwais plant, a venture with the Abu Dhabi National Oil Company, reaches full production. The joint-venture operation, known as Borouge, would have lower production costs than Borealis's existing plants in Europe, Mr Garrett said, and would bolster the company's net profits.

A first expansion will increase capacity from 600,000 tonnes a year to 2 million tonnes, with a second expansion set to raise output to 4.5 million tonnes annually by 2014. Also this year, Borealis will start up in Sweden a plastics plant with the rare capability of switching between natural gas and oil-based fuels as feedstock, depending on market conditions. "We got through 2009. I think we were the only western polyolefin maker that made a net profit, no asterisks, no footnotes, no nothing," Mr Garrett said.

"2010 then for us is pretty unique because of the start-ups, and then we're really looking forward to 2011, 2012, and so on with those fantastic projects in Ruwais." [e-mail]