Although the financial result for 2019 was ultimately lower - albeit only slightly – than 2018, the company was nevertheless satisfied with what it referred to as its ‘good balance sheet’.
The company reported a net profit of €872 million for the full year 2019, down from the €906 million recorded in 2018. The negative impacts of the softening polyolefin market in Asia were in part compensated for by the stellar performance of the Fertiliser, Melamine and Technical Nitrogen Products segment, which achieved a turnaround from a steep loss in 2018 to a €77 million profit in 2019.
This led to a strong EBIT, which, at €605 million, was up 22% over 2018’s €496 million. According to Mark Tonkens, CFO at Borealis, this was the result of an internal cost monitoring programme and low gas prices.
He noted that the Hydrocarbons division showed ‘record ever’ results, due to the company’s advantaged feedstock position.
Total sales, he said, were flat, but because of the volatility of feedstock prices, the revenue is not an indicator of growth. “The absolute price level is not everything – low feedstock prices usually mean lower polyolefin prices - but that doesn’t mean lower margins. A low price environment from a feedstock perspective obviously means less top line, but better profitability. We look at the volumes we produced,” Tonkens explained.
Sustainability and the circular economy continue to be a guiding principle, said Borealis’ CEO, Alfred Stern, who talked about the success and expansion of the Project Stop in Indonesia, in which the company and a number of partners are investing some $14 million. The project, he said, will reach 450,000 people and collect 80,000 tonnes of waste, of which 8,000 tonnes will be plastic. “Collaboration is essential for this to be effective,” he added. “
Sustainability is not an optional thing,” Stern added. “And we are ahead of the game and we want stay that way.”
In that light, the company has formulated a new corporate strategy, the basis of which, he said, is ‘leading from the core’. “The core is producing high-quality products, a high focus on safety and trying to create added value through innovation. We aim to be a full-fledged polyolefin supplier – a global supplier with local capabilities - and are therefore looking to expand our geographic footprint, outside Europe and outside Abu Dhabi, with our project in North America. We are also looking at some production hubs in Asia, to supply those important growth markets”, he clarified.
However, the circular economy is one of the key drivers that will transform the business in the future, according to Stern. Borealis has already invested in this and will continue to do so, with plans, for example, to quadruple its mechanical recycling capacity by 2025. “That’s a much faster growth rate than the rest of our business,” he said. The company plans to achieve this through a combination of partnerships, building new capacity and acquisitions, depending on what’s available in the market. The focus for these activities is currently in Europe, as the requisite collection and waste management infrastructure is in place, and, as Stern pointed out, ‘there is a supportive environment to drive this forward’.
The final pillar is the creation of added value. Here, said Stern, Borealis is looking to expand and accelerate growth into areas such as energy, automotive and advanced products such as healthcare. “This growth can be inorganic and organic”, he said.
Sustainability is also being pursued internally at Borealis. The company has a structured programme to reduce energy consumption by 20% by the year 2030, versus 2015. “We will reach 10% by 2020,” Stern noted. And by 2035, 50% of the electricity used by the company will be derived from renewable sources. “We are also working to reduce flaring and have a whole line of innovative approaches we are investigating. For example, we are a member of the Cracker for the Future consortium - a group of raw material producers study on whether the electrification of the furnaces would be possible, as a large part of the CO2 emissions are from the furnaces,” he explained.
For Borealis, these measures are not something the company just started doing – the company has been active in the circular for many years now, Stern emphasised. “A lot of people are talking about it, but we are doing it,” he said. “Not many others can say that.”