While the figures announced by Borealis for second quarter of 2020 could not be called good, the company nonetheless maintains a positive outlook.
“Relatively speaking, and looking at some of the others in the sector, we haven’t done at all badly,” said CEO Alfred Stern in a telephone interview.
The company yesterday announced a second-quarter net profit of €64 million, compared to €328 million in the same quarter of 2019.
The profit fall was mainly driven by the negative inventory value development due to the declining oil price, a decreased advantage from the use of light feedstock versus naphtha, and the unplanned outage of the steam cracker in Sweden. For the second half of the year, however, net profit is expected to increase.
As Mark Tonkens, CFO at the Austrian company pointed out, the inventory item is a one-off development that won’t be repeated and the accident with the cracker will hopefully not recur. “It will be up and running again in the further quarter, he added.
The sales volume in the Polyolefins business remained relatively stable, even during the pandemic, and the contribution from the Fertilizer business was at the level as in the same period in 2019. However, Borouge recorded higher sales volumes year-on-year, but weaker polyolefin prices in Asia impacted the earnings negatively.
“The European polyolefins industry environment has been impacted by Covid-19 and the deterioration of the oil price since the end of the first quarter of 2020. However, the crisis has demonstrated how important our products are for sustainable living during a pandemic,” said Stern.
The resilience programme implemented by the company, with its focus on reduction of cost and investments has also helped to maintain positive results and a strong cash flow even during the COVID-19 crisis.
“We will not be taking any extra measures, such as making personnel redundant,” said Stern. The company is also continuing its ongoing growth projects in Texas and the Emirates, for example.
Asked whether the current situation will affect the company’s sustainability goals, Stern commented that in his view, circularity will continue to drive the circular economy. “As more and more plastics are used, circularity simply becomes more important. We should not let ourselves be distracted from that goal.”
He added that the situation was impacting on the demand for recycled polymers. Low oil prices have led to low prices for virgin polymers. Recycled resin prices have also declined, yet, as he pointed out, ‘the costs of collecting, sorting washing and processing have not gone down. Hence demand for recycled materials has fallen’.
“We want a green recovery, but to make this viable, the returns on investment in recycling must improve, if recycling is to become interesting to investors.”
“For Borealis, I do not foresee a problem, but for standalone recyclers we are likely to see insolvencies over the coming months. And that, while what we need is more recycling capacity. We need the right economic framework to make the green recovery happen.”