Second-quarter profit at Abu Dhabi's Borealis down on weak fertilizer market

Abu Dhabi-owned Borealis petrochemicals said net profit fell 12 per cent in the three months to the end of June, with a similar decline in year-on-year sales.

The company said the decline was down to a slump in base chemicals and the fertilizer market, which offset another strong performance in polyolefins, which are precursors to materials used in products from plastic pipes to tennis rackets.

Borealis reported a net profit of €309 million in the second quarter, down from €351m in the same period last year. Net sales were €1.8 billion, down from €2bn in the second quarter last year.

The Vienna company is owned by the Abu Dhabi Government through a 64 per cent direct stake, and a further share through the government’s 24.9 per cent stake in Austrian oil company OMV, which owns 36 per cent of Borealis. It reports only sales and “net profit” numbers, but does not provide any further breakdown.

“The base chemicals business saw a lower performance compared to the second quarter of 2015 as the fertilizer market experienced an atypical fertilizer season with low demand and falling prices,” the company explained.

It emphasised that after a strong first quarter, profit was a record for the whole of the first half of this year – up 15 per cent on last year’s first half – at €564m.

Borealis also announced that during the second quarter it started the final stage of its expansion of the Borouge plant in Ruwais, in Abu Dhabi’s Al Gharbia, a joint venture between Borealis and Abu Dhabi National Oil Company.

The start-up of the cross-linked polyethylene plant was the final piece of the US$4bn “Borouge 3” plant expansion project, which more than doubled overall capacity to 4.5 million tonnes, making it the world’s largest integrated polyolefins complex.

“Borouge … significantly increased its contribution to the Borealis result compared to the first quarter,” said Mark Garrett, chief executive. “On the other hand, the fertilizer business suffered from low demand and depressed prices,” he added.

In March, Borealis reported an 86 per cent rise in first-quarter net profit to €255m, as good demand and lower feedstock (oil and gas) prices boosted margins.

Borouge is adjacent to Adnoc’s main oil refinery in Ruwais, the expansion of which was completed last year, doubling capacity to 800,000 barrels per day.

The Borouge expansion means the plant now has annual capacity to produce 2.3 million tonnes of polyethylene, 1.7 million tonnes of polypropylene and 350,000 tonnes of low-density polyethylene.

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