2020 has been a decisive year for Borealis’ future. While Borealis demonstrated its resilience against the pandemic impacted market environment the owners agreed on a new ownership structure to ensure the best positioning for the long-term future of the company. Accordingly, OMV announced in October the closing of the acquisition of an additional 39% stake in Borealis from Mubadala, thus increasing its share to 75%. Mubadala retains a 25% share in Borealis. The Supervisory Board is convinced that this new ownership structure will make both companies, OMV as well as Borealis, stronger by combining the best of both companies. Early efforts to identify and capitalise on potential synergistic effects have already borne fruit within both organisations. We are confident that the new ownership structure will generate even more value for each of the companies, its shareholders as well as for society as a whole.
Consequently, several important changes were made to the Supervisory Board in 2020. Most recently, and effective from 29 October 2020, Rainer Seele was appointed Chairman and Musabbeh Al Kaabi, Vice-Chairman of the Supervisory Board. Also effective from 29 October 2020, Reinhard Florey and Saeed Al Mazrouei were appointed as Supervisory Board members, succeeding Suhail Mohamed Faraj Al Mazrouei and Khalifa Alromaithi. Earlier in the year, effective from 21 February 2020, Khalifa Alromaithi was appointed Supervisory Board member, succeeding Khalifa Al Suwaidi.
The Supervisory Board would like to thank the former members of the Supervisory Board and especially His Excellency Suhail Mohamed Faraj Al Mazrouei who has been instrumental over a period of more than five years as Chairman of the Supervisory Board in forming the future of Borealis as a successful and leading global provider of innovative and more circular polyolefins-based solutions in an industry undergoing rapid change.
With regard to safety performance in 2020, Borealis reported a Total Recordable Injuries (TRI) frequency per million working hours of 1.7. This represents a reduction in safety performance versus the 1.6 recorded in 2019. While a TRI rate of 1.7 is still world-class in the industry, this result is below our expectations and Borealis must continue to improve its safety culture in order to reach its ambitious “Goal Zero” of no accidents or incidents whatsoever. The Supervisory Board is confident that Borealis’ management will rise to this task by reinforcing its commitment to both personal and process safety. Safety is and will remain the number one priority at Borealis.
With a net profit of EUR 589 million in 2020, Borealis achieved a strong financial result in an extraordinary year: a global market reeling from the effects of the coronavirus pandemic and an unprecedented slump in the price of oil in the first months of the year. Yet polyolefin sales volume growth for Borealis and its joint ventures, Borouge and Baystar™ points to robust demand for its innovative products, even in the most challenging of market environments.
The 2020 financial result falls short of the net profit of EUR 872 million reported in 2019, having been negatively affected by a weaker hydrocarbons market, limited benefit from feedstock flexibility and operational issues at Borealis crackers in Stenungsund, Sweden and Porvoo, Finland. Borealis Polyolefins sales volumes weathered the difficult market environment well, increasing by 2% compared with the same period in 2019. While integrated polyolefin industry margins also increased in 2020 compared with the previous year, the olefin share thereof contracted due to the reduced light feedstock advantage resulting from a lower oilprice. This led to a lower contribution from the Borealis Hydrocarbons business segment. The 2020 contribution from Borouge remained nearly at the same level as in 2019, as lower polymer prices were compensated by higher sales volumes. The contribution from the Borealis Fertilizers business declined due to a weaker industry margin, operational issues at Borealis production sites in France and impairment of tangible assets in Belgium and the Netherlands.
The new global Group Strategy 2035 rolled out at the beginning of 2020 encapsulates the company’s commitment to achieving sustainable growth in the long term: “Life demands progress – we are re-inventing for more sustainable living.” Building on core Borealis capabilities and traditional values such as Respect, Responsible, Exceed, and Nimblicity™, the strategy guides Group efforts to act as leaders in the transformation to a circular economy, to create an even more customer-centric organisation on a global scale and to capitalise on demand in growth markets by way of geographic expansion.
The strong 2020 financial result was made possible in part by quick action taken by Borealis’ management early in the year: a resilience programme was launched to address the potentially massive negative effects of the COVID-19 outbreak. By reducing and/or postponing costs and investments where appropriate, it safeguarded the company’s solid financial position. It successfully mitigated the potentially negative impacts of the pandemic in all areas of Group business without compromising ongoing growth projects.
The first-ever Borealis Pulse Check was carried out to measure employee engagement in 2020. It confirmed the resilience of Borealis employees in a year marked by COVID-19 disruption, measuring an increased employee engagement level of 7 percentage points and generally higher levels of engagement across all business groups, business units and locations.
Despite disruptions to infrastructure and supply chains around the world caused by the pandemic, Borealis continued to make good progress on its major growth projects. These include the new world-scale propane dehydrogenation plant at the existing Borealis production site in Kallo, Belgium, in which approximately EUR 1 billion will be invested to ensure that Borealis remains the supplier of choice for its European customers. The construction of the new Borstar® polyethylene (PE) unit in Texas, US also progressed well, albeit in a new ownership formation, with Borealis acquiring the 50% ownership share in Novealis Holdings LLC previously held by NOVA Chemicals. This now makes Baystar a 50/50 joint venture between Borealis and Total Petrochemicals & Refining USA, Inc. In Asia, a controlling stake was acquired in the South Korean compounder DYM Solution Co., Ltd., thus extending the company’s presence in the global wire and cable industry and augmenting the existing portfolio with complementary products and technologies. Finally, construction continued on the fifth Borstar polypropylene (PP) plant, PP5, at the Borouge complex in Ruwais, UAE. The Borouge 4 project is also successfully progressing in the FEED (Front-End Engineering and Design) phase.
Through its dedication to Value Creation through Innovation and customer-centricity, Borealis has accelerated the shift to plastics circularity by developing and launching a wide range of material solutions in the circular economy sphere. Its own extensive investment in mechanical and chemical recycling will now be augmented by new synergistic effects to be gained through the closer relationship with OMV.
The pioneering Borealis EverMinds™ approach is evident in two important Group goals on the journey to “closing the loop” on plastics circularity: increasing the volume of recycled plastics solutions to 350,000 t/y by 2025 and ensuring that by 2025, 100% of consumer products made with Borealis polyolefins should be recyclable, reusable, or made using renewable content.
Borealis passed important mileposts in plastics circularity in 2020, further consolidating its position as industry pioneer. For the first time, Borealis was able to replace fossil fuel-based feedstock with renewable feedstock in the large-scale commercial production of PP at its production facilities in Kallo and Beringen, Belgium. These plants, as well as others in Finland and Austria, have since received the ISCC PLUS certification issued by the International Sustainability and Carbon Certification (ISCC) organisation, the global standard for recycled and bio-based materials. The Bornewables™ portfolio of premium polyolefin products manufactured with renewable feedstock derived entirely from waste and residue streams was launched. The proprietary technology Borcycle™ introduced in 2019 now forms the foundation of an increasing number of more sustainable products and applications in the rigid packaging segment. Finally, an innovative pilot project carried out in Belgium literally closed the loop on plastics circularity by replacing around 1.5 million single-use drinking cups with reusable lightweight ones kitted out with a double-closed loop system.
Borealis’ management has set ambitious goals to counter climate change by using a higher share of energy derived from renewable sources in its operations, significantly increasing energy efficiency and reducing flaring. To this end,two long-term power purchase agreements for renewable energy were signed in 2020 to power Borealis production facilities in Porvoo and one to provide renewable electricity from an offshore wind farm to Belgian operations. Also in Belgium, a new waste-to-energy plant jointly commissioned with partner Bionerga is now operational. Finally, a new 80,000 m3 naphtha cavern was commissioned in Porvoo, enabling Borealis to draw on and store both conventional and renewable naphtha for its own operations in a safer and more economical way.
A step-change innovation launched by Borealis in 2014 is now powering the German Energiewende, or energy transition. Crosslinked polyethylene (XLPE) power cables made with Borealis extruded high voltage direct current (HVDC) technology are being used for the majority of the so-called German corridor projects. This is the first time that Borlink™ XLPE HVDC technology is being used at extra-high levels of 525 kilovolt (kV). The Borlink cables enable the transmission of renewable energy from north to south Germany with minimal loss.
The Supervisory Board trusts that measures implemented by Borealis’ management for 2021 to improve both occupational and process safety will be effective in getting safety performance back on track. Safety is to remain the number one priority for the Group at all levels and across all global operations.
The integrated polyolefin business as well as Fertilizers are expected to show improved financial performance in 2021, driven by the focus on polyolefins specialty sales, higher operability of the assets and the anticipated improvement of the overall market environment. The profit contribution from Borouge to Borealis is expected to remain at a similar level as in 2020.
The change in ownership structure in 2020 will begin to bear fruit in 2021 as Borealis and OMV realise the identified synergies, merge the best of both corporate cultures and find ways to streamline and scale up their activities, programmes and projects. The excellent fit between the two companies is certain to facilitate growth across a wide range of business areas.
While it is not possible to predict when the COVID-19 pandemic will end, it is certain that the rebuilding of the post-pandemic global economy will require innovative technologies and products that make life safer and more sustainable. The Supervisory Board is convinced that thanks to the company’s leading-edge portfolio of advanced and circular polyolefins solutions, Borealis is in an advantageous position to capitalise on growth opportunities during the economic recovery. Borealis will maintain its commitment to re-inventing for more sustainable living and by offering chemical and plastic solutions that create value for society.
We would like to thank the Executive Board and all employees for their commitment in this challenging year and congratulate them on the performance achieved in 2020.
Vienna, 24 February 2021