Borealis achieves major increase in operating profit to EUR 278 million for 2004

Financial overview for 2004

Commenting on Borealis' overall performance, Chief Executive John Taylor said, "2004 was the 'Year of Delivery' in which Borealis completed the performance turnaround embarked on in 2001. Against a market background of rising oil and feedstock prices, deteriorating USD/EUR exchange rate, and slow European economies, we successfully achieved the financial goals set three years ago."

Borealis achieved an operating profit of EUR 278 million in 2004, a substantial improvement compared to the EUR 39 million recorded in 2003. This performance was achieved as a result of internal efforts stemming from its nine-quarter transformation programme. In addition, the result benefited from improving industry margins brought about by a generally tight supply/demand situation in the marketplace. Sales volumes grew 7%, significantly outpacing growth in main markets and especially in key market segments, underpinned by strong operational performance.

Net profit rose to EUR 203 million in 2004, from EUR 16 million in 2003. Borouge, the joint venture with Abu Dhabi National Oil Company (ADNOC) serving the Middle East and Asian markets, continued to perform impressively, benefiting from high oil prices in addition to healthy demand for its Borstar® PE enhanced products.

The net result for 2004 corresponds to a return on capital employed (ROCE) after tax of 11%, compared with 3% in 2003.

In 2004, Borealis reduced net interest bearing debt by EUR 344 million, and the gearing ratio dropped from 72% to 39% by the end of the year. This was achieved through a combination of strong capital management and tight cash control, aided by the restructuring of its European asset base including selling its plants in Portugal. Another step was the creation of a new operational hub in Scandinavia in 2004 by merging the activities in Norway and Sweden. These restructuring steps simplify Borealis' European production base, allowing it to concentrate on four operational hubs: Belgium, Central Europe (Austria and Germany), Finland, and Scandinavia.

For a more detailed financial overview, please refer to the Borealis' 2004 Annual Report available on financial performance page.

Safety and operations

Progress in safety performance in 2004 deserves prominent recognition. Borealis reduced total recordable injuries (TRIs) per million working hours from 3.8 in 2003 to 2.4 in 2004. This result is comparable to the best in the industry and is in line with Borealis' ambition to be a leader in health, safety and environmental practice and performance.

Improved safety has created a foundation for operational excellence, exemplified by the performance of the production plants in 2004, particularly the cracker operations. Borealis achieved several production records and benefited from high output during the year in a market generally characterised by tight supply of olefins and polyolefins.

The compounding operations in USA and Brazil, which primarily serve the wire and cable, and automotive markets respectively, displayed significant operational, commercial and financial performance improvements in 2004.

Innovative solutions

In 2004, significant innovations were launched by Borealis, including: a clarified polypropylene (PP) to satisfy growing market demand for deep freeze resistant transparent packaging; a PP random copolymer offering an improvement of potentially more than 50% in strength for hot and cold water pressure pipe systems; and two new families of single site polyethylene (PE) catalysts for the linear low density PE (LLDPE) blown and cast film market with greater consumer appeal and enhanced sealing, while offering more efficient processing.

"Continued efforts in promoting innovation strengthened the company position in 2004 with the proportion of sales in target market segments growing to 43%, reinforcing our position as a leading, innovative provider of plastics solutions," says John Taylor.

Looking ahead at 2005

European polyolefin consumption is expected to return to more modest growth rates in 2005 influenced by a continuation of the slow and fragile recovery of the major European economies. However, Borealis will continue to invest in technologies to grow the market and benefit consumers with high performance plastics.

Borealis will complete a major plant start-up and a number of expansions during 2005. In Austria, Borealis is constructing a new Borstar PE plant to start-up in the second half of 2005 with an annual capacity of 350,000 tonnes. On the same site, the Borstar PP capacity is being expanded by 90,000 tonnes. In Norway, Borealis will expand its PP plant by 50,000 tonnes and its Noretyl joint venture cracker with 100,000 tonnes. Finally, in the United Arab Emirates, Borouge is expanding the capacity of Borstar PE from 450,000 tonnes to 580,000 tonnes by mid 2005.

"Although the market outlook for 2005 is uncertain, we are confident that our strategy of pursuing the value creation path remains sound. We enter 2005 with a much improved asset base, solid customer relationships and are well prepared to implement the next phase of our strategic development aimed at Shaping the Future with Plastics," concluded John Taylor.

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