Borealis announces 2nd quarter net profit of EUR 51 million

Solid results despite tough business climate

Borealis today announced solid financial results for the second quarter, posting a net profit of EUR 51 million. This result constitutes a 50% increase on the EUR 34 million achieved in the same quarter last year. Lower industry margins reduced net profit by EUR 33 million compared to the first quarter of 2005.

The second quarter was characterised by rising oil and feedstock prices combined with low demand and sharply dropping polyolefin prices in Europe.

Solid results despite tough business climate

Commenting on the result, Chief Executive John Taylor said: "Despite the tough business climate in Europe we continue to deliver solid results, a testimony to our successful transformation over the past four years, and confirmation that our value creation strategy targeting key market segments remains the right one. The continued implementation of our strategy based on innovation, in conjunction with our recent expansion in the Middle East, will be further underpinned by the foreseen change in our ownership structure."

New Borealis ownership

Borealis recently announced a change in its shareholding structure when the International Petroleum Investment Company (IPIC) of Abu Dhabi and OMV AG of Austria announced their agreement to purchase Statoil's 50% shareholding in Borealis A/S.

As a result, the new Borealis ownership will be 65% IPIC and 35% OMV, with a closing of the transaction expected during the fourth quarter, subject to regulatory approvals being received.

Borouge awards contracts for expansion

Borouge, Borealis' joint venture with the Abu Dhabi National Oil Company, continued to improve its performance following the first quarter expansion of its Borstar® polyethylene (PE) capacity from 450,000 to 600,000 tonnes per year.

With its successful track record and in response to growing market needs in the Middle East and Asia, Borouge progressed a proposed major expansion in Abu Dhabi by awarding the Project Management and Financial Advisor contracts to Foster Wheeler and HSBC respectively. This expansion will more than triple current polyolefin production capacity in Ruwais, Abu Dhabi to 2 million tonnes per year.

A closer look at the result

Borealis' net interest-bearing debt grew by EUR 13 million in the second quarter, while gearing dropped slightly to 43%. The increase in net debt was a result of an increase in working capital as Borealis built additional inventory ahead of planned maintenance stops in the second half of the year.

Cash flow was also influenced by further progress along Borealis' European capacity expansion programme, which includes construction of a new 350,000 tonnes Borstar PE plant in Austria to be started up in the fourth quarter.

New products underline accent on innovation

Innovation continues to be central to Borealis's strategy, several new products were launched in the second quarter including;

• Daploy™ High Melt Strength polypropylene (PP) which allows for the first time use of PP in very low density soft foams for applications such as automotive seating, sport shoe construction, and protective packaging.
• Borecene Compact™ black and natural powder grades that offer exceptional flow characteristics to give sharp control of wall thickness in very intricate shapes such as automotive diesel tanks.
• Borflow™ very high meltflow PP homopolymers set a new standard for meltblown, nonwoven applications such as diapers and medical gowns with improved barrier performance. The meltflow performance allows the production of a very uniform non-woven material.

3rd quarter outlook

Commenting on the outlook for the third quarter, Chief Executive John Taylor stated, "During the early part of the third quarter, we experienced further pressure on industry margins in Europe, which will have an impact on our results for the quarter. However, I am confident that it is a temporary situation and that margins will be restored driven by healthier market conditions in the Middle East and Asia."

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