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Borealis announces third quarter net profit of EUR 40 million

Key figures and ratios

(Quarter ending September 30, 2005)

Q3 

2005

Q3 

2004

Q1-3 

2005

Q1-3 

2004

Sales revenueEUR Million1,2321,1763,5503,319
Operating profit / (loss)EUR Million2669191174
Net profit / (loss) after taxEUR Million4051174123
Reduction / (increase) in
net interest-bearing debt
EUR Million2135(81)22
Gearing%40%64%

Borealis today announced its third quarter results reporting a net profit of EUR 40 million, a reduction from both last year's EUR 51 million and from the EUR 51 million recorded in the second quarter of 2005.

The result was achieved amidst a period of deteriorating industry margins and surging oil prices. The mounting pressure from rising oil prices directly and indirectly influences the cost of raw materials, transportation and utilities. Combined with low third quarter olefin prices, it led to historically low cracker margins, only partially recovered by increases in polyolefin prices.

Although working capital increased on the back of rising prices and capital expenditure remained high in line with new plant investment activity, Borealis generated positive cashflow in the quarter, reducing net interest-bearing debt by EUR 21 million. The gearing ratio dropped by three points to 40%.

Borouge, Borealis' joint venture with the Abu Dhabi National Oil Company (ADNOC), continued to perform strongly, benefiting from high prices and solid demand for its differentiated products in the Middle East and Asia.

Commenting on developments, Chief Executive John Taylor said: "We saw the downwards price trend that characterised the first half of the year turn during the course of the third quarter. This was in line with a change in inventory levels through the supply chain and was influenced by the impact of hurricanes in the USA. The third quarter finished stronger than it started."

Building on Borstar® advantages

Borealis launched a new generation of proprietary technology – Borstar® PE 2G - yielding a step change in polymer design at a press conference in late October. This multi-modal process in combination with a new catalyst system brings the possibility to offer more sophisticated, customer-oriented solutions.

For example, in advanced packaging, the technology brings added value qualities by allowing material to be tough, stiff, easy-to-open, and with significant downgauging potential making them more energy-efficient. Similarly, with Borstar PE 2G enhanced pipe grades, we can provide even better durability and improved water flow characteristics.

Investments in Europe

At the end of the quarter Borealis completed the construction of a new 350,000 tonnes plant based on Borstar PE 2G, as well as a 90,000 tonnes expansion of the existing Borstar PP plant in Austria. Looking to continuously improve the European asset configuration, Borealis simultaneously closed a 100,000 tonnes HDPE plant.

In Norway, Borealis progressed with projects to expand its PP plant by 50,000 tonnes and its Noretyl joint venture cracker with 100,000 tonnes. Both projects are on schedule to be completed in the fourth quarter. Additionally, we recently announced plans to significantly expand cross linkable PE (XLPE) capacity in Sweden to meet growing demand from the power cable industry along with capacity expansions for the Phenol and Aromatics business in Finland.

New ownership structure final

On October 14, upon receipt of the necessary regulatory approvals, the change in Borealis' ownership structure, by which International Petroleum Investment Company (IPIC) of Abu Dhabi, and OMV of Austria purchased Statoil's 50% shareholding, was finalised. The new ownership of Borealis is 65% IPIC and 35% OMV.

Outlook

Commenting on the outlook for the fourth quarter, Chief Executive John Taylor stated, "Although demand has eased somewhat, margins recovered in the latter part of the third quarter and continued to improve in the early part of the fourth quarter with cracker margins also returning to positive territory."

END

Media Contact
Patrick Laureys
Senior External Communications Manager

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