Borealis Plots Next Growth Phase After Petrochemical Outlayby
Polymer maker weighing up list of acquisition opportunities
North America, Russia considered; recycling possible target
Borealis AG is exploring growth in North America and Russia while considering expansion into new industries as the Abu Dhabi-owned plastics maker looks to build on a $10 billion investment in Middle Eastern petrochemical operations.
The company’s profit margins and earnings are rising while debt levels are low, making now the time for the next strategic move, Chief Financial Officer Mark Tonkens said in an interview. A list of possible deals includes acquisitions in fertilizer and investing in the recycling industry, Chief Executive Officer Mark Garrett said in the same meeting.
“We started with a huge funnel of projects and are narrowing them down,” said Garrett. “We’d hope to announce a few things in the next 18 months.”
Borealis is searching for new opportunities after the opening of three petrochemical complexes with Abu Dhabi National Oil Co. transformed the fortunes of the Vienna-based polymer maker. The company is now the best-performing asset in Abu Dhabi’s sovereign wealth fund, helping to offset the impact of weaker crude prices on the oil-rich emirate. Net income was 988 million euros ($1.1 billion) in 2015, compared with about 38 million euros in 2009.
“We’re now at this place where at the bottom of the cycle we should still be making good money and at the top of the cycle we can make really good money,” Garrett said.
While there’s scope to generate an additional 1 million metric tons of output from the rapidly-built petrochemical plants known as Borouge by boosting efficiency, a waning of ethane supplies in the Middle East means it doesn’t make sense to open another multi-billion-dollar complex, the CEO said. Ethane is an essential raw material used to split molecules into plastics.
North America and Russia are attractive markets for Borealis as they both have gas supplies for helping process petrochemicals, Garrett said.
Acquisitions are also being looked at in the arena of fertilizers given the polyolefin space doesn’t offer many sizable opportunities as it’s dominated by Exxon Mobil Corp., LyondellBasell Industries NV, China Petroleum & Chemical Corp. and Saudi Basic Industries Corp., Garrett said. Other than bolt-on purchases in plastomers, ethylene derivatives and elastomers, any expansion in polymers would be investment projects.
Borealis sees the volume of recycled polyolefins in Europe almost doubling to 6 million metric tons by the end of the decade on tougher legislation to counter waste in the region. Rather than taking on the job of collecting and sorting rubbish, Borealis is interested in processing used plastics into near pure streams of polymers that can be blended with output from Borealis’s existing plants.
“I’m not interested in having a whole bunch of truck drivers going around collecting stuff and other guys washing and separating it,” Garrett said. “We want to take 99.9 percent pure recycled polypropylene, mix it with our virgin polypropylene and still get a world class bumper for Audi.”
Borealis may invest in some companies to raise the purity of the recycled material, Garrett said.
“By 2025, we need to be a different company to today,” the CEO said.