Borouge first-half revenue jumps to $2.8b with strong support from Value Enhancement Programme

Borouge Plc, a leading petrochemical company that provides innovative and differentiated polyolefin solutions, on Friday announced its financial results for the three- and six-month periods ended 30 June 2023, with first-half revenues of $2.8 billion and adjusted EBITDA of $978 million.

The company’s ambitious Value Enhancement Programme delivered a material $253 million impact in efficiencies and revenue optimisation year to date and is a significant and positive contributor to countering external market pressures, the company said in a statement.

Hazeem Sultan Al Suwaidi, Chief Executive Officer of Borouge, said: “In a challenging market environment, our results for the second quarter and first half of 2023 are a demonstration of our resilience. Following the successful completion of the planned turnaround of our Borouge 2 facility, our production is at a very high utilisation rate. In addition, we continue to achieve significant efficiencies through our ambitious Value Enhancement Programme, which is assisting us in mitigating market pressures and positions us for further growth.

“In view of our robust financial position and very strong cash conversion, we are pleased to announce that our board has endorsed an interim dividend of $650 million to be approved by shareholders during the second half of the year and reiterated our commitment to pay $1.3 billion in dividends for 2023. Our commitment to creating value for our shareholders, while innovating and differentiating our solutions to deliver the highest quality in the market, remains as strong as ever.”

Highlights for the three months ended 30 June 2023 include the second-quarter revenue increasing by 2.5% quarter-on-quarter, to reach $1.4 billion, although it declined on a year-on-year basis.

Borouge reported a net profit of $231 million in Q2 2023, increasing by 16% compared to the first quarter, supported by a 4% increase in sales, but decreased compared to Q2 2022, the company said.

While top and bottom-line performance in Q2 faced year-on-year pricing challenges, Borouge delivered a healthy EBITDA margin of 37%, up 10% compared to the previous quarter, reflecting improved operational efficiencies. Cash conversion was very strong at 96%, with a healthy adjusted operating free cash flow of $496 million, up 31% compared to the previous quarter.

Pressures from market weakness were partially offset by the positive impact of the Value Enhancement Programme, as well as by healthy sales volumes and the resilience of the company’s pricing premia compared to benchmarks, Borouge said.

Strong volumes for both polyethylene (PE) and polypropylene (PP) included 40% of total sales to the value-added infrastructure segment, representing a high premia end market and strategic growth focus for Borouge. Meanwhile, production resumed at a high utilisation rate following the successful completion of the planned turnaround of the Borouge 2 facility in Q1.

Pricing premia was maintained above management guidance for both PE ($249/t) and PP ($150/t) despite softening benchmark prices and some compression driven by a challenging market environment.

Among the highlights for the six months ended 30 June 2023 was that sales volumes grew by 1.5% year-on-year to 2.4 million metric tonnes. Net profit for the period was impacted due to a sharp 22% decline in average selling prices compared to their peak levels in Q2 2022, when prices were supported by a combination of high product benchmark rates and exceptional premia for PE and PP, the company said.

Value Enhancement Programme delivers $253 million material impact

Borouge’s Value Enhancement Programme continues to successfully deliver cost efficiencies and revenue optimisation. Tracking ahead of its target of $400 million, the programme has achieved a $253 million material impact within this year. This is the result of a stringent and detailed range of operational improvement initiatives addressing fixed and variable costs, the company said.

In addition, Borouge’s cost-advantaged Olefins Conversion Unit (OCU) is operating at high utilisation, bringing a cost benefit from propylene substitution and supporting margins. Owing to its competitive feedstock contracts, economies of scale and young asset base, Borouge is positioned in the first quartile of the global cost curve.

Borouge also continues to manage a robust balance sheet and maintains a conservative leverage profile, enabling significant dividend capacity and future growth. Borouge 4, which is being built by the Company’s major shareholders, ADNOC and Borealis, has reached another important milestone in completing project funding constituting of equity, shareholder loans and long-term external financing.

As part of its strategy for innovation, Borouge recently launched a new polypropylene infrastructure product to assist with the manufacturing of durable, corrosion-free plumbing and heating pipe systems. With a longer lifetime and easy installation process, the product provides several sustainability benefits and differentiates the company’s overall PP product portfolio. The new solution is expected to add significant value to Borouge’s hot and cold water pipe offering, aiming to grow its market share of the segment to over 20%, the company said.