Abu Dhabi-based Borouge reports $1.4bn net profit in 2022

Despite an overall challenging market environment, Borouge held up well, reporting a net profit of $1.4bn for 2022. The adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the full-year period stood at $2.6bn.

The company reported a revenue of $6.7bn, increasing by 8.2 per per cent versus 2021. The increase in revenue over the 12-month period was driven by a 14.9 per cent rise in total polyolefin sales volumes.

Overall production capacity grew by 10 per cent year-on-year, in support of increasing volumes, with the completed ramp-up of Borouge’s PP5 unit adding a significant production capacity of 500 kilotonnes per annum, bringing more differentiated grades into the production mix and supporting premium production.

Building on cost optimisation activities in 2022, Borouge has announced its high-impact value enhancement programme, anchored in cost efficiency and revenue optimisation initiatives.

Positive outlook for 2023-24
The programme focuses on driving efficiencies within variable costs, fixed costs, and revenue enhancement opportunities and is expected to deliver a $400m EBITDA impact in 2023.

Borouge management expects to sustain a 15 per cent positive EBITDA impact from 2024 onwards versus the full-year 2022 baseline. This is intended to offset market pressures and position the company for future growth.

Hazeem Sultan Al Suwaidi, CEO of Borouge, commented: “We are pleased to report our 12-month solid financial results, which demonstrate the resilience and efficiency of our business and our ability to achieve significant volume and revenue growth in the face of challenging market conditions.

“As we look ahead to 2023 and beyond, we will continue to execute our commitment to organic growth and explore new opportunities for expansion in the UAE and internationally, where they complement our long-term growth strategy and reinforce our position as a world-leading polyolefins producer.

“Our operations are of world-class quality and scale, as shown by very strong production volumes. We are bringing ever-greater differentiation to our production mix, supporting premia and bolstering our competitive positioning. We expect demand in our core territories to continue to outperform global markets. We will press ahead with our innovation strategy, bringing new products to customers while tactically placing volumes to meet shifting demand.”

Highlights for Q4 2022
Revenue was $1.6bn, with pricing pressures partially offset by robust sales volumes.

Total sales volume for the period increased by 23.8 per cent year-on-year to 1,415kt and increased by 5.5 per cent against the previous quarter.

Borouge delivered adjusted EBITDA of $541m in the fourth quarter, flat on a year-on-year basis. Net profit for the period was $247m, in line with market expectations.

Borouge maintained its pricing premia guidance over the cycle, which is a key competitive advantage for the business, despite some quarter-on-quarter compression, an industry-wide challenge in the current market environment.

During the fourth quarter, there was some cost relief, with shipping costs coming down from very high levels, which is expected to support improved margins.

The company expected this trend to continue as it executes its value enhancement programme, targeting significant further efficiencies in fixed and variable costs, coupled with revenue optimisation.

Additionally, with Borouge’s Olefin Conversion Unit (OCU) playing an essential role in bringing a material cost benefit from internally rather than externally sourced propylene feedstock, the unit will be maintained at maximum capacity to support margin enhancement.

The company continues to operate comfortably within the top quartile of the global cost curve, owing to its competitive feedstock contracts, economies of scale and young asset fleet.

Given its healthy cash flow and operational performance, Borouge reiterated its commitment to pay a total of $975m in post-IPO dividends to shareholders for 2022, and at least $1.3bn for FY 2023, having paid an interim dividend of $325m to shareholders in October 2022.

In January 2023, a post-period event, based on a significant cash balance of over $1bn at year-end, the company repaid $500m of its $3.65bn commercial term facility, resulting in significant interest cost savings and an updated balance for the facility of $3.15bn.

The company will continue to prudently manage its debt and capital allocation in response to the prevailing market environment, further strengthening its balance sheet in anticipation of growth and ensuring future dividend capacity.

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