Borouge PLC announced that it achieved a 37% year-on-year growth in net profits during the first quarter of 2024, reaching one billion dirhams ($273 million) thanks to strong price premiums, driven by a focus on high-value product sectors and highly efficient cost management.
The company continues to achieve significant competitive advantages in key growth markets in Asia Pacific, the Middle East and Africa thanks to its distinguished solutions that meet the needs of diverse sectors, such as infrastructure, energy, agriculture, custom packaging, and healthcare. As a result, the price premium for polyethylene produced by Borouge rose to $222 per ton, an increase of 19% compared to the previous quarter, and the polypropylene premium increased by 46% on a quarterly basis to reach $162 per ton.
During the first quarter, the total cost base decreased by 20% from the previous year and 18% from the previous quarter to reach 2.7 billion dirhams ($739 million), which contributed to an improvement in Borouge’s industry-leading EBITDA margins. by 44%, an increase from the 40% that it recorded during the last quarter of 2023. The company continues to rely on a disciplined approach in managing the cost base, following the distinguished results achieved by the “Value Enhancement Program” during the year 2023, which exceeded its specific goals, recording an impressive impact. Positive financial value of 2.2 billion dirhams ($607 million) during the year 2023.
During its annual general assembly meeting held on March 28, Borouge reaffirmed its intention to pay attractive dividends worth 4.8 billion dirhams ($1.3 billion) in 2024, supported by the company’s ability to achieve exceptional cash flows and a strong balance sheet. Dividends also represent a current return of 6.5%, equivalent to 15.88 fils per share.
On this occasion, Hazim Sultan Al Suwaidi, CEO of Borouge, said: “Borouge continues to confirm its strong leadership role in this sector according to a wide range of standards, starting from profitability and high price premiums to distinguished operational levels and high efficiency in performance. By achieving strong profits in light of difficult global market conditions, the company has demonstrated great flexibility and speed in adapting. This has increased our confidence that Borouge will achieve continued success during the coming period.”
He added: “Borouge is currently moving towards implementing a qualitative leap in its development process, as it has made great progress in developing the ‘Borouge 4’ project, in which more than 60% of its construction work has been completed, which will contribute to increasing the company’s annual production capacity by 28% to reach 6.4 million tons, relying on a new generation of technology and artificial intelligence applications to enhance the diversity of our product range. The company also seeks to explore broader global growth horizons, including a significant growth opportunity in the Asia-Pacific region, which has reached the feasibility study stage.”
- Strategic focus
Borouge recorded revenues of 4.8 billion dirhams ($1.3 billion) during the first quarter of 2024, representing a 6% decrease year-on-year. This is due to declining prices and planned comprehensive operational maintenance related to raw materials, which had an impact on the volume of Production is about 170 kilotons during the aforementioned quarter. Operations continued to achieve an outstanding production record, which was reflected in the overall asset reliability of 99% until the end of the first quarter of 2024.
This sequential improvement of 400 points in EBITDA margins was driven by higher price premiums, as Borouge continued its pursuit of a specific strategy to give priority to sectors with high added value. All of this was reflected in the enhanced importance of energy and infrastructure solutions, which represented 45% of the total sales volume, achieving an increase from 36% recorded in the last quarter of 2023.
- Rising prices
Borouge’s average sales prices increased by 4% for polyethylene and 6% for polypropylene, compared to a 1% increase in global standard prices for both products. Therefore, the price premium for polyethylene of $222 per ton and for polypropylene of $162 per ton during this quarter exceeded the company’s expectations regarding its price premium during the market cycle of $200 per ton for polyethylene and $140 per ton for polypropylene, which is not It is still ongoing according to management’s assurances.
Net profits reached one billion dirhams ($273 million), representing an increase of 37% year-on-year. Cash conversions also reached a high of 97% with strong adjusted free operating cash flows of AED 2 billion ($552 million), an increase of 46% year-on-year.
- Strategic growth
The company is actively working to develop its polyethylene production capabilities, as the completion rate of construction work for the “Borouge 4” project has reached more than 60% so far. The new factory will contribute to increasing the company’s production capacity by 28%, making Borouge’s production sites in Ruwais the largest complex in the world for polyolefin production in one location. It is expected that the high production will contribute to achieving revenues ranging between 5.5 billion to 7 billion dirhams ($1.5 to 1.9 billion) annually, after re-annexing the new factory to Borouge and increasing its total production. Construction work on this project is progressing according to the specified plan, as it is expected to be completed by the end of 2025, after which the project will be transferred to the ownership of “Borouge” by its main shareholders, “ADNOC” and “Borealis.”
The “Borouge 4” project continues its role in stimulating the manufacturing sector in the UAE, and is considered a major contributor to supporting the “National Content Program” in the UAE, as it aims to achieve a rating of 63% within the program index. This project has already achieved significant economic gains by granting purchase orders totaling more than 2.2 billion dirhams ($600 million) to local companies within the country.
Borouge is also preparing and developing plans for the second ethylene unit in its industrial complex, with the aim of increasing the total production of olefin and polyolefin by an additional 230 thousand tons. After the project ends in 2028, this production unit is expected to contribute to annual revenues ranging from 809 million to 920 million dirhams ($220 million and $250 million). This modernization of the second ethylene unit, along with the “Borouge 4” project, will contribute to enhancing Borouge’s total annual production capacity to 6.5 million tons.
- Operational excellence
Borouge is implementing a series of digital transformation and artificial intelligence programs across all its operations, with the aim of driving innovation and enhancing the value and efficiency of its operations. These initiatives have already achieved significant value as the company aims to achieve approximately 1 billion dirhams ($280 million) in value generation over the coming years. The “Borouge Innovation Center” in Abu Dhabi plays a major role in achieving a sustainable international competitive advantage. The center also contributed to facilitating the launch of 8 pioneering products during the past year, which included an innovative solution dedicated to gas pipelines that is recognized globally in terms of unparalleled safety and reliability standards. , which contributed to the successful expansion of the infrastructure solutions sector.
- Strengthening international presence
Borouge announced earlier this year the opening of new offices in Kenya and South Korea in line with its strategy of increasing its market share within geographical regions that record high growth rates. The number of the company’s offices globally has so far reached 14 international offices in its main markets in the UAE, China, Egypt, India, Japan and Southeast Asia.
- Zero emissions
In April of this year, Borouge announced its commitment to achieving net zero emissions through its businesses and activities within Scopes 1 and 2 by the year 2045. This commitment is considered an extension of the company’s approach to adopting the best practices used in environmental, social and corporate governance, and also supports the country’s desired sustainability goals. The UAE.
As part of its endeavor to achieve net zero emissions through its operations and activities, Borouge has set interim goals of reducing the intensity of greenhouse gas emissions by 25% and reducing energy intensity by 30% by the year 2030. The company will also explore the possibility of employing modern technology solutions and adopting means of reducing emissions. Within key areas, including saving electricity and carbon capture.
- a future vision
Borouge will continue its efforts to strategically focus on high-value sectors, including investment in renewable energy and electricity supply. The company’s management expects a positive future regarding its pricing of polyolefin products, and also reiterated its price premium guidance during the session. Borouge’s successful value enhancement program has contributed to a significant positive impact on EBITDA compared to the 2022 baseline, and management expects to maintain the majority of the gains from the measures taken to improve costs in 2024 and beyond, while continuing to invest in Innovation to improve the use of Borealis’ innovative Borstar technology while achieving savings in production volume within one of the largest integrated polyolefin production complexes in the world.