Abu Dhabi-based petrochemical company Borouge Plc has reported a 33 percent year-over-year (YoY) increase in second-quarter net profit, reaching $308 million. This strong performance was driven by higher sales and cost efficiencies, as the company recorded its highest-ever production volumes.
Surging EBITDA and robust margins
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged 18 percent YoY to $613 million in the second quarter (Q2). This was underpinned by a 6 percent increase in revenue. There was a 6 percent improvement in cost per ton, reflecting sustained efficiencies from the Value Enhancement Program. The Value Enhancement Program delivered a $607 million positive impact in 2023.
Borouge maintained its industry leadership in profitability, with an EBITDA margin of 41 percent in Q2, up from 37 percent a year earlier.
Read more: Abu Dhabi’s Borouge shareholders approve $1.3 billion dividend for 2023
Premium products drive strong sales
The company’s premium products continued to drive strong sales performance. This underscores Borouge’s resilience in a challenging global market environment for the petrochemicals industry.
Leveraging competitive advantages, sustained price premia
Borouge is leveraging its competitive advantage in the Asia Pacific, Middle East, and African regions. This is driven by superior technology, innovation, and operational excellence. Borouge also has an extensive sales and marketing network.
A key factor in Borouge’s industry-leading profitability is its sustained price premia for polyethylene and polypropylene. These price premia remained robust at $198 and $138 per ton respectively in Q2.
Record production levels achieved
Borouge achieved record quarterly production levels. This was driven by outstanding capacity utilization rates of 114 percent for polyethylene and 103 percent for polypropylene. This was also supported by an ongoing focus on process safety and asset reliability, which stood at 97 percent in Q2.
Future growth initiatives
Hazeem Sultan Al Suwaidi, chief executive officer of Borouge, commented that they will drive a transformational increase in production volumes. This will be achieved through the Borouge 4 complex and their second ethylene unit EU2. It will also be accomplished as part of a consortium planning a new specialty polyolefins plant in China. Moreover, an ambitious artificial intelligence program is powering growth. It is also enhancing productivity, safety, and sustainability. This is helping to unlock significant financial value, he added.
Sales volume, price dynamics
Moreover, Borouge reported revenue of $1.5 billion in Q2, up 6 percent YoY. Sales volumes increased 16 percent quarter-on-quarter (QoQ), driven by a focus on high-value segments, with infrastructure solutions contributing 41 percent of sales volumes.
Average sales prices softened marginally in the quarter. Global benchmarks rose 4 percent and 2 percent QoQ respectively, with a small gain for polypropylene offset by a slight decline for polyethylene.
Regional sales mix optimization
Also, Asia Pacific accounted for 66 percent of sales volume, unchanged YoY. The Middle East and Africa advanced to 28 percent from 27 percent a year earlier as the company optimized its regional sales mix.
Adjusted EBITDA increased to $613 million from $518 million a year earlier. The company achieved management guidance on price premia despite the challenging market conditions.
Strong H1 performance
Additionally, for the first half of 2024, the company reported a net profit of $581 million, an increase of 35 percent YoY, and adjusted EBITDA increasing 21 percent to $1.18 billion. H1 revenue of $2.81 billion was unchanged from a year earlier, while costs, excluding depreciation and amortization, decreased 11 percent through continued commitment to rigorous cost management.
Dividend reaffirmation, interim dividend
At Borouge’s Annual General Meeting on March 28th, the company reaffirmed its intention to maintain a $1.3 billion dividend for 2024. The dividend of 15.88 fils per share provides a significant current yield of almost 6.5 percent.
Furthermore, shareholders are scheduled to meet at a general meeting in the third quarter to approve the distribution of a 7.94 fils per share interim dividend.
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