Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Borouge PLC (ADX:BOROUGE, Financial) achieved the highest ever quarterly production volumes in Q2 2024, demonstrating strong operational performance.
- The company reported a net profit of $308 million in Q2, marking a 33% increase year-on-year, and a 35% increase in net profit on a half-year basis.
- Borouge PLC maintained an exceptional EBITDA margin of 41% in Q2, reflecting ongoing operational efficiencies.
- Sales volumes increased significantly, with polyethylene up by 9% and polypropylene up by 25% quarter-on-quarter.
- The company is strategically positioned for growth with several investment projects, including the Borouge 4 project, which will increase production capacity by 28% by Q4 2025.
Negative Points
- Blended average selling prices for polyethylene and polypropylene were relatively flat compared to the previous quarter and down 2% year-on-year.
- General and administrative expenses increased by 10% year-on-year due to one-off items.
- The company faces logistical challenges, particularly in shipping to western markets, which could impact sales distribution.
- The premium above benchmark prices for polyethylene and polypropylene decreased slightly in Q2 compared to Q1.
- Borouge PLC's feedstock price agreement with ADNOC is due for repricing in 2027, which could lead to higher costs.
Q & A Highlights
Q: We've seen strong utilization rates above 100%. Are these sustainable, and could capacity be higher than currently assumed?
A: (Hasan Karam, COO) We have a clear reliability program to sustain high utilization rates, and we expect to maintain these levels in 2024. Our detailed due diligence indicates that our facilities are well-positioned for continued high utilization.
Q: Can you provide details on the Chinese cracker project, particularly the product breakdown and feasibility studies?
A: (Hazeem Al Suwaidi, CEO) The project is in the feasibility stage, focusing on producing high-premium products using Borstar technology. China is a key market, representing 40% of global polyolefins demand, and we see significant growth opportunities there.
Q: With significant capacity additions in China and economic challenges, is it still a good place for investment compared to other markets like the US?
A: (Hazeem Al Suwaidi, CEO) Despite challenges, China remains a strategic market due to its size and demand for polyolefins. Our project is carefully evaluated to ensure it adds value and aligns with our growth strategy.
Q: How are you managing increasing freight rates, and will this affect future expenses?
A: (Hazeem Al Suwaidi, CEO) We have a strong cost control strategy for logistics, which has helped maintain our EBITDA margins. We are managing logistical challenges effectively, and costs remain under control.
Q: Why have premiums for polyethylene and polypropylene decreased, and what are your expectations for the second half of the year?
A: (Rainer Hoefling, CMO) Premiums decreased due to increased sales volumes in Q2, but they remain within our cycle guidance. We expect prices to stay within a narrow band due to logistical constraints and low operating rates.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
