Borouge’s PP5 unit generates $209 million sales in H1 2023

Dr Hasan Karam, Borouge’s Chief Operating Officer, has said that the fifth polypropylene unit (PP5) played a significant role in H1 2023, contributing $209 million (Dhs767 million) in polypropylene material sales, representing 22% of the Company’s propylene sales and 10% of our overall turnover.

In a statement to the Emirates News Agency (WAM), Dr Karam said, “Our core markets in Asia accounted for 68% of the total sales, with the Middle East and Africa accounting for the remaining 32% of sales.” Located at the Borouge 3 facility in the Al Ruwais Industrial City, PP5 represents a critical milestone in the Borouge 2030 Strategy, positioning it among the top five polyolefin producers in the Asia Pacific and Middle East region.

“Beyond expanding our product portfolio with polypropylene solutions, the unit supports our In-Country Value programme, which aims to enhance the resilience of our local value chain by maximising the use of local goods and services, encouraging local manufacturing, and creating job opportunities for UAE nationals,” he emphasised.

Asked on PP5’S role in Borouge’s growth in H1 2023, Dr Karam said, “PP5 boosted our polypropylene production capacity by over 25%, helping us further expand our product portfolio. Borouge commenced production in 2001 with an annual capacity of 480,000 tonnes. The start-up of PP5 grew our annual production volumes to reach a milestone of five million tonnes in 2022 - an exponential tenfold increase in capacity over two decades.

Regarding the sectors that Borouge cater for its needs of polypropylene manufactured at the PP5, he said that demand for products made from polypropylene is set to rise in the coming decades thanks to its versatility and recyclability. The PP5 unit significantly enhances the Company’s sustainable, innovative and differentiated products to meet this demand.

“Polypropylene is a crucial raw material for making recyclable advanced packaging solutions, as well as for producing strong, durable and lightweight pipes used in the infrastructure sector,” he noted.

Since the commencement of operations 18 months ago, Borouge’s PP5 unit has contributed $484 million (Dhs1.81 billion) in sales and boosted the Company’s polyolefin production capacity by 10% year-on-year.

He added, “Borouge remains a key enabler of the UAE’s industrial growth. Over the past 25 years, we have supported the UAE’s economy through our world-scale manufacturing facilities in Abu Dhabi, producing differentiated raw materials that enable the development of local supply chains. Today, our products are exported to 86 countries worldwide.”

The Company’s differentiated product portfolio, enabled by Borstar technology, innovation, and strategic market approach, have helped Borouge maintain a strong market position and effectively adapt the production and distribution volumes in response to changes in demand.

Asked about Borouge’s global outlook for the polypropylene market, Dr Karam said the polypropylene market in Asia, Africa and the Middle East is valued at $10 billion and is predicted to grow by 5.5% annually. “We are capitalising on this demand and projected growth by introducing a wider range of differentiated product grades into the production mix, supporting our customers and building on our track record,” he noted.

Regarding the Company’s role in the sustainability and the energy transformation domain, he said that Borouge had invested significantly in integrating sustainability into the operations and developing innovative polyolefin solutions that enhance sustainability across the industries, noting that, “In doing so, we have embedded sustainability across our value chain, from production to end-use.” Borouge focuses on the circular economy and has formed a dedicated team to address this area. Their circularity strategy involves developing solutions for consumers and infrastructure that promote circular practices throughout their business and beyond. The goal is to minimise waste and enhance material recovery at the end of a product’s life.

In the packaging sector, they collaborate with stakeholders along the value chain to incorporate recycled plastic into new production, reducing plastic waste. In China, they’ve established a closed-loop system for post-consumer recyclate content in heavy-duty shipping sacks, ensuring recyclability without compromising performance.

Additionally, Borouge has formed partnerships to expand its portfolio of recycled polyolefins, with applications spanning consumer uses, industrial packaging, houseware, and more, contributing to its circularity goals.

“We have also initiated strategic partnerships to boost the growth of recycled polyolefins within our sustainable product portfolio. Today, we are involved in 12 partnerships across seven countries, serving our key territories and supporting our circularity ambitions,” he concluded.

Borouge announced recently its financial results for the three- and six-month periods ended 30th 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.

Second-quarter revenue increased by 2.5% quarter-on-quarter, to reach $1.4 billion, and declined on a year-on-year basis. Borouge reported net income 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.

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.

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.