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The Abu Dhabi-based specialty chemicals company Borouge Plc is in a very strong position financially to support growth opportunities either through organic expansion or through mergers and acquisitions (M&A), CEO Hazeem Sultan Al Suwaidi said after the company posted a net profit of $199 million for Q1 2023.
In an exclusive interview with Zawya, Al Suwaidi said, as mandated by the board earlier this year, Borouge is looking at acquisitions within its primary markets in India and China. “While we cannot disclose more details, we have been given a clear mandate by the board to look at organic and inorganic growth like M&A within our primary markets that complement our geographies and our product mixes and be value-accretive for the company.”
The company, which produces polyethylene and polypropylene, listed on ADX in June 2022 after raising over $2 billion. Post-IPO, it has disbursed $975 million as dividend for 2022 and is now committed to a $1.3 billion dividend payout this year.
Al Suwaidi declined to discuss if Borouge would finance any acquisitions internally. He said: "We have a very healthy balance sheet. And we are really very strong in our financial positions."
In its Q1 balance sheet, Borouge shows free cash flow of $377 million. Cash conversion in the first quarter was very strong, at 82%, with capex increasing by 8% quarter-on-quarter in support of the Borouge 2 turnaround.
In terms of organic growth, Al Suwaidi said the Borouge 4 expansion at Ruwais, which was carved out during the IPO and handed to a separate entity until start-up to mitigate risk to the investors, will add 1.4 million tons of polyolefins capacity when operational in 2025.
The company, which is joint venture between Abu Dhabi National Oil Company (ADNOC) and Austrian chemical giant Borealis, had on Friday said that the net profit was driven by strengthening product prices that partially offset lower sales volumes.
However, Al Suwaidi was positive on the outlook for demand. He said while the market for polyolefins has been under pressure last few years because of the pandemic, he was confident that within the company's core markets in Asia, the Indian subcontinent, the Middle East and Africa, demand would be pick up as these economies are set to see high GDP growth.
"For the next five years the market looks to be healthy for Borouge's highly differentiated products as governments continue to invest in infrastructure solutions. The product mix that we have at Borouge has given us a mitigation for being more resilient and managing the cyclical business. So, for the coming 12 months we see a greater demand for business, and we look forward to positive results."
The company's long-term feedstock agreement with ADNOC has also placed it in a very competitive cost position with respect to energy prices, which allows it to compete in its core markets, he said. Borouge's products, like polyethylene and polyolefins, have always been able to command premiums, he added.
"We understand that the petrochemical business is a very cyclical business...(but) throughout the cyclicality, our high-end differentiated products will always give us a better realisation of our premiums."
(Reporting by Brinda Darasha; editing by Seban Scaria)
