Borealis Chief Fine-Tunes Fertilizer Unit Wile Eyeing M&A

Borealis AG, Europe's second-largest
producer of polypropylene, may explore an acquisition to bolster
its fertilizer unit and grow in overseas markets once existing
French plants are running satisfactorily.

Expanding in North America, the world's largest
agricultural market, or into the southern hemisphere to help
with the seasonality of the business, are both potential
options, Chief Executive Officer Mark Garrett said in an
interview today.

After observing the attempted $25 billion merger between
Yara International ASA and CF Industries Holdings Inc., Garrett
said he expects another wave of consolidation in the fertilizer
business. Over 20 years, upstart companies such as Borealis and
Ineos Group have replaced Dow Chemical Co. (DOW) and DuPont Co. (DD) at the
top of the leader board for basic chemicals and polyolefin
plastics, and Garrett will look to bolster sales of products
such as nitrogen, phosphorous, potassium and ammonia used in
farming.

"There will be more consolidation, where, when and how I
can't answer," Garrett said. "I wouldn't be surprised that if
the right opportunity came along, we'd be involved."

The priority for now is to improve the reliability of
fertilizer plants in France acquired from Total SA (FP) in 2013. The
integration of those assets is helping Vienna-based Borealis
hone its expertise in the area, ready for any further expansion,
according to the CEO.

Looking to Growth

"We're too small to be significant in fertilizers, too big
to be insignificant," Garrett said in the interview. "There's
nothing that we are looking at right now."

The U.S. is a net importer of fertilizer, making any
investment in that sector a better bet than polyolefins, where
an increase in capacity has led the nation to start exporting
supplies, the CEO said.

Borealis, controlled by Abu Dhabi, is using its bulk and an
integrated portfolio from crackers to feedstocks and end
products including plastics for autoparts and planes to shrug
off challenges from rivals in emerging markets as well as in the
U.S., where the chemical industry has been revitalized by cheap
shale gas.

Earnings Boost

Borealis is feeling the benefits from the expansion of a
petrochemical facility in Abu Dhabi, known as Borouge 3 and
costing more than $4 billion. It's bucked predictions that
polypropelene and more-traditional polymers would be made
redundant by high-performance plastics such as polyether ether
ketone polymer, or PEEK, used in smartphones. Rather than be
usurped, Borealis has adapted its cost-effective technology so
it can be used in foams and in heat-sensitive environments such
as the air-intake manifolds in cars.

Third-quarter net income increased to 185 million euros
($230 million) from 131 million euros a year earlier, while
sales were little changed at 2 billion euros, the company said
today.

Like Ineos, Borealis has entered an agreement with a
shipping company to import ethane from the U.S. to supplement
supplies from the North Sea obtained from Norwegian state-controlled oil producer Statoil ASA. (STL) That agreement means
Borealis won't need to increase the number of ships, in contrast
to Ineos, which is planning a fleet of as many as eight vessels.

To contact the reporter on this story:
Andrew Noel in London at
anoel@bloomberg.net

To contact the editors responsible for this story:
Simon Thiel at
sthiel1@bloomberg.net
Kim McLaughlin, Robert Valpuesta

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