All amounts in the management report are not considering the reclassification of the discontinued operation and related balances held for sale. The amounts therefore include data from Borealis’ nitrogen business for six months 2023 and 12 months 2022.
In 2023, Borealis AG and its subsidiaries (the Company or Group) reported a Total Recordable Injuries (TRI) rate per million working hours of 4.0, a marked deterioration compared to the rate of 2.9 obtained in 2022. A large number of low impact (actual and potential) incidents were recorded, a third of which took place at the major construction site of the new propane dehydrogenation (PDH) plant in Kallo (Belgium). Borealis subsequently initiated an expanded training program to improve the safety performance there. No fatalities or life-threatening injuries were recorded in 2023.
In line with the Group’s commitment to “Zero Harm,” Borealis aims to further improve its safety record by eliminating accidents and safety incidents altogether. Lessons learned from the sole fatality in 2022, as well as incidents which occurred in 2023, are applied across all Group locations to avert future safety incidents. One key effort is “B-Safe,” a proactive risk management program implemented in 2022 and currently being rolled out across the entire Group. As of the end of 2023, 4,000 Borealis employees had already received a one- or three-day training session, depending on their respective role. With its focus on implementing risk identification measures, learning from previous incidents, proactive intervention and elevated awareness for the safety of others, B-Safe will be further embedded in the Group throughout 2024.
Health and safety on the job must be assured for Borealis’ own employees as well as those hired by subcontractors working for the Borealis Group. The Executive Board welcomes all measures implemented by Borealis senior management that help fulfill the Group’s commitment to “Zero Harm” while at the same time heeding the most stringent ethical standards.
The Borealis Executive Board and senior management have taken specific actions in response to the war in Ukraine. Maintaining business continuity while ensuring human health and safety is the paramount concern. Borealis employs very few people in Russia and has no production operations in either Russia or Ukraine. Sales to Russia and Belarus have been halted. After terminating contracts with Russian-based suppliers, Borealis is now procuring feedstock from the US. The reliable and cost-effective transportation of liquefied petroleum gas (LPG) from North America to the Borealis crackers in Porvoo (Finland) and Stenungsund (Sweden) as well as to the PDH unit in Kallo (Belgium) is made possible by long-term charter contracts for custom-built LPG vessels.
While operations at Borealis sites have not been disrupted by the conflicts in Europe or the Middle East, plans are in place to address contingencies such as supply chain disruptions. In monitoring the geopolitical situation closely, the Group continually adapts and updates its measures to ensure stable material procurement for Borealis production sites.
The Brent crude market remained volatile throughout 2023, with the average price of USD 83/bbl lower than the 2022 average of USD 101/bbl. Even given supply management and the extension of OPEC+ supply cuts into the first quarter of 2024, concerns regarding the global macroeconomic climate and China’s lagging recovery weighed heavily on the oil markets. Core inflation remained sticky in developed markets, resulting in rising interest rates which are however expected to have peaked in the fourth quarter of 2023.
Naphtha prices increased from USD 559/metric ton (t) in December of 2022 to a 2023 peak of USD 717/t in March, supported by higher crude prices and increased blending of naphtha into the gasoline pool as the differential between crude and naphtha narrowed. In July, naphtha prices fell to USD 552/t, in line with low seasonal demand from refineries as well as lower crude prices. At year end, naphtha prices stood at USD 640/t.
Ethylene and propylene contract prices were impacted by the naphtha price development. Ethylene started the year at EUR 1,170/t and, supported by healthy demand in the spring turnaround season, peaked in March at EUR 1,290/t. Unprecedented industry destocking occurred during the seasonally weak summer months. Ethylene prices hit a low of EUR 1,120/t in July and ended the year at EUR 1,185/t. The price of propylene rose from EUR 1,075/t in January to EUR 1,185/t in April, closing out the year at EUR 1,050/t.
The polyolefins market remained weak overall in 2023 but was temporarily bolstered from January to April by the spring turnaround season and optimism surrounding China’s post-Covid opening. Industry profitability plunged in the summer months, with unprecedented levels of industry destocking due to underlying factors such as import pressure, high inventories, expectation of falling polyolefins prices, and the annual demand slowdown during the holidays. Industry profitability and operating rates fell to levels last recorded during the height of the global financial crisis of 2007–2008. While industry profitability recovered somewhat post summer with seasonal decline towards year end, it remained very weak.
The Borealis Strategy 2030 is a strategic evolution centered on sustainability. Since its launch in 2022, it has guided Borealis in its efforts to transform the Company and expand its global presence while at the same time significantly reducing the Group’s CO2 footprint. Built on the strong foundation of its people, corporate culture and safety mindset, the Borealis Strategy 2030 enables Borealis to deliver value-added solutions in collaboration with its customers and partners to accelerate the transition to a circular economy of plastics. Its emphasis on innovation and technology in tandem with performance excellence is a catalyst for growth in high potential areas such as specialty polyolefins, compounding, catalyst technologies and the licensing thereof.
Borealis achieves geographic expansion by way of joint ventures, mergers and acquisitions and by new builds on several continents. It is crucial to boost the production capacity of both base chemicals as well as advanced and sustainable polyolefin-based solutions based on proprietary Borealis technologies in order to better serve global customers and drive the circular economy transition.
The largest global growth project currently underway is Borouge 4, situated within the Borouge joint venture founded by Borealis and the Abu Dhabi National Oil Company (ADNOC) in 1998. Ground was broken in 2022 for the construction of Borouge 4, the new USD 6.2 billion facility at the existing complex in Ruwais (UAE). The increased production capacity of advanced base chemicals and polyolefins, which will be unlocked once Borouge 4 comes onstream, will further enhance its role as it supplies large volumes to customers in the Middle East and Asia as well as feedstock to the adjacent TA’ZIZ Industrial Chemicals Zone.
The Baystar™ joint venture with TotalEnergies in Pasadena, Texas (US) passed a most significant milepost in October 2023 with the start-up of the new 625,000 metric ton/year Borstar® polyethylene (PE) unit (Bay 3). This growth project has brought the state-of-the-art Borstar third generation (3G) technology to the US in the most advanced Borstar plant ever built outside of Europe. With the completion of the USD 1.4 billion PE unit, Baystar has doubled its production capacity. As a fully integrated petrochemicals venture, it will supply value-added specialty polymers primarily to the booming energy, infrastructure and consumer product sectors in North America. In addition to the new Bay 3, the Baystar site comprises an ethane-based steam cracker (started up in 2022), two legacy PE production units and the TotalEnergies ethane cracker in adjacent Port Arthur.
A major European growth endeavor is the new, world-scale PDH plant at the existing Borealis production site in Kallo. Upon its expected start-up in 2025, the projected annual propylene production will be 740,000 metric tons. Up until late 2022, construction had been halted after misconduct on the part of one of the site’s former contractors led Borealis to terminate all contracts and restart the tender process. Substantial progress has been made since work resumed in mid-summer 2023, and on-site mobilization has picked up speed. Borealis does not tolerate breaches of work ethics or contractual non-compliance in any aspects of its operations. The Kallo case has resulted in the implementation of in-depth monitoring measures to ensure full compliance in the future.
In October, Borealis successfully closed its acquisition of Italy-based Rialti, a leading polypropylene (PP) compounder of recyclates used in injection molding and extrusion processes. In the same month, Borealis declared its intent to acquire Integra Plastics, an advanced mechanical recycling company based in Bulgaria. Once regulatory approvals have been obtained, this transaction will further boost recycling capacity for the Borealis portfolio. At the end of November, Borealis increased its share in Belgiumbased recyclers Renasci from 50.01% to 98.56%.
The divestment process of the Borealis nitrogen business unit (including fertilizers, technical nitrogen and melamine products) which commenced in February 2021 was completed as of July 5, 2023. Final regulatory approvals were obtained at the end of June 2023, after which Borealis divested its former asset to Czech-based AGROFERT, whose binding offer had been submitted in June 2022. The parties continue the process of customary closing accounts adjustments. Payment may be deferred in part subject to contractually stipulated conditions. The Borealis Executive Board has full confidence that AGROFERT, as a leading European fertilizer concern, will remain committed to maintaining supply security and the development of production facilities in the long term.
In September 2022, a binding agreement made by YILDIRIM for the acquisition of Borealis’ shares in Rosier was first announced. On January 2, 2023, Borealis reported that it had divested all of its shares in Rosier after finalizing the agreement with the YILDIRIM Group.
In the Borealis Strategy 2030, the strategic goal of geographical expansion is complemented by that of transformation: Borealis is cementing its position as a fully customer-centric supplier of sustainable material solutions which add value to society and accelerate the transition to a circular economy. Long an industry front-runner in circularity, Borealis aims to further increase the share of circular products in its overall production output in the coming years. These include recycled and renewable-based polymers in its Borcycle™ C, Borcycle™ M, and Bornewables™ grade portfolios, as well as the renewable hydrocarbons in the Borvida™ family of base chemicals.
Upon the certification of the Borealis polyolefin compounding site in Monza (Italy) in July 2023, all Borealis polyolefin and polyolefin compounding sites in Europe have now been certified ISCC PLUS (International Sustainability and Carbon Certification). This mark of quality ensures traceability by way of objective, third-party verification of critical points along the supply chain.
Recycling facilities operated by Renasci in Ostend (Belgium), mtm in Niedergebra (Germany) and Ecoplast in Wildon (Austria) have also been ISCC PLUS-certified. Borealis was the first virgin polyolefins player in Europe to have entered mechanical recycling by acquiring mtm plastics in 2016, and Austria-based Ecoplast in 2018. Now 100% owned by the Borealis Group, the combined mtm and Ecoplast output will be augmented by high-quality volumes from the recent acquisition Rialti and, at a later date to be determined, Integra Plastics.
In addition to ongoing collaboration with OMV centered on the patented OMV ReOil® technology, Borealis is working closely with its upstream partner Neste and its Neste RE™ technology to take the commercialization of chemically recycled plastics to the next level. The majority stake acquired in late 2023 in Renasci also gives Borealis access to chemically recycled feedstock for the grades in its ISCC PLUS-certified Borcycle™ C portfolio. Because the chemical recycling process valorizes residual waste streams which would otherwise be landfilled or incinerated, it is a valuable complement to mechanical recycling. The virgin-grade quality of monomers produced in chemical recycling processes makes them suitable for use in the production of high-end polyolefin applications in food-grade consumer packaging, infrastructure and healthcare.
As a pillar of the strong Borealis foundation, innovation drives transformation in all areas of business activity. Making good on the corporate purpose of “Reinventing Essentials for Sustainable Living” requires ongoing investment in research and development (R&D). Proprietary technologies such as Borstar® form the base for material solutions which help the industry address urgent societal and environmental issues such as decarbonization, the green-energy transition and waste reduction. Its suite of technologies enables Borealis to continually expand its offer of advanced specialty polyolefins in order to capitalize on promising market opportunities in lucrative niche applications in sectors like renewable energy, mobility, healthcare, consumer packaging and the circular sphere.
In May, Borealis launched a new class of engineering polymers produced from renewably-sourced feedstock: Stelora™ opens up an abundance of options for technically advanced applications requiring high heat resistance, such as in e-mobility and renewable energy generation. The introduction of the Bornewables line of Queo™, a portfolio of polymers and elastomers based on renewable feedstock, took place in the same month.
The EverMinds™ platform founded in 2018 is one way in which Borealis is spearheading the circular economy transition. By encouraging collaboration among value chain partners and other stakeholders in the name of circularity, Borealis is facilitating the development of a broad range of eco-efficient applications across diverse industry sectors. In 2023, highlights included the development of a new monomaterial pouch for dry foodstuffs containing over 95% PP and fully compatible for mechanical recycling. Bornewables grades were used to enhance the circularity of BOPP film used in flexible packaging, while Bornewables PP for absorbent hygiene products were able to help improve the ecological footprint of nonwovens.
Innovation at Borealis is global in scope. Nearly 600 are employed in one of three innovation hubs: the Innovation Headquarters in Linz (Austria) as well as the innovation centers in Porvoo (Finland) and Stenungsund (Sweden). Borealis also operates Borstar pilot plants for PE in Porvoo, and for PP in both Porvoo and Schwechat (Austria). Catalyst manufacturing plants in Linz and Porvoo are augmented by a pilot facility in Porvoo.
Borealis continues to head the list of patent filers in Austria. In 2023, Borealis filed 128 new priority patent applications at the European Patent Office, the same number filed as in 2022. As of December 2023, the Borealis Group holds around 12,000 individual patents or patent applications which are subsumed in approximately 1,500 patent families. The growing number of patents is proof positive of the Group’s dedication to Value Creation through Innovation.
Increased greenhouse gas concentrations cause environmental and societal impacts and lead to global warming, extreme weather events, and rising sea levels. Global efforts, like the Paris Agreement, aim to limit temperature increases to well below 2°C, with a target of 1.5°C. To achieve this, industries like the chemical sector must reduce emissions throughout their operations and value chains.
Borealis adheres to and uses the Greenhouse Gas Protocol to calculate emissions across three scopes: direct emissions (Scope 1), emissions from purchased energy (Scope 2), and other indirect emissions (Scope 3). This framework guides efforts to mitigate climate change effectively.
The sustainability ambition at the heart of the Borealis Strategy 2030 calls for significant lower reported Scope 1 and Scope 2 emissions, from 5.1 million metric tons/year (baseline 2019) to 2 million metric tons/year by 2030 1). Besides process improvements Borealis intends to reach this goal by using ever-increasing amounts of electricity from renewable sources to power its Polyolefins and Base Chemicals production operations in Europe. To this end, multiple long-term power purchase agreements (PPA) have been signed over the past several years. A crucial milepost was reached in 2023 as five new PPAs put Borealis over a 40% share of renewables in the total electricity supply to its European operations. Borealis achieved this intermediate goal two years earlier than originally projected. All PPAs will supply energy from wind farms to Borealis’ operations in Finland, Sweden and Belgium as well as hydropower to Sweden. By 2030, 100% of the electricity sourced for the operation of the Polyolefins and Base Chemicals businesses will be of renewable origin.
Furthermore, Borealis sees improving energy efficiency as a cornerstone of its climate ambition. The group aims to implement 10% energy savings for the consumption of 2015 by 2030.
In July, Borealis reported the successful completion of a major revamp of its Stenungsund cracker furnace. Marked by excellent safety performance, the seven-year effort resulted in significantly higher energy efficiency and process safety standards for the cracker. As one of the most feedstock-flexible crackers in Europe, Stenungsund will continue to be a vital supplier of ethylene and propylene to the Borealis Group’s international customers, particularly in Wire & Cable.
Using digitalization to drive Climate neutrality is key to the customer-centric approach taken by Borealis. Neoni, an innovative tool developed by the in-house Borealis Digital Studio, computes cradle-to-gate emissions data for commercially available Borealis polyolefins as well as base chemicals manufactured in Europe. Neoni allows Borealis customers to differentiate between virgin, renewably-sourced and mechanically recycled polyolefins offered by Borealis in order to determine which materials should be used to further their own sustainability goals.
1) This includes the divestment of the Fertilizer division. Following Greenhouse gas protocol is seen as a base year emission shift.
Borealis is actively involved in various initiatives aimed at raising awareness and fostering learning both internally and externally. This includes contributing to the development of science-based target methodologies for the chemicals sector through the SBTi's Expert Advisory Group.
Borealis are also participating in a CEFIC working group to understand the implications of different options for setting sector guidelines in the chemical industry.
Additionally, Borealis is part of the “Sustainable Plastics Industry Transformation” (SPIRIT) program in Finland, which focuses on activities like replacing fossil-based feedstocks with renewable ones, developing recycling technologies, decarbonizing production operations, and exploring enablers for the green transition. Borealis is co-funding a research project, FUTNERC, with the Swedish Energy Agency and Preem, aimed at achieving net-zero greenhouse gas emissions from refineries and chemical plants by 2050. Moreover, Borealis has launched a Sustainability Academy with OMV and OMV Petrom, focusing on climate change and ESG to engage and train their entire organization on the journey towards climate neutrality.
Borealis’ energy and climate objectives for 2024 include advancing their digitalization project to improve reporting on climate, energy, and environmental data.
To refine the current accounting model based on a CO2 budget for Scopes 1, 2, and 3 to better understand our climate impact.
Additionally, Borealis plans to evaluate the feasibility of setting science-based targets, integrating climate criteria into key decision processes, and limiting ETS emissions to 1.477 million metric tons of CO2 e.
Borealis also aims to achieve specific energy performance targets for both hydrocarbons and polyolefins and has already approved implementation of 70,000 MWh in energy savings from 2024 onwards.
In an accelerated decarbonization scenario ensuring reaching the climate goals according to the Paris Agreement, Borealis management would not see negative effects on the overall demand of polyolefin solutions. Pricing of polyolefin is driven by base chemical markets like naphtha, ethane, propane etc. An accelerated change of the worlds energy landscape might lead to different price movements in those relevant base chemicals, effecting the profitability of some assets in the polyolefin value chain. Driven by the expected strong demand of polyolefin solutions Borealis’s management does not see substantial negative effects on the overall integrated value chain.
The pace of energy transition may have an impact on the remaining useful lives of assets. Borealis fixed assets will be fully depreciated over the next 5 to 15 years. It is, therefore, not expected that energy transition has a material impact on the expected useful lives of property, plant, and equipment.
Borealis’ net profit plunged from a record high of EUR 2,111 million in 2022 to EUR 168 million in 2023. This drop must be considered in the context of current market challenges which affect all petrochemical companies as well as the one-off positive effects specific to the Borealis Group that contributed to the outstanding results obtained in 2022. The former includes ongoing market volatility; stubborn inflation and high energy costs, particularly in Europe; weak margins; and record polyolefins overcapacity in the face of feeble demand. Factors specific to Borealis include profits enjoyed in 2022 due to the blockbuster Borouge IPO in June, as well as the re-measurement gain of EUR 266 million from the disposal group related to the divested Borealis nitrogen business unit.
In 2023, the contribution to net results from Borealis joint ventures declined from EUR 1,001 million in 2022 (supported by the Borouge IPO amounted to EUR 604 million) to EUR 160 million in 2023. The Borouge contribution, while still significant at EUR 317 million, was negatively impacted by market conditions, soft demand, reduced margins and the Borouge 2 turnaround in the first quarter of the year, which had a negative impact on production volumes. As in 2022, the 2023 Baystar contribution, which at EUR -158 million, compared to EUR -58 million in the previous year, failed to fulfil expectations, due in the main to lower sales prices as well as the slow ramping up of production at both the new Borstar PE plant and the ethane-based steam cracker.
The after-tax return on capital employed (ROCE) of 2% in 2023 was significantly lower than the 19% reported in 2022. The marked drop reflects the one-off boost provided by the 2022 sale of the stake in Borouge, but is also due to adverse market conditions and lower sales volumes. The five-year average ROCE of 12% also remains well above the Group’s target of 11% throughout the cycle.
In 2023, Borealis net debt decreased to EUR -152 million. This resulted in a gearing ratio of -2% at the end of 2023, compared to -1% at the end of 2022. This gearing reflects a very strong balance sheet. Liquidity reserves, composed of undrawn committed credit facilities and cash balances, amounted to EUR 3,478 million at year end 2023, compared to EUR 3,408 million at year end 2022. Borealis also benefits from a well-diversified financing portfolio and a balanced maturity profile. The solvency ratio was 70% at the end of 2023, compared to 66% at year-end 2022.
In 2023, Borealis sold 3.50 million metric tons of polyolefins, slightly less than the 3.54 million sold in 2022. The decline is due primarily to imports into the European market. The macroeconomic situation was difficult throughout the year, with weak economic growth, high energy prices in Europe and ongoing supply chain bottlenecks. The industry situation was also bleak, with sluggish demand in the face of record-level polyolefins capacity additions and increased imports to Europe. In response, the Group has adopted initiatives to improve inventory and working capital management by lowering cracker utilization and protecting margins from oversupply.
In the first half of the year (prior to divestment of the Borealis nitrogen business unit as of the beginning of July 2023), Borealis Fertilizer sales were 1.35 million metric tons. This compares to the 1.63 million metric tons reported for the same period in 2022. Melamine sales also decreased, from 0.06 million metric tons in the first half of 2022, to 0.04 million metric tons in the same period in 2023 due to lower demand.
The lower feedstock price environment saw a sharp reduction in 2023 production costs compared to 2022. The negative macroeconomic scenario throughout the year, with weak economic growth and high inflation, resulted in sluggish demand and lower sales and distribution costs, which decreased from EUR 873 million in 2022 to EUR 755 million in 2023. Administration costs increased from EUR 278 million in 2022 to EUR 297 million in 2023. Guided by an unwavering commitment to Value Creation through Innovation, spending on research and development (comprising costs for the Borealis Innotech organization and depreciation of R&D assets) increased from EUR 112 million in 2022 to EUR 120 million in 2023.
At the end of 2023, the Borealis Group employee headcount was 5,943. This reduction of 1,706 versus the previous year was driven by the divestment of the Borealis nitrogen business unit.
The implementation-focused performance improvement program has been launched in 2022 as part of Borealis 2030 Strategy. The program is set up to deliver significant sustainable profit improvements and helps to protect margins short-term and mitigate the current downturn in the industry.
2023 marked an important year for SFPE as strong results could be reported from the profitability improvement measures across our value chain. This program supported the results by around EUR 140 million in 2023. The measures aim at optimizing product pricing, reducing variable costs through feedstock sourcing improvements, enhancing operational efficiency in energy consumption, uplifting the reliability of our assets and leveraging integrated margin opportunities. Given the prolonged and deeper downturn, a dedicated fixed costs program has been launched as part of SFPE in addition to other short-term measures to weather the storm. Focus points of the fixed costs program include optimizing inventories, enhancing maintenance processes and managing discretionary expenses.
Additionally, the program focuses on streamlining internal and external spend structures in line with our Borealis values. The targeted fixed costs reductions will achieve a mid-term run rate of 100 million in savings.
Operating loss in 2023 was EUR -9 million versus operating profit of EUR 1,081 million in 2022. The Polyolefins operating profit declined from EUR 526 million in 2022 to EUR -79 million in 2023 due to lower demand and one-time impairments. Borealis Base Chemicals delivered an operating profit of EUR 162 million, down from the EUR 243 million reported in 2022. The operating result was lower due to lower demand and lower margins.
Operating profits were impacted by high inventory effects (EUR -233 million), due to a weaker environment in all business areas. The full-year Borouge contribution was solid (EUR 317 million), albeit below the previous year. The Baystar contribution fell short of expectations; its overall contribution was negative (EUR -158 million) despite an improved contribution from the already existing PE plants Bay 1 and Bay 2 in the second half of 2023. The operating profit from the Borealis nitrogen business unit was negative.
The decrease in net financial income from EUR 104 million in 2022 to EUR 43 million in 2023 was mainly due to less favorable currency effects.
In 2023, the Borealis Group earned EUR 141 million in interest income from loans granted to its joint ventures and its cash deposits, compared to the EUR 56 million earned in the previous year.
Income from taxes amounted to EUR 51 million in 2023, compared to tax charges of EUR -342 million in 2022. The lower overall tax charge in 2023 was to a large extent driven by weaker business performances and tax gains in connection with the Borealis nitrogen business divestment.
The contribution from Borealis joint ventures declined significantly, from EUR 1,001 million in 2022 to EUR 160 million in 2023. The Borouge 2 turnaround in the first half of 2023 as well as generally softer demand and lower sales prices reduced the overall Borouge contribution
The Baystar contribution was also lower than projected due to the slower than expected ramping up of the new ethane-based cracker.
Investments in property, plant and equipment amounted to EUR 729 million in 2023, compared to EUR 667 million in 2022. A major portion of the total is associated with the construction of the new world-scale PDH plant in Kallo; final debottlenecking efforts at the PP plant in Kallo; and the upgrade of semicon units in Antwerp. Health, Safety and Environment (HSE) capital expenditure amounted to EUR 153 million, compared to EUR 107 million in 2022. Investments in intangible assets amounted to EUR 79 million in 2023, compared to EUR 58 million in 2022.
Depreciation, amortization and impairment amounted to EUR 411 million in 2023 versus EUR 352 million in 2022.
At year end, total assets and capital employed stood at EUR 13,412 million and EUR 11,422 million, respectively, compared to EUR 14,685 million and EUR 11,952 million at the end of 2022.
Cash flow from operating activities was EUR 552 million and supported primarily by a positive working capital development. In 2023, the Borealis Group benefited from the divestment of the nitrogen business unit and Rosier, which together generated a positive cash flow of EUR 691 million. These positive flows were, however, offset by capital contributions and financing throughout 2023 in the joint ventures Borouge (EUR 150 million) and Baystar (EUR 91 million); increased CAPEX investments of EUR 808 million (tangible and intangible); and payments related to the acquisition of Rialti in the latter part of the year.
Net interest-bearing debt decreased significantly to EUR -152 million at year end, down from EUR -70 million at the end of 2022 (see table below).
Shareholders’ equity at year end 2023 was EUR 9,219 million, compared to EUR 9,785 million in 2022. For further information on equity see note 13 in the consolidated financial statements.
Borealis has a documented risk management process ensuring that all parts of the Group routinely identify and assess their risks and develop and implement appropriate mitigation actions. Risk management contributes to achieving the Group’s long-term strategies and short-term goals. Borealis believes that an effective risk culture makes it harder for an outlier, be it an event or an offender, to put the Company at risk.
Borealis captures emerging risks which may materialize during the business plan period, and strategic risks that may affect the delivery of the Group’s long-term strategy. In addition, Borealis distinguishes between “outside-in” and “inside-out” risks. In 2023, particular emphasis was placed on geopolitical and energy supply-related risks.
The Group’s overall risk landscape is periodically consolidated, reported and reviewed. Borealis distinguishes between different risk categories as outlined below. While this list is not exhaustive, it does illustrate the most relevant risk types.
Strategic and reputational risks are those that may severely impact the Borealis Group’s strategy or reputation. Strategic risks are often related to unfavorable long-term developments, such as market or industry developments, technology, innovation, a change in the competitive environment, or a threat to the reputation of the Group.
Operational and tactical risks usually refer to unfavorable and unexpected short-term or mid-term developments and include all risks that may have a direct impact on the Group’s daily business operations. All operational risks are assessed according to documented guidelines and procedures that are administered by the respective business functions.
A proactive approach to risk prevention management has been implemented in the Operations function, covering risks in the areas of Production; Health, Safety and Environment (HSE); Product Stewardship; Plant Availability and Quality. The risk management approach also safeguards the Responsible Care® approach towards risks in operations. The standard risk management process includes a common risk matrix and risk registers, built bottom-up from plant to portfolio level, enabling a common risk rating system for the whole of operations.
HSE risks are assessed according to the procedures and framework described in the Borealis Risk-based Inspection Manual. The HSE Director is responsible for managing all HSE-related risks and periodically reports the Borealis HSE risk landscape to the Executive Board.
Borealis assesses and discloses the potential negative impact of its activities on the environment and society, and related mitigation measures, in its Non-financial Report in accordance with legal obligations (NaDiVeG). The main risks analyzed are:
Climate-related risks and mitigation actions are also specifically analyzed according to TCFD (Task Force on Climate-Related Financial Disclosures) guidelines and disclosed in the Borealis Non-financial Report. Related transition risks are, for example, higher GHG emission prices, increasing operating costs, increasing pressure on the usage of fossil fuel-based feedstock and a negative industry image. Physical risks are mainly related to potential supply chain disruptions, due, for example, to extreme weather events or political unrest. However, the risks associated with climate change also represent opportunities for innovation, such as product portfolio extensions that include low-emission, circular and/or renewable-based products as well as partnerships that help transform the industry towards climate neutrality.
Project-related risks are assessed in the Borealis project approval process. The applicable key risks related to an individual project are assessed. These risks include financial, market, technical, legal, patent infringement, strategic, operational, country-related and political factors. The risk assessment also reflects the probability of project completion within the estimated time frame and forecasted resource requirements, and the likelihood that key project objectives will be achieved. Project-related risks are managed by the project manager and reported to the Project Steering Committee.
Financial and market risks may refer to risks arising for instance from unexpected changes in market supply, demand, commodity prices, services or financing costs. Risks may also arise from liquidity, interest rates, foreign exchange rates, credit and insurance, the inability of a counterparty to meet a payment or delivery commitment, and may, for example, extend to incorrect assumptions or the inappropriate application of a model. The assessment of financial risk management is described in detail in note 17 of the consolidated financial statements. The Treasury & Funding Vice President and the General Counsel are responsible for reporting and coordinating the management of all financial risks.
Compliance risks involve legal and regulatory risks, codes of conduct (ethics policy), standards as well as contracting compliance. Doing business in an ethical manner is vital to the Group’s good reputation and continued success. Tactical or generic risks are risks identified as part of standards or compliance. These risks mainly relate to processes or control weaknesses.
Information security risks relate to the confidentiality, integrity and availability of critical company information. The Vice President Digital Solutions and the General Counsel support line managers with the assessment of information security risk and the development and implementation of risk mitigation actions.
The Executive Board periodically reviews the Group’s key risks, defines the Group’s risk tolerance levels, monitors the implementation of mitigation actions, and reports the key risks and mitigation steps to the Supervisory Board. The Executive Board safeguards the integration of risk assessment in its strategic planning.
The Supervisory Board is responsible for reviewing the effectiveness of Borealis’ risk management practices and processes, risk appetite and tolerance levels, the Group’s risk exposure, and the effectiveness of mitigation actions. The Supervisory Board delegates some of these responsibilities to the Audit Committee, which is a sub-committee of the Supervisory Board.
All Borealis employees are responsible for managing risk, within their authority and in their field of work, in order to ensure that risk management is properly embedded in the organization and reflected in the daily decision-making processes.
In April 2023, Daniela Vlad, OMV Executive Vice President Chemicals & Materials and member of the OMV Executive Board, was appointed Chairperson of the Borealis Supervisory Board, replacing Alfred Stern, OMV CEO. Daniel Turnheim was appointed Borealis Chief Financial Officer for a threeyear period taking effect as of June 1, 2023. He takes over from Mark Tonkens, who left the Borealis Executive Board by mutual agreement at the end of May 2023. As of February 1, 2024, Craig Arnold assumes the position of Executive Vice President Polyolefins, Circular Economy Solutions and Innovation & Technology held by Lucrèce Foufopoulos-De Ridder up until December 31, 2023.
The year 2023 was a turbulent and challenging one for the entire industry. The Borealis Executive Board and its senior management anticipate a prolonged and deepening trough as increased global production capacity collides with lagging demand. These shorter-term factors are joined by long-term developments that are reshaping the petrochemicals industry, such as carbon reduction efforts; the transition to a circular economy; structural changes in key industries such as mobility and energy; and digitalization and technological disruption, to name only a few.
The Borealis Strategy 2030 is, however, a solid foundation which provides stability in turbulent times. Thanks to carefully managed growth and expansion efforts, and leadership in innovation and the circular economy sphere, Borealis is ideally positioned to capitalize on future market opportunities as they arise.
Making good on the commitment to “Zero Harm” will be the chief priority in 2024. While the Group posted excellent results in process and occupational safety in 2023, there is still work to be done on improving the TRI rate. The recently launched initiative “HSSE 2030” envisions Borealis as the industry leader in health, safety, security and the environment by 2030. We have full confidence that Borealis will make meaningful progress towards this goal in 2024 thanks to the dedication and commitment of its people.
1) NITRO 2023: Borealis divested the Borealis Fertilizers, Melamine and Technical Nitrogen (TEN) Business at the beginning of July 2023; therefore only Fertilizers, Melamine and TEN data for first six months is included for NITRO. For further details please refer to note 8.1. Sale of Borealis NITRO in the Notes to the Consolidated Financial Statements
2) NITRO 2020–2022: Borealis Fertilizers, Melamine and Technical Nitrogen Business excl. Rosier Group. See also footnote 1
3) Environmental data might be subject to minor adjustments due to ongoing audits and missing third-party data at the time of closing of this report.
4) Rosier Group is excluded from TRI 2022 excl. NITRO.
5)Severe upsets led to significant emergency flaring during shutdowns; further there was a lack of recycling capacity.
6) Full-time equivalents considers part-time employed staff only as 0.5
7) Number of employees has been presented in headcount instead of full-time equivalents since 2022. A comparison to previous years is only possible with 2021.
Capital employed: Total assets less non-interest-bearing debt
Return on capital employed: Operating profit, profit and loss from sale of operations, net result of associated companies and joint ventures plus interest income, after imputed tax, divided by average capital employed
Solvency ratio: Total equity, less goodwill, divided by total assets
Gearing ratio: Interest-bearing debt, less cash and cash equivalents, divided by total equity
HSE: Health, Safety and Environment
In accordance with Section 267a (6) of the Austrian Commercial Code (UGB), Borealis prepares a separate consolidated non-financial report.
As a company subject to non-financial reporting obligations according to Article 19a of Directive 2013/34/EU of the European Parliament and of the Council, Borealis falls within the scope of the EU Taxonomy. Applying the EU Taxonomy enables Borealis to be transparent about its sustainable economic activities and to demonstrate the development of the sustainability performance of all business areas within the Group. For 2023, Borealis discloses within the separate consolidated non-financial report the share of taxonomy-eligible and non-taxonomyeligible economic activities in its total turnover, CAPEX and OPEX, as well as the taxonomy alignment levels of these KPIs.
