Chemicals & Materials

In the Chemicals & Materials segment, OMV is one of the world’s leading providers of advanced and circular polyolefin solutions and a European market leader in base chemicals and plastics recycling. The Company supplies services and products to customers around the globe through Borealis*OMV announced in July 2023 that it had decided to pursue negotiations with ADNOC on a potential cooperation regarding their polyolefins businesses. Such cooperation would include a potential combination of the Borealis and Borouge businesses as equal partners under a jointly controlled, listed platform for potential growth acquisitions to create a global polyolefin company with a material presence in key markets. and its two joint ventures: Borouge (with ADNOC, based in the UAE and Singapore) and Baystar (with TotalEnergies, based in the United States).

Financial performance

The clean Operating Result decreased substantially in 2023 to EUR 94 mn (2022: EUR 1,457 mn). This was mainly a result of the deterioration of the chemical sector caused by a global economic slowdown and a highly inflationary environment, which led to substantially lower olefin and polyolefin indicator margins, negative inventory valuation effects, and a lower contribution from Borealis JVs. In addition, the sale of the nitrogen business to AGROFERT, a.s. was completed in early July 2023, leading to a EUR 367 mn lower result contribution compared to 2022.

The contribution of OMV base chemicals declined mainly following substantially lower olefin indicator margins. The ethylene indicator margin Europe lessened by 9% to EUR 507/t (2022: EUR 560/t), while the propylene indicator margin Europe declined significantly, by 27%, to EUR 389/t (2022: EUR 534/t). In 2023, weak demand and ample supply weighed on olefin contract prices, while propylene contract prices also experienced downward pressure stemming from high refinery throughput in Europe. Easing naphtha prices provided some support to the olefin indicator margins.

The utilization rate of the European steam crackers operated by OMV and Borealis increased to 80% (2022: 74%). While 2022 was impacted by the planned turnarounds at the Stenungsund and Burghausen steam crackers and the reduced steam cracker utilization rate in Schwechat, 2023 was affected by the planned turnarounds at the Schwechat and Porvoo steam crackers.

The contribution of Borealis excluding JVs came in considerably lower in 2023 at EUR –74 mn (2022: EUR 967 mn). Substantially lower olefin and polyolefin indicator margins, the absent contribution from the nitrogen business due to the divestment in July 2023, which impacted the result negatively by EUR 367 mn compared to 2022, and negative inventory valuation effects were the main contributors to the sharp decline. Inventory valuation effects, excluding the nitrogen business, were around EUR 160 mn lower than in 2022, and had a negative impact on the result. The Borealis base chemicals business experienced a decline that was mainly caused by weaker olefin indicator margins, although a more positive light feedstock advantage and increased utilization of the steam crackers counteracted this to a certain extent. The polyolefin business experienced a substantial decline amid the persistent weak market environment in Europe, leading to considerably lower polyolefin indicator margins and negative inventory valuation effects. A less favorable product mix as well as higher fixed costs due to the inflationary environment also impacted the result negatively. The polyethylene indicator margin Europe decreased by 17% to EUR 322/t (2022: EUR 390/t), while the polypropylene indicator margin Europe came down by 27% to EUR 355/t (2022: EUR 486/t). In 2023, polyolefin indicator margins decreased on the back of the global economic slowdown and inflationary pressure on customers. In addition, increased availability of imported volumes into Europe put pressure on margins. As a consequence, realized margins for standard products declined markedly. In contrast, realized margins for specialty products increased slightly. Polyethylene sales volumes excluding JVs declined by 3% while polypropylene sales volumes excluding JVs increased marginally, by 1%, compared to 2022. The decrease in sales volumes stemmed predominantly from the energy and health care industries, while the mobility industry experienced a slight increase. The sale of the nitrogen business to AGROFERT, a.s. was completed in early July 2023. The nitrogen business contributed EUR 339 mn to the result in 2022, while it showed a loss of EUR –28 mn in 2023.

The contribution of Borealis JVs, accounted for as OMV’s share of clean net income of the at-equity consolidated companies, declined to EUR 102 mn (2022: EUR 332 mn) following a lower contribution from Borouge and the more negative contribution from Baystar. Polyethylene sales volumes from the JVs increased slightly by 2% compared to 2022, while polypropylene sales volumes from the JVs grew by 4%. The Borouge result declined primarily due to a weaker market environment in Asia. OMV’s reduced share in Borouge following the successful listing of 10% of Borouge’s total issued share capital on June 3, 2022, also lowered financial and operational contributions compared to 2022. The pricing environment in Asia weakened compared to 2022, as new polyolefin production capacities came online amid muted Asian demand. Borouge recorded slightly higher sales volumes in 2023. At Baystar, polyethylene sales volumes saw a minor increase compared to 2022, which was also attributable to the ramp-up process for the new polyethylene unit Bay 3 in Q4/23. The Baystar ethane cracker recorded a low utilization rate due to operational challenges that continued throughout 2023. Combined with the weak market environment, increased costs due to the planned depreciation of the cracker and higher interest expenses and fixed costs resulted in a markedly negative result contribution from Baystar.

Net special items amounted to EUR –214 mn (2022: EUR 582 mn) and were mainly a result of impairments related to Borealis’ nitrogen business and Renasci N.V. Net special items in 2022 were mainly related to the successful listing of a 10% share in Borouge, leading to a gain from the disposal, and the write-up of Borealis’ nitrogen business. The Operating Result of Chemicals & Materials declined substantially to EUR –120 mn compared to EUR 2,039 mn in 2022.

Capital expenditure in Chemicals & Materials decreased to EUR 1,345 mn (2022: EUR 1,896 mn). Capital expenditure in 2022 included an equity injection to Borouge 4 of around EUR 0.4 bn and non-cash effective CAPEX related to leases in the amount of around EUR 0.5 bn, which were related to Borealis’ construction of the new propane dehydrogenation (PDH) plant in Belgium. In 2023, besides ordinary running business investments, organic capital expenditure was predominantly related to Borealis’ construction of the new PDH plant in Kallo, the planned turnarounds at the Schwechat and Porvoo sites, and the construction of the ReOil^® plant in Austria.