Political and social unrest are the key challenges facing the petrochemical industry in 2011, Borealis' CEO Mark Garrett said Thursday.
In an interview with Platts, following Borealis' reporting net profits of Eur333 million (about $460 million) for 2010 -- up significantly from 2009 -- Garrett said maintaining such a performance could prove difficult in 2011, with political issues threatening market conditions.
"In 2010 the market conditions were better than anybody expected and it was satisfying to make such a profit. We're happy about it, but there was a market tailwind that supported the results," Garrett said.
Looking ahead to 2011, there are three key challenges according to Garrett: "When we look at it, we see social unrest on top of our list of uncertainties. There is also the political inability to deal with sovereign debt. And the final thing is, will government bring the financial market reforms that were promised, but most of them haven't yet delivered on.
"Those three things could all blow the real economy out the water and the petrochemical industry could become irrelevant again like at the end of 2008, when the bubble bust and world stopped. That's more our concern. Not the real economy as such, but the peripheral things that can lead to that situation and that seems to be cooking up again now," he added.
Daniel Shook, Borealis CFO, said: "In terms of keeping up the 2010 performance, it's our goal. I'd love to say the world is nice and stable, but there's still a lot of fundamental challenges in the world."
Shook added that he believed Borealis to be well set to face those challenges adding: "Our shareholders understand the volatility in our businesses and allow us to operate with a good strong balance sheet. Which enables us to weather through these periods."
Garrett said that "the industry needs to be conservative" in its approach going forward.
"In our opinion this is an industry that is not a good industry for private equity to leverage balance sheets and put heaps of debt on a company. We saw that with LyondellBasell," he said.
