"With Versalis, Eni chemistry is back in Serie A". Daniele Ferrari, CEO of Versalis, does not hide his satisfaction. He is about to close a record year at the helm of the chemical subsidiary Eni born from the ashes of Polimeri Europa and Enimont which had loaded a disastrous legacy on its neck. He has just returned from a conference which celebrated the centenary of Porto Marghera where the petrochemical plant was opened in 1917 in the middle of the war and on the eve of the Russian revolution. The day before he was in the Middle East at the GPCA, the international chemical conference in Dubai, also promoting the oilfield chemicals (products intended for the oil industry) thanks to the agreement signed with the local Mazrui Energy Services. And he had just returned from South Korea where the plant built with Lotte Chemical in the elastomer sector had been inaugurated. These are all stages that gather the fruit of the strategy launched in 2012 with the birth of Versalis and which we asked him to talk about in this interview with FIRST online. Knowing full well that chemistry rests on somewhat obscure names – such as styrene polymers, elastomers, polyethylene, intermediates – which we find however at every step in daily life in the form of toys, cars, household appliances, tyres, water bottles and a thousand other applications of plastic. And so it affects us all.
Has Eni found a treasure in Versalis? Eni's latest quarterly seems to be leaning towards yes and for Versalis 2017 promises to be a record year. How did we go from an operating loss of 688 million, six years ago, to an operating profit of 420 million in the first nine months of this year, with a growth trend of 42%?
“Let's say that Versalis is a treasure to be built and that its transformation is a process in continuous evolution after the difficult years that have led to a downsizing of the presence abroad and the concentration of the market share in Italy. The mandate we received in 2012, to restructure chemistry, was very complex. Furthermore, from the point of view of the accounts, the situation was truly dramatic. Scandals and cyclical crises had greatly tarnished the brand and rebuilding was not an easy task”.
Surely. So much so that Claudio Descalzi, shortly after rising to the top, announced in 2015 that Versalis was for sale – after having cost the beauty of 3,6 billion in losses in the previous 10 years. But now he has changed his mind. What happened?
“We have followed three fundamental guidelines. The first: chemistry is an integrated business; therefore we have aimed at recreating production integration, renewing and refocusing the portfolio on products with greater added value. We then decided to close the plants with no future, repositioning the plants on new productions, wherever possible. This is the case of Porto Torres in green chemistry and Priolo in Sicily, Hythe in England and Sarroch in Sardinia. The third pillar is the return to the international scene”.
We remain on the accounts and on Versalis' new strategy. The results are visible but can they be considered structural, like a real cycle reversal, or are they at least in part linked to the fall in the price of the raw material, oil?
“The choices we have made, the measures we have taken allow us to normalize our future. On what levels? Perhaps not on those of 2017 which should be considered a record year also influenced by the favorable external context. But the actions taken protect us from cyclicality and make it realistic to stabilize adjusted EBIT at 300-350 million a year. If we manage to complete all the development activities undertaken, these will increase the result”.
Versalis is changing its skin: from traditional basic chemistry towards premium manufacturing, as we have said. But also towards green chemistry. How are they doing?
“Green chemistry is a project and a goal on which we aim. In Porto Torres, in a joint venture with Novamont, we have managed to replace the old plants that are no longer sustainable with new renewable production and an investment of 280 million so far. Experimentation is underway, we had some start-up difficulties that we are working on. Resolved those, we will evaluate the transition to the third and final phase. In Porto Marghera we want to combine traditional chemistry with renewable chemistry in the future. We then have many other initiatives, for example agronomic experimentation with guayule, a shrub from which a natural hypoallergenic rubber can be extracted, or bio-chemical processes for the production of chemical intermediates from sugars, in joint venture with Genomatica”.
The international agreements chapter saw a marked acceleration during 2017.
“It was necessary to change course and we did it quickly, leveraging our heritage in proprietary technologies. Precisely that heritage has been one of the strengths that we have brought around the world: it has led to joint ventures with local partners, therefore with lower risks. The recent inauguration of the Lotte Versalis Elastomers plant in South Korea, built in the record time of 26 months, is the fruit of this strategy and we are ready to replicate it in other geographical areas. Also in 2017 we closed agreements with Sonatrach in Algeria, with Mazrui in Abu Dhabi and with Elevance Renewables for Porto Marghera: they arrived now but left years earlier. In 2012 we were no longer present in Asia, today we are back with sales offices in India, China, Singapore and even Australia”.
Some of these areas incorporate geopolitical risk…
"Eni has enormous geopolitical diversification and this reduces the hypothetical risks. Furthermore, the group boasts an exceptional ability to manage international relations. Finally, it should be considered that over the next 5 years, 75% of the growth that the chemical sector will achieve will be in Asia and China. So in order to grow, it's imperative to be there: that's where cars, mobile phones, tires are built. And South Korea is the ideal location to supply Southeast Asia and China."
Next steps?
"I hope we can announce a partnership in the United States soon. There, the target is elastomer or styrene polymers (rubbers or polystyrene base materials), where we have proprietary technologies to exploit: we are present with sales offices in Houston but we don't have a production unit yet. That will be the next step."
Has chemistry changed in recent years not only in Italy but also in the rest of the world with which Versalis is confronted?
“Between 2010 and XNUMX we witnessed a clear division between basic chemistry and specialty chemistry. The former migrated to the Middle East in the Gulf countries where the raw materials are at the plant mouth; the latter were concentrated in Europe and the USA where the novelty of shale gas and ethane have recently prompted strong investments throughout the supply chain.
China is one of the major users of these productions but has now also begun to welcome foreign companies with qualified products but, above all, to become increasingly self-sufficient. Suffice it to say that in 2017 investments in research and development rose to 11 billion, for the first time overtaking the United States (9 billion) and Europe (8 billion). Therefore wealth and know-how are being redistributed. The prospects for Europe lie in specialty products, a high quality workforce, and technologies. It is no coincidence that we have also witnessed a beautiful rebirth in the Old Continent”.
You were recently appointed, the first Italian, president of PlasticsEurope, the association of European plastics industries and sits on the board of Cefic, which brings together the CEOs of chemical companies. What files do you have on the table?
“We are at the forefront of the Circular Economy Package and the EU strategy on plastics: two sensitive issues for our sector in which it is easy to encroach on propaganda and much more difficult to set realistic goals for the industry. However, these are two appointments that represent an important recognition for Eni and for Versalis. And they reward the international partnership strategy we have undertaken”.
A last question. In 2016, Eni abandoned the search for a "travel companion" for Versalis identified in the SK Capital Partners Fund and the sale of the company or a significant share of the capital. Then there was talk of a chemical pole under the direction of Cdp that would bring together Versalis and Mossi Ghisolfi. Or again the possibility of an IPO, with listing on the Stock Exchange. But can Versalis walk alone in the face of giants like the German and French ones or the expansion of Asian industry?
“Eni's CEO has expressed his views on Eni's strategy towards Versalis several times and I refer you to his words, but it doesn't seem to me that there are currently any specific operations on the table. As for Versalis, I can answer that we are happy with Eni's renewed interest in growing the chemical sector. It guarantees us that solid basis to continue the strategy started, through partnerships such as those with Lotte Chemical, Genomatica, Elevance and the other groups we have mentioned. It leads us to have an international presence that is recognized by our partners and representative bodies, as we have seen".
