Deficit won't sour interest in Taisalt

Analysts said yesterday they remain optimistic about the intitial public offering on the stock market of Taiwan Salt Industrial Corp (Taisalt, 台鹽) next month, despite the state-run company's statement that it would lower its pre-tax profits forecast to a NT$100 million loss from the NT$600 million profit it originally predicted.

The company will take a one-time hit to its profits this year because of its plans to set aside NT$700 million in additional provisioning for pensions.

The additional provisioning is an attempt to avoid having to incur provisioning expenses over the next few years, said Hsu Chun-chieh (許俊傑), a special aide to company chairman Cheng Pao-ching (鄭寶清).

The funds will be allocated for the pensions of Taisalt employees who were forced into early retirement in 1976 and 1982.

"The NT$700 million expenditure will not dampen the interest of shareholders, as the Commission of National Corporations has held the outlay for us," Hsu said. The commission supervises all state-run companies under the management of the Ministry of Economic Affairs.

"We have high expectations for Taisalt's share sale," said Angel Lu (呂叔玲), a public relations official at Taiwan Securities Co (台証證券), which is managing the sale.

"Taisalt still retains a favorable image among investors due to its brisk sales figures in recent years," Lu said.

Taisalt, with capital of NT$2.5 billion, reported sales of NT$517 million last year, up from NT$291 million the previous year.

The company was planning to be listed on the local stock market in June.

However, the sale has been postponed until next month due to an unresolved pension dispute.

The company is set to sell 60 percent, or 150 million shares, to investors, Hsu said.

Taisalt was trying to give pensions to its employees forced into retirement for years, but was unabel to do so because of the absence of legal regulations covering such special pensions, Hsu said.

Toward the end of May, the Legislature approved a measure requiring Taisalt to allocate the full budget for the special pensions in its balance sheet this year.

Hsu also said the company was pleased with the proposed share price set by the Commission of National Corporations, which is NT$24.8 per share.

He said that the price is affordable for workers interested in the 10 percent stake reserved for company employees.

One securities analyst viewed Taisalt as one of the most promising companies in the biotech sector on the TAIEX.

"Taisalt can still attract a fair number of investors due to the success of its transformation," said Stanley Yeh (葉德霖), an analyst at Yuanta Core Pacific Securities Corp (元大京華證券).

Besides the salt business that constitutes 64 percent of Taisalt's sales, the company has also been putting effort into developing biochemical products, such as various skincare products, which generate NT$300 million in annual revenues.

Taisalt is also seeking to franchise its retail stores, increasing its number of storefronts from 50 to 100 by the end of the year.

"I think that although Taisalt's financial report may look bad for this year, it won't dampen investors' interest as long as the company can ensure that it has reserve funds to cover the deficit it forecasts," Yeh said.