Nan Ya Plastics' Q2 profit drops 18%

Nan Ya Plastics Corp (南亞塑膠), the world's largest processor of plastics for pipes and imitation leather, had its first quarterly profit decline in more than two years as Chinese demand for its products stalled.

Second-quarter net income fell 18 percent to NT$7.9 billion (US$246 million) from NT$9.6 billion a year earlier.

It represents the first decline in profit since a 25 percent drop in the first quarter of 2003.

"China was the main reason" for the profit decline, Matthew Lin, an analyst at Polaris Securities Co (寶來證券) in Taipei, said after the earnings announcement on Thursday. "Production of fibers fell because competing plants in China have lower costs."

He has a "hold" rating on the stock.

Growth in sales faltered as China imposed lending curbs on its property market and other industries to prevent the economy from growing too quickly. Some of Nan Ya Plastics' customers couldn't get loans for expansion, Wu Chia-chau (吳嘉昭), executive vice president of the company, said on March 16.

The company started as a plastics-product maker more than four decades ago and has expanded to manufacturing petrochemicals, polyester fibers and electronics components such as optical disks and materials used to make printed circuit boards.

Factories use Nan Ya's products to make goods including handbags, shoes and fabrics.