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Formosa Plastics profit rises sharply

"The earnings figures reflect steady growth."

Hank Chen, National Investment Trust Co manager

Formosa Plastics Corp's (台塑) fourth-quarter profit rose at the fastest pace in two years after the world's second-largest maker of polyvinyl chloride, or PVC, paid less for raw materials.

Net income jumped 90 percent from a year earlier to NT$7.09 billion (US$215 million) in the three months that ended Dec. 31. The numbers were derived from full-year earnings, the company said yesterday.

Formosa Plastics earned more from making chemicals used in bottles, toys and pipes as the cost of ethylene, a key ingredient for the company's products, fell on expectations increasing supplies would depress prices.

"The earnings figures reflect steady growth," said Hank Chen (陳維隆), who manages US$21 million for National Investment Trust Co (建弘投信).

Expanding "ethylene capacity is positive for them," he said.

The increase in net income was the biggest gain since the final quarter of 2004. Jerry Lin (林勝冠), a company spokesman, declined to comment on the derived fourth-quarter figures.

Spot prices of ethylene, a basic material for plastics and chemical fibers, fell 2.4 percent in Taiwan during the fourth quarter, according to Platts, an oil-price service.

Asian ethylene makers are boosting production to tap China's rising demand for the feedstock. Formosa Petrochemical Corp (台塑石化), a Formosa Plastics affiliate, will open a plant in the second quarter that will increase Taiwan's annual ethylene capacity by 42 percent to 4 million tonnes a year.

Fourth-quarter sales at Formosa Plastics, which also makes polyethylene for use in packaging and bottles, climbed 3.5 percent from a year earlier to NT$36.9 billion, after increasing 13 percent in the previous three months, according to previous filings to the Taiwan Stock Exchange.

Formosa Plastics' shares rose 0.3 percent to close at NT$61.6 on the Taiwan Stock Exchange yesterday. The stock has advanced 14 percent this year, more than the 0.5 percent gain in the benchmark TAIEX index.

Net income last year dropped 6.9 percent. Full-year profit fell to NT$30.9 billion, Formosa Plastics said in a statement yesterday, from the NT$33.2 billion reported in 2005. The company plans to pay a cash dividend of NT$4.4 a share. That compares to a cash dividend of NT$4.1 per share and a stock dividend of 3 percent last year.
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