Tue, Apr 24, 2007 - Page 11 News List

Formosa Petrochemical profit surges as oil costs fall

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Formosa Petrochemical Corp (台塑石化), Taiwan's only publicly traded oil refiner, posted its biggest quarterly profit gain in more than two years after crude oil costs fell and the company expanded capacity.

Net income more than doubled to NT$12.4 billion (US$374 million) in the first quarter from NT$4.46 billion a year earlier, the company said in a filing to the Taiwan Stock Exchange yesterday.

Chairman Wilfred Wang (王文潮) has expanded refining capacity 20 percent in the past two years, enabling the company to increase overseas sales. Formosa Petrochemical, based in Mailiao, has earned more turning petroleum into fuels and chemicals as crude oil costs fell 8.3 percent from a year earlier.

"The most important change was that regional refining margin in the first quarter was much better than last year," said Scott Weaver, an oil and chemicals analyst at Macquarie

Securities Ltd in Taipei and who has an "outperform" rating on the stock, before the earnings announcement.

Complex refining margin -- the profit made from processing crude oil into gasoline, diesel and other fuels -- averaged US$5.7 a barrel in Singapore in the first quarter, compared with US$2.6 a year earlier, Macquarie Securities said.

Margins in Singapore, an oil refining and trading center, are a benchmark for Asia. Crude oil fell to an average US$58.23 a barrel in New York in the first quarter, from US$63.48 a year earlier.

Formosa Petrochemical's first-quarter sales surged 22 percent from a year earlier to NT$133.3 billion, after a 0.5 percent gain in the previous three months, based on monthly filings to the Taiwan Stock Exchange.

Petrochemicals accounted for 27 percent of sales in the three months ended last month, compared with 26 percent for diesel and gasoline's 20 percent, the filings said.

Formosa Petrochemical and state-owned rival CPC Corp, Taiwan (台灣中油), the nation's only oil refiners, also have units that process naphtha, an oil product, into ethylene for making plastics and fibers.

Shares of Formosa Petrochemical advanced 1.1 percent to close at NT$73.6 on the Taiwan Stock Exchange before the earnings announcement. The stock has risen 2.8 percent this year, compared with a 2.4 percent gain in the benchmark TAIEX.

Increased capacity helped lift Formosa Petrochemical's sales and earnings, said Erik Chang, an analyst at Capital Securities Corp (群益證券).

Formosa Petrochemical completed a 20 percent refinery expansion last August, boosting its total crude processing capacity to 540,000 barrels a day.

The refiner sells about half of its oil products overseas, Su Chi-yi (蘇啟邑), executive vice president, said on Feb. 12. Formosa controls about 24 percent of Taiwan's gasoline and diesel markets this month, while state-run CPC has the remainder, Chiang Chung-chen (江中鎮), chief of CPC's marketing business division, said earlier this month.

Formosa Petrochemical aims to start production from its third naphtha cracking unit -- able to make 1.2 million metric tons for ethylene a year -- next month. The facility will boost the refiner's total annual ethylene capacity to 2.94 million tonnes, the company's Web site said.

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