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Formosa Plastics posts record profit

Formosa Plastics Corp (台塑), the world's second-largest maker of PVC, or polyvinyl chloride, posted a record quarterly profit as demand from China helped bolster product prices.

Net income surged 65 percent to NT$20.1 billion (US$619 million) in the three months ended Sept. 30, up from NT$12.2 billion a year earlier. The figure was derived by deducting first-half profit from nine-month earnings the Taipei-based company announced yesterday.

Economic growth in China, which buys about one-third of Formosa Plastics' products, has helped push up demand for PVC, used in construction, as well as the manufacture of handbags, shoes and toys. China's GDP expanded 11.5 percent from a year earlier in the third quarter.

"Formosa Plastics made handsome earnings from PVC in the third quarter," Benny Ho, a Taipei-based analyst at Yuanta Core Pacific Management Co (元大京華投顧), said before the earnings announcement. He did not have a rating for the stock.

Average prices of PVC climbed 12 percent in the third quarter from a year earlier in East Asia, according to Platts, an oil-price service provider.

Third-quarter sales at Formosa Plastics, also a maker of polyethylene for use in packaging and bottles, increased 23 percent from a year earlier to NT$48.2 billion.

Falling costs helped boost the company's earnings, Ho said.

Northeast Asia's average price for ethylene, a basic material in plastics production, fell 10 percent in the third quarter from a year earlier, according to Platts.

Separately, affiliated Nan Ya Plastics Corp (南亞塑膠), the world's largest processor of plastics for pipes and imitation leather, posted a 34 percent gain in third-quarter profit after prices of chemical products surged.

Net income advanced to NT$20.7 billion from NT$15.5 billion a year earlier. The figure was derived by deducting first-half profit from nine-month earnings the Taipei-based company announced yesterday.

"The ethylene glycol market will keep looking good in the coming months," Jason Lin, a Taipei-based analyst at SinoPac Securities Corp (永豐金證券), said before the earnings announcement. He has a "buy" rating on the stock.

Third-quarter sales surged 30 percent from a year earlier, after rising 17 percent during the April-June period, according to the company's filings to the Taiwan Stock Exchange.

Formosa Petrochemical Corp (台塑石化), the nation's only publicly traded oil refiner, also posted a record quarterly profit because of increased chemical production.

Net income rose 68 percent to NT$22.9 billion in the three months ended Sept. 30, from NT$13.6 billion.

Profit from chemicals has increased since Formosa Petrochemical started production at its No. 3 ethylene plant in May, boosting the refiner's annual capacity to produce the raw material for plastic and textiles by 1.2 million tonnes to 2.94 million tonnes.

"The new capacity makes Formosa Petrochemical more efficient by lowering costs" because of increased economies of scale, Ho said.

Third-quarter sales jumped 33 percent from a year earlier to NT$187.7 billion, after a 9.2 percent increase in the previous three months, the company's filings showed.
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