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Formosa Plastics' Q4 profit rises as output increases

Formosa Plastics Corp (台塑), the nation's largest maker of polyvinyl chloride (PVC), posted a 55 percent gain in fourth-quarter profit after boosting production of the chemical.

Net income rose to NT$11.02 billion (US$363 million), from NT$7.09 billion a year earlier, beating the average estimate of NT$9.9 billion in a survey of four analysts compiled by Bloomberg.

The figure was derived by deducting nine-month profit from full-year earnings the Taipei-based company announced yesterday.

Formosa Plastics had expanded output to meet rising demand from Asia, including China, for materials used in construction as well as the manufacture of handbags and toys.

"The main driver for Formosa Plastics' earnings growth is the increase in production volume," Huang Lan-ying, an analyst at Capital Securities Corp (群益證券) in Taipei, who has a "neutral" rating on the stock, said before the earnings announcement.

"Demand in the Asia market has been good," Huang said.

Formosa Plastics said in June it planned to invest US$116 million in China to expand chemical production.

The company has plants in China producing PVC, acrylic esters and polypropylene.

Fourth-quarter sales at Formosa Plastics surged 34 percent from a year earlier to NT$49.4 billion, after a 23 percent gain in the previous three months, according to monthly filings to the Taiwan Stock Exchange.

Average prices for PVC climbed 16 percent from a year earlier in East Asia in the fourth quarter, according to Platts, an oil-price service provider.

The material accounted for 20 percent of Formosa Plastics' sales during the period, stock exchange filings showed.

Formosa Plastics shares fell 0.6 percent to close at NT$95.7 on the Taiwan Stock Exchange, before earnings were announced. The stock has advanced 5.1 percent this year, compared with the benchmark TAIEX's 1.4 percent gain.

The company's net income last year climbed 55 percent to a record NT$47.8 billion, it announced yesterday.

Formosa Plastics plans to pay a cash dividend of NT$6.7 a share on last year's earnings. That compares with a payout of NT$4.4 for 2006.

Formosa Plastics' earnings this year will probably be little changed from last year, Huang said.

Power shortages in China hampered some PVC producers there that make the material using electricity-intensive processes. That benefited the Taiwanese company, which produces its PVC from ethylene, she said.
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