Sat, Mar 14, 2009 - Page 12 News List

Petrochemical firm cuts dividends

HARD TIMES After posting a loss in the fourth quarter and a sharp drop in full-year earnings, Formosa Petrochemical proposed paying only NT$1.50 per share, down 78 percent

By Kevin Chen  /  STAFF REPORTER

Formosa Petrochemical Corp (台塑石化) said yesterday it would distribute NT$1.50 in dividends per common share based on last year’s earnings, down 77.6 percent from the NT$6.70 it paid in the previous year.

The dividend payout will include NT$1.20 in cash and 3 percent in stock, the company said in a stock exchange filing.

If approved by shareholders on June 4, the NT$1.50 dividend payout for last year’s performance would be the lowest payout from a Formosa Plastics Group (台塑集團) member company, according to the financial reports of the nation’s largest petrochemical conglomerate.

Formosa Petrochemical paid all-cash dividends of NT$6.70 and NT$4.40 per share in the previous two years, the company’s financial reports showed.

With the stock closing at NT$61.70 on the Taiwan Stock Exchange yesterday, Formosa Petrochemical’s proposed cash dividend of NT$1.20 translates into a dividend yield of 1.94 percent. That would be lower than the 3.1 percent in dividend yield that analysts at Citigroup Global Markets had expected.

“The FY08 dividend yield was significantly below the 6 to 8 percent paid in 2004-07,” Citigroup analyst Oscar Yee (余浩銘) said.

In comparison, U-Ming Marine Transport Corp (裕民航運), a member of the Far Eastern Group (遠東集團), said yesterday it would distribute an all-cash dividend of NT$6, offering a dividend yield of 12.42 percent based on its share price of NT$48.30.

Macronix International Co (旺宏電子), a local maker of memory chips that counts Nintendo Co among its clients, yesterday said its board agreed to offer a dividend yield of 5.32 percent, based on a cash dividend of NT$0.70 and its closing share price of NT$13.15.

Formosa Petrochemical did not specify the cause for the dividend cut in the stock exchange filing.

Analysts have said earlier that local companies were under pressure to conserve cash this year as earnings fall amid the global recession. Formosa Petrochemical, in particular, faces challenges in both its refinery and chemicals divisions given the slowdown in global demand and increased volatility of refining margins and oil prices, Citigroup said in a report.

In a separate stock exchange filing, Formosa Petrochemical reported that net profit dropped 77.84 percent year-on-year to NT$15.19 billion (US$440 million), or NT$1.64 in earnings per share, last year. The company posted a record NT$69.61 billion in profit, or NT$7.53 in earnings per share, in 2007. Revenue rose 25 percent to NT$875.57 billion last year from NT$699.31 billion a year ago, the company said.

The NT$15.19 billion profit was 30 percent below Citigroup’s forecast, which Yee attributed mainly to NT$8.2 billion in inventory write-offs to market value and falling oil prices. Citigroup has a sell rating on Formosa Petrochemical shares, with a target price of NT$46.

After subtracting the NT$45.56 billion in profit that the company made in the first three quarters of last year, Formosa Petrochemical incurred a loss of NT$30.37 billion in the fourth quarter — the first quarterly loss for the company. The company made a quarterly profit of NT$18.24 billion a year earlier.

To help strengthen its financial structure, the company’s board also approved a capital enhancement plan yesterday, aiming to raise NT$2.77 billion by issuing 277 million new common shares.

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