Fri, Mar 27, 2009 - Page 11 News List

Formosa Chemicals profits drop

WEAK FOURTH QUARTER Write-downs from inventory losses and sharp drops in chemical prices led to a bigger-than-expected loss of NT$21.85 billion in the last quarter

By Kevin Chen  /  STAFF REPORTER

Local chemical maker Formosa Chemicals & Fibre Corp (台灣化纖) said yesterday its after-tax profit plunged 87.3 percent last year from a year earlier because of a bigger-than-expected fourth-quarter loss.

The company, one of the four largest units of Formosa Plastics Group (台塑集團), said in a statement that it made a profit of NT$6.1 billion (US$180 million), or NT$1.1 in earnings per share (EPS), last year, compared with NT$47.69 billion, or an EPS of NT$8.69, in 2007.

The other three main Formosa units are Formosa Plastics Corp (台塑), Nan Ya Plastics Corp (南亞塑膠) and Formosa Petrochemical Corp (台塑石化).

The company said on Jan. 7 that revenue rose 4.09 percent to NT$249.82 billion last year from NT$240.05 billion a year earlier.

EIGHT-YEAR LOW

Formosa Chemicals’ net profit of NT$6.1 billion last year was the lowest since 2001, when it reported NT$4.61 billion in profit. The company attributed the weak performance last year to a plunge in chemical prices and write-downs from inventory losses during the last three months of the year.

After subtracting the NT$27.95 billion in profit that the company made in the first three quarters of last year, Formosa Chemicals incurred a loss of NT$21.85 billion in the fourth quarter, compared to a profit of NT$10.5 billion for the same period of the previous year.

DIVIDEND PLAN

This represented the company’s first quarterly loss since the first three months of 1999, when it posted a loss of NT$518 million, the company’s previous financial reports showed.

Despite a loss of NT$21.85 billion in the fourth quarter, Formosa Chemicals is likely to break even on its earnings before interest and tax (EBIT) in the first quarter thanks to a higher utilization rate, a pickup in shipments and improved margins for the quarter, Citigroup analyst Oscar Yee (余浩銘) said in a client note last night.

“However, we do not expect the current strength to be sustainable into late in the second quarter or second half of the year,” he wrote, citing the restart of many idled Asia facilities from next month and new supplies from Kuwait.

Given last year’s poor performance, the company’s board yesterday approved a proposal to distribute NT$1.2 in dividends to shareholders — NT$0.9 in cash dividend and 3 percent in stock dividend. Last year, the company paid shareholders an all-cash dividend of NT$7.

Based on the company’s closing price of NT$43.15 in Taipei trading yesterday, the company’s NT$0.9 cash dividend translated into a dividend yield of 2.1 percent, which is slightly higher than the 1.7 percent in dividend yield at Formosa Petrochemical and 1.9 percent at Nan Ya Plastics, but lower than the dividend yield at Formosa Plastics at 3.3 percent.

The company’s board also agreed to issue NT$10 billion worth of seven-year corporate bonds to repay debt and improve the company’s financial structure.

In addition, the board gave the green light to a plan to raise NT$1.66 billion through the issuing of 166 million new common shares.

The company said in the statement that it would use the proceeds to enhance capacity and improve manufacturing facilities.

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