Formosa Plastics Corp (台塑), the world’s second-biggest maker of polyvinyl chloride, or PVC, posted a 58 percent drop in first-quarter profits after product prices fell.
Net income declined to NT$2.92 billion (US$87 million), or NT$0.51 per share, from NT$6.96 billion, or NT$1.22 a year earlier, the company said in a filing to the Taiwan Stock Exchange yesterday.
Sales at Formosa Plastics plunged as the global recession cut demand for PVC, used in construction as well as production of handbags, shoes and toys. The average price of the plastic material in East Asia tumbled 37 percent in the first quarter from a year earlier, according to data compiled by Bloomberg.
“The PVC market was in a terrible condition,” said Erik Chang, a Taipei-based analyst at Capital Securities Corp, who has a “reduce” rating on the stock.
Sales in January-to-March fell 37 percent from a year earlier to NT$31.4 billion, after the 42 percent decline in the fourth quarter, according to monthly stock exchange filings. PVC accounted for 20 percent of first-quarter revenue.
Formosa Plastics gained 0.9 percent to NT$54.5 in Taipei trading before the earnings announcement. The stock has risen 25 percent this year, compared with the 22 percent gain in the benchmark TAIEX index.
Earnings may improve in the second half as demand will probably pick up along with the economy, said Donald Hung, an analyst at Taiwan International Securities Corp in Taipei, who has a “trading buy” rating on the stock.