Formosa Plastics Group (台塑集團, FPG) chairman William Wong (王文淵) said yesterday that the group’s revenue in the second half of this year may fall as much as 30 percent from the first half amid the compulsory closures of six petrochemical plants and China’s continuing monetary tightening.
That confirmed the group’s pessimism concerning the second half voiced during Formosa Chemicals & Fibre Corp’s (台灣化學纖維) annual shareholders’ meeting on Friday.
“The negative impact will vary among companies in the group, with the average falling between 20 and 30 percent,” Wong told reporters after FPG flagship unit Formosa Plastics Corp’s (台塑) shareholders’ meeting yesterday.
Photo: Chien Jung-feng, Taipei Times
Last year, the group’s revenue stood at NT$2.19 trillion (US$75.52 billion), up from NT$1.76 trillion in 2009, according to data on the group’s Web site.
Rising uncertainties in the global economy are driving up the petrochemical industry’s risks for the second half of this year, with a slowing economy in US, a debt crisis in some European countries and Japan’s supply shortage of components being the main factors, company chairman Lee Chih-tsuen (李志村) said.
Despite these challenges, the company is still forging ahead with four major capacity expansion projects in the short term, Lee said, adding that the four projects were located in Mailiao (麥寮), Singang (新港), Jenwu (仁武) and Dongshan (冬山), with all to be completed by the end of the year.
Formosa Plastics also plans to maintain its pace of re-investment for this year by investing US$600 million in the company’s subsidiary in China’s Ningpo, mainly to expand the capacity of five products, including polyvinyl chloride (PVC) and Ethylene vinyl acetate (EVA), Lee added.
Both Wong and Lee agreed with the government’s recent conclusion that the local petrochemical industry should develop higher value-added products, saying the company’s overall research and development (R&D) spending accounts for more than 10 percent of its total revenue, more than the 2 percent investment standard promulgated by the Ministry of Economic Affairs.
However, the development of high value-added products is not easy, because it is difficult to increase the volume of production of these products, and the company may not see a return on R&D, Lee said.
“Taking carbon fibers as an example, Formosa Plastics has been developing this high value-added product for many years, but it hasn’t made money for us until this year,” he said.
Therefore, Lee said the company would carefully consider related investment in this kind of product, while seeking possible cooperative opportunities with global petrochemical companies in R&D.
Formosa Plastics shareholders yesterday approved a plan to pay a cash dividend of NT$6.8 per common share, based on last year’s net income of NT$45.55 billion, or NT$7.44 per share.
In the first five months of this year, the company’s revenue totaled NT$87.15 billion, up 6.93 percent from a year earlier.
Shares in Formosa Plastics fell 2.3 percent to close at NT$106, according to the Taiwan Stock Exchange’s data.
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