Formosa Plastics Corp (台塑), the nation’s largest maker of polyvinyl chloride, yesterday said its pretax profits dropped 67.8 percent from a year earlier because of declining sales and falling petrochemical prices amid the global slowdown.
The company’s pretax profits were NT$5.4 billion (US$183 million) in the three months ended on March 31, down NT$11.4 billion from the same period last year, according to a company filing to the Taiwan Stock Exchange.
On a quarterly basis, the first-quarter figure indicated a surge of 384.2 percent over the previous three months, which Formosa Plastics attributed to a NT$400 million increase in operating profits, a rise of NT$3.32 billion in equity investments and a NT$1 billion gain from selling land in New Taipei City’s Sansia District (三峽).
Revenues in the first quarter totaled NT$47.3 billion, up 16.1 percent quarter-on-quarter, while operating profits grew 22.2 percent to NT$2.3 billion from the previous quarter, the company said.
“Demand from downstream industries was weak in the fourth quarter because of credit tightening in China and the eurozone debt problem,” Formosa Plastics said in the filing. “Sales increased in the first quarter to reflect the recovering market demand.”
Formosa Plastics is the flagship company of the Formosa Plastics Group (台塑集團) and its NT$0.89 earnings per share in the first quarter was the best among the group’s major members.
Three of Formosa Plastics’ affiliates also announced their first-quarter results yesterday, with Formosa Petrochemical Corp (台塑石化) saying its pretax profits were down 75.8 percent year-on-year to NT$4.87 billion, or earnings per share of NT$0.51.
Formosa Petrochemical, based in Yunlin County’s Mailiao (麥寮), said in a separate filing that its NT$15.24 billion decline in pretax profits in the first three months was mainly because of the government’s control of domestic fuel prices amid rising global crude costs.
Crude oil prices rose in the first quarter on US and European efforts to curtail Iranian oil exports over Tehran’s nuclear program, which in turn has boosted costs for refiners and petrochemical makers.
The government has asked state-owned CPC Corp, Taiwan (CPC, 台灣中油) to help stabilize consumer prices by not passing on the full cost increase, eroding profit margins of CPC and Formosa Petrochemical, which followed its larger peer in price changes.
“Formosa Petrochemical didn’t make much money from oil products in the first quarter,” Capital Securities Corp (群益證券) analyst Max Chan said. “Petrochemicals rose, but costs rose more.”
However, Formosa Petrochemical said it swung into a profit from a loss of NT$4.42 billion in the previous quarter as a result of increased sales in both refining and petrochemical businesses.
Revenues in the first three months totaled NT$229.82 billion, up 13.3 percent quarter-on-quarter and 1.4 percent year-on-year, the company said.
Formosa Chemicals and Fibre Corp (台灣化纖), a group member which produces aromatics and styrenics, reported NT$3.67 billion in pretax profit, or NT$0.65 per share, 81.9 percent lower than a year earlier, while Nan Ya Plastics Corp (南亞塑膠), the nation’s largest plastics maker, said its pretax earnings were NT$1.77 billion in the first quarter, or NT$0.22 per share, a decline of 89 percent from the year before.