Mon, May 12, 2014 - Page 13 News List

Refiner Formosa forecasts lower quarterly profits

MIRED IN MAINTENANCE:Formosa Petrochemical Corp expects to see a slide in revenues as repair work delays shipments ahead of the summer travel season

By Camaron Kao  /  Staff reporter

Formosa Petrochemical Corp (FPCC, 台塑石化), the nation’s only listed oil refiner, is likely to see declining profit this quarter as annual maintenance affects its product shipments, the company’s president said last week.

Oil product shipments are forecast to decline to about 377,000 barrels per day on average this quarter, from 523,000 barrels a day last quarter, while shipments of refinery products will fall 28 percent over the period, president Tsao Mihn (曹明) said on Tuesday.

As a result, Tsao said net profit for this quarter would see sequential decline from NT$8.78 billion (US$291.5 million) last quarter, though he did not say how much the decline would be.

However, he said net profit for next quarter would return to the level in the first quarter after maintenance projects are completed.

Formosa Petrochemical began repair work at its residue fluid catalytic cracker in Mailiao Township (麥寮), Yunlin County, at the end of March.

It is the first maintenance at the cracker in 10 years and the work is expected to take three months, decreasing the company’s capacity by about one-third, Tsao said.

The company’s second crude oil distillation unit is also undergoing a 45-day maintenance until the end of this month, cutting oil shipments last month to 360,000 barrels a day from 509,000 a month earlier, he said.

Tsai said oil shipments for this month would rise to 370,000 barrels and could climb further to 400,000 barrels next month, if the maintenance ends early.

“Oil demand would rise this quarter as demand in the US and Europe surges with the approach of the tourist season in July, and as diesel demand increases in Muslim nations during the Ramadan holiday period,” Tsao said. “Nevertheless, oil supply around the world is also on the rise this quarter.”

Tsao said that West Texas Intermediate oil would be about US$100 per barrel this quarter, while Brent crude oil will be between US$105 and US$110 per barrel.

As a result, he forecast the company would see a quarter-on-quarter decline in oil product margins from about US$12 per barrel last quarter.

However, margins would still be above US$10 per barrel, he added.

Tsao said Formosa Petrochemical would keep its utilization rate near 100 percent this quarter in its olefin business, similar to a quarter ago, while prices are expected to stay the same.

Sales of oil refinery products account for 65 percent of Formosa Petrochemical’s annual revenue, while those of olefin products 27 percent. Formosa Petrochemical’s revenue decreased 15.9 percent to NT$73.43 billion last month from NT$87.32 billion in March, company data showed.

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