Sat, Jun 14, 2014 - Page 13 News List

Formosa Plastics issues its lowest-ever dividend

US ACTIVITY:The firm spent US$2bn expanding its branch in the US, which is set to increase output, but the investment has hit payouts to shareholders

By Camaron Kao  /  Staff reporter

Shareholders of Formosa Plastics Corp (台塑企業), the nation’s largest producer of polyvinyl chloride, yesterday approved a plan to distribute 58.46 percent of its earnings per share (EPS) from last year and save the rest for capacity expansion needs.

The company is to pay a cash dividend of NT$1.9 to shareholders this year, based on last year’s EPS of NT$3.25, with the payout ratio to be the lowest in the company’s history.

“We apologize to our shareholders for distributing so little this year. It’s because we have many foreign investments to make,” company chairman Lee Chih-tsuen (李志村) said at this year’s annual general meeting.

“The interest rates overseas are high and it is difficult to obtain funds from foreign banks, making it more efficient for us to use our own money,” Lee said.

Normally, the company distributes most of its income generated the previous year to shareholders, a principle set by company founder Wang Yung-ching (王永慶), Lee said, adding that the company once paid 90 percent of its income to shareholders.

This year, the company has spent US$2 billion to increase the capacity of its US branch, Formosa Plastics Corp USA, which will allow the company to make an additional 1.2 million tonnes of ethylene, 600,000 more tonnes of propene and 400,000 more tonnes of high-density polyethylene each year, Lee said.

The company has also spent US$750 million to expand a factory in China’s Zhejiang Province to make an additional 160,000 to 200,000 tonnes of acrylate a year, 45,000 more tonnes of superabsorbent polymers and 75,000 more tonnes of ethylene-vinyl acetate, Lee added.

Even so, he said, the company’s operating profit in the first half of this year will be more than the NT$1.28 billion (US$42.6 million) of the previous year on the back of better global economic conditions.

However, Lee said it is not likely that Formosa Plastics Corp USA will report a higher profit this year than the US$1.33 billion it reported last year because of higher raw material costs. Formosa Plastics holds 22.59 percent of the US company’s shares.

Lee said the company is likely to post higher profit this year than NT$20.72 billion last year because it will book income of about NT$2.6 billion from sales of Formosa Petrochemical Corp (台塑石化) shares.

As for Formosa Plastics Group’s (台塑集團) construction of a new giant steel mill in Vietnam, Lee said the Vietnamese government has to guarantee the safety of Chinese workers for them to return to work.

About 3,000 Chinese workers were evacuated by Beijing during violence in Vietnam after China deployed an oil rig near the Vietnamese coast.

If these workers cannot resume work within two months, the mill’s first furnace might not be operational by the end of next year, the group said.

The group chose to build the mill in Vietnam because there are few factories in the country, so it does not need to worry about how much carbon dioxide it produces, Lee said.

Formosa Plastics shares rose 0.26 percent to NT$76.7 yesterday, outperforming the TAIEX, which was down 0.09 percent.

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