Sat, Dec 13, 2014 - Page 14 News List

FPG’s four major units to see reduced profit

OILY SLIP:The low price of oil has pushed down the prices of key products for all four of Formosa Plastic Groups’ main units, affecting production and inventory

By Camaron Kao  /  Staff reporter

The share prices of the four major units of Formosa Plastics Group (FPG, 台塑集團), the nation’s largest industrial conglomerate, declined by a range of 3.96 percent to 6.29 percent this week, as investors offloaded holdings in these companies fearing that their profits would be dragged by falling oil prices.

Lower oil prices have pushed down prices of olefin products and other downstream petrochemical products, forcing the four companies — Formosa Petrochemical Corp (台塑石化), Formosa Chemicals & Fibre Corp (台灣化學纖維), Formosa Plastics Corp (台塑) and Nan Ya Plastics Corp (南亞塑膠) — to book losses related to declining inventory prices, Jih Sun Securities Investment Consulting Co (日盛投顧) said in a report issued on Tuesday.

Jih Sun analyst Jun Liao (廖景濬) forecast that Formosa Petrochemical, the nation’s only listed oil refiner, would report pretax losses of NT$7.2 billion (US$230.12 million), or NT$0.76 per share, this quarter, down from a pretax profit of NT$7.89 billon in the previous quarter.

Formosa Chemicals, which produces aromatics and styrenics, would post pretax losses of NT$3.4 bilion, or NT$0.58 per share, this quarter because of a sharp decline in its product prices, Liao said.

Due to cross-holdings among firms under the group, losses at Formosa Petrochemical and Formosa Chemicals would eat away profits at Formosa Plastics and Nan Ya Plastics, Liao said.

Formosa Plastics Corp, the nation’s largest producer of polyvinyl chloride, would report a pretax profit of NT$270 million, or NT$0.04 per share, while Nan Ya Plastics, the nation’s largest plastics maker, would a post profit of NT$2.12 billion, or NT$0.27 per share, Liao said.

On Monday, the four companies posted collective revenues for last month of NT$136 billion, down 16 percent year-on-year and 9 percent month-on-month, affected mainly by weaker petrochemical and refining prices, as well as lower refinery utilization rates given a scheduled maintenance shutdown last month.

This month, Formosa Chemicals plans to temporarily shut down its first and second styrene monomer factories because the two factories are of lower efficiency and not profitable due to current product prices, general manager Hong Fu-yuan (洪福源) said on Monday.

The company would also stop making polycarbonate for 10 days this month and stop producing oxylene, except to satisfy demand from Nan Ya Plastics, to reduce inventory levels, Hong said, adding that the utilization rate for its plastics division would remain at 80 percent this month, the same as last month.

Nan Ya Plastics chairman Wu Chia-chau (吳嘉昭) said the utilization rate of its ethylene glycol plants would be 80 percent this month.

Utilization rate for the company’s four ethylene glycol factories in Taiwan would be 100 percent, while its ethylene glycol factory in the US, which can produce 360,000 tonnes a year, would be 100 percent after it completes maintenance on Dec. 20.

Despite lower prices for ethylene glycol, the margin for the product can still be sustained, Wu said.

The current inventory level of ethylene glycol in China is 660,000 tonnes, a relatively low level, and the need to replenish inventory in China and rising demand in the US next quarter would boost market sentiment, Wu said.

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