Formosa Plastics Group (FPG, 台塑集團), the nation’s largest industrial conglomerate, yesterday said aggregate annual earnings last year by its four main companies grew more than twofold, despite a persistent slump in international oil prices, because the group improved its product mix through differentiation.
As international oil prices continued to drop, the companies managed to raise earnings thanks to favorable foreign exchange movements and rising sales among partners down the supply chain.
Last year, the group’s four major units — Formosa Petrochemical Corp (台塑石化), Formosa Plastics Corp (台灣塑膠), Formosa Chemicals and Fibre Corp (台灣化學纖維) and Nan Ya Plastics Corp (南亞塑膠) — saw their combined net income rise 97.8 percent annually to NT$145.86 billion (US$4.33 billion), with sales dropping 21.9 percent to NT$1.45 trillion.
The companies gave a muted outlook for this quarter, but are expecting momentum to pick up after a Chinese New Year vacation lull.
“The pace of recovery in the global economy remains a lingering concern, but we are prepared to hedge against a possible downturn by diversifying our markets and expand to the India, New Zealand, Africa and South America markets,” Formosa Plastics vice chairman Jason Lin (林健男) said in a joint earnings conference.
Lin also said that the group’s products remain highly competitive in China, due to tariff benefits brought on by the Economic Cooperation Framework Agreement.
However, Lin said that these boons might diminish as free-trade agreements between Japan, South Korea and China take effect.
The group’s product mix includes a new material that has superior water absorbency properties developed by Formosa Plastics Corp that could be used for diapers, which contributed about NT$601 million in sales.
“Crude prices are expected to halt its tumble, and fluctuate by US$5 above or below US$37 per barrel,” Lin said, adding that the international market is susceptible to speculation since US regulators had lifted restrictions on institutional investors activities.
“Currently, petrochemical products are priced at about 12 times higher than the cost of crude oil, which is higher than the traditional average of 10 times,” Formosa Chemicals and Fibre vice chairman Hong Fu-yuan (洪福源) said.
During the period, Formosa Petrochemical Corp led the four units, reporting a 479.3 percent year-on-year rise in earnings of NT$47.30 billion, or NT$4.97 per share, while sales dropped 31.1 percent annually to NT$629.51 billion.
Formosa Chemicals and Fibre Corp reported that net income rose 125.4 percent to NT$27.59 billion, or NT$4.72 per share, with sales slipping 18 percent from 2014 to NT$329.35 billion.
Nan Ya Plastics Corp said that its net income had only risen 10 percent from last year to NT$360.64 billion, or NT$4.5 per share.
Formosa Plastics Corp reported a 72.8 year-on-year rise in net income last year to NT$30.87 billion, or NT$4.85 per share, and that sales declined 11.6 percent annually to NT$191.5 billion.
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