Formosa Plastics Group’s (FPG, 台塑集團) subsidiaries released conservative outlooks for next quarter as the US-China trade dispute continues to weaken demand for plastic products and some factories are due to undergo annual maintenance.
Formosa Petrochemical Corp (台塑石化), the group’s oil refining subsidiary, on Thursday said its sales for last month declined 12.09 percent year-on-year, but increased 10.87 percent from April to NT$58.24 billion (US$1.85 billion) after its annual maintenance concluded.
“The recent decline in the price of Brent crude oil weighed on our refining business’ margin,” Formosa Petrochemical president Tsao Minh (曹明) said in Taipei.
The price of Brent crude dropped to US$60 a barrel as of Thursday, Tsao said. The company plans to cut its daily output of refined petroleum by 7.4 percent next quarter, due to the low oil prices, Formosa Petrochemical said, adding that the capacity utilization rate of its petrochemical units would drop due to annual maintenance.
Formosa Chemicals & Fibre Corp (台灣化纖), which manufactures and sells integrated plastic and nylon products, saw its revenue fall 16.84 percent annually to NT$27.15 billion, a 6.2 percent decrease from a month earlier.
The company attributed the decline to the shutdown of its No. 1 and No. 3 aromatics plants and No. 3 styrene monomer plant in Taiwan, as well as its purified terephthalic acid plant in Ningbo, China, which were last month still under inspection.
Sales for this quarter are expected to decline from last quarter, but maintenance would come to an end next quarter, Formosa Chemicals vice chairman Hong Fu-yuan (洪福源) said, adding that prices for its products might drop due to sluggish demand.
Supply in the Chinese market increased after Hengli Group Co Ltd’s (恆力石化) new plant began operations in March, and Zhejiang Petrochemical Corp (浙江石化) plans to increase its output next year, Hong said.
“It will be challenging for us in the next few years as new companies enter the market, but if crude oil prices hover between US$50 and US$55 a barrel, there will be a profit margin,” he said.
Formosa Plastics Corp (FPC, 台灣塑膠), which makes intermediate raw materials for plastics such as polyvinyl chloride (PVC) and vinyl chloride, said its revenue dropped 15 percent annually and fell 1.05 percent monthly to NT$19.01 billion.
Profits for next quarter would be higher than this quarter, as PVC prices would increase ahead of the peak season for polyethylene and due to an addition of NT$7 billion in cash dividends, FPC president and chairman Jason Lin (林健男) said.
However, sales might fall next quarter as demand for daily necessities, mostly made of plastic materials, weakened amid uncertainty over the US-China trade dispute, he said.
The company’s utilization rate might fall to 89 percent next quarter, from 93 percent this quarter, as some of its plants would be undergoing maintenance, Lin said.
Nan Ya Plastics Corp (南亞塑膠), which makes plastic products, chemicals and electronic materials, saw its revenue drop 17.51 percent year-on-year and 1.14 percent monthly to NT$24.79 billion.
Sales for this quarter are expected to increase from last quarter, Nan Ya chairman Wu Chia-chau (吳嘉昭) said.
Wu said that ethylene glycol prices remained low and the company plans to cut the utilization rate of its ethylene glycol factory in Taiwan to 40 percent on Monday.
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