Thu, Jul 11, 2019 - Page 12 News List

FPG subsidiaries hit by plunging sales and profits

HALF-YEAR REPORT:Net profits fell by between 36.3 percent and 63.8 percent, but FPCC, FCFC and Nan Ya Plastics expect to see sales pick up in this quarter

By Kwan Shin-han  /  Staff reporter

Formosa Plastics Group’s (FPG, 台塑集團) four major subsidiaries yesterday reported declining sales and profits for the first half of this year, due to lower prices and weakening demand for plastic products, although all but Formosa Plastics Corp (FPC, 台塑) expect a rebound this quarter.

FPC, which makes intermediate raw materials for plastics such as polyvinyl chloride (PVC) and vinyl chloride, saw net profit plunge 36.3 percent annually to NT$18.5 billion (US$593.71 million) and earnings per share (EPS) decline from NT$4.56 to NT$2.91 while cumulative revenue dropped 6.1 percent to NT$109.58 billion.

“In the first half of the year, prices for our plastics products dropped between 10 and 30 percent as a result of declining global demand for automobile, aluminum products, home appliances and lower prices of raw materials,” FPC president and chairman Jason Lin (林健男) told a media briefing in Taipei

Falling prices led to a decline of NT$8.73 billion in sales, Lin said.

“Although sales for this quarter might continue to fall due to annual inspections on some of our factories, we expect net profit would outpace the second quarter due to cash dividend income of NT$7 billion and the low supply in the market,” he said, adding that the high-density polyethylene plant in the US will start operation this quarter.

As for pollution incidents at its Texas factories, the company said all of the waste water created during the production process had to be treated before discharging to nearby waterways.

The company would add hose caps to prevent spills from the 8,000 railcars used to carry plastics pallets along a 96.5km stretch of rail line, and specially assigned employees would clean up after unloading, FPC said.

It is going to add plastic pellets recycling systems and monitoring systems to the factories and invest US$55 million to create a detention basin to reduce the possibility of the pellets entering the environment.

On June 27, US District Judge Kenneth Hoyt ruled that FPG had violated its state-issued permits and federal clean water laws for discharging plastic pellets and other pollutants into Lavaca Bay and other waterways from its Point Comfort, Texas, plant.

Formosa Petrochemical Corp (FPCC, 台塑石化), the group’s oil refinery arm, saw net profit plummet 60.4 percent to NT$17.25 billion and EPS decline from NT$4.57 to NT$1.81, while cumulative revenue fell 10.5 percent to NT$335.24 billion.

“The revenue-to-material cost spread of oil refinery and olefins products shrunk significantly in the first half of the year,” FPCC president Tsao Minh (曹明) said.

Although its clients remain conservative due to the US-China trade dispute and annual maintenance might reduce its utilization rate from last quarter’s 90 percent to 82 percent this quarter, Tsao said that he expects sales this quarter would increase annually as prices of oil and olefins products rebound.

The company expects cash dividend income to contribute NT$4.16 billion to profits for the third quarter, Tsao said.

Formosa Chemicals & Fibre Corp (FCFC, 台灣化學纖維), which manufactures integrated plastic and nylon products, reported net profit fell 47.5 percent to NT$14.32 billion and EPS drop from NT$4.67 to NT$2.45. Cumulative revenue declined 12.8 percent to NT$173.3 billion.

“We expect sales for this month will be higher than last month, and that sales would increase every quarter,” FCFC vice chairman Hong Fu-yuan (洪福源) said, adding that the firm will have cash dividend income of NT$8.1 billion this quarter.

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