Wed, Oct 09, 2019 - Page 12 News List

FPG units post lower profits on sluggish demand

‘FIERCE COMPETITION’:Nan Ya Plastics reported the biggest decline, with a 56.1 percent drop amid slowing economic growth and new capacity entering the market

By Kwan Shin-han  /  Staff reporter

Formosa Plastics Group’s (台塑集團) four major subsidiaries yesterday all reported lower profits and sales for last quarter due to sluggish market demand and low product prices, while offering a conservative outlook for this quarter as rivals undertake capacity expansion.

Nan Ya Plastics Corp (南亞塑膠), which makes plastics, chemicals and electronic materials, posted the largest decline. Net income plummeted 56.1 percent annually to NT$8.02 billion (US$260 million), while sales dipped 17.1 percent to NT$71.89 billion.

“As economic growth slows and new capacity enters the market, competition would become fiercer from this quarter to next year,” Nan Ya chairman Wu Chia-chau (吳嘉昭) told a news conference in Taipei.

Nan Ya’s sales of electronic materials might decline this month as clients remain conservative, but demand for high-end electronic materials remains robust, Wu said, adding that sales this quarter would be flat from last quarter.

Formosa Petrochemical Co (台塑石化) said net income fell 39.98 percent annually to NT$12.44 billion, while sales declined 20.44 percent to NT$160.01 billion, as sales in its olefins business fell due to low product prices and utilization rates, while sales in its oil refinery business also declined due to falling oil prices and lower shipments.

Although the revenue-to-material cost spread for oil refinery products increased from US$8 per barrel last quarter to US$9.60 per barrel, the company is still conservative about this quarter, Formosa Petrochemical president Tsao Minh (曹明) said.

“New oil refinery plants will start operations in November, while cold weather would also curb people’s tendency to travel, which would lead to lower demand from the aviation industry,” Tsao said.

Formosa Chemicals & Fibre Corp (FCFC, 台灣化纖), which manufactures integrated plastic and nylon products, saw net profit drop 35.6 percent annually to NT$12.71 billion, while sales declined 27.7 percent to NT$77.87 billion.

“This month and last month were supposed to be the high season, but so far we have not seen any increase in demand,” FCFC vice chairman Hong Fu-yuan (洪福源) said, with prices of petrochemical, plastic and fiber products remaining low.

Only the group’s textile affiliate, Formosa Taffeta Co (福懋興業), reported higher average selling prices thanks to increasing shipments of high-value-added products, he added.

Routine maintenance at the No. 1 aromatics plant, No. 3 styrene monomer plant and phenol synthesis plant, and an accident at the No. 3 aromatics plant also lowered the output of chemical products, FCFC said.

“Demand for petrochemical products would remain weak in the next one to two years, due to the lingering US-China trade dispute, while competition would become fiercer in light of new capacities from Chinese companies,” Hong said.

Formosa Plastics Corp (FPC, 台塑), which makes intermediate raw materials for plastics such as polyvinyl chloride and vinyl chloride, said net income dropped 14.1 percent annually to NT$15.68 billion, with sales falling 13.4 percent to NT$49.72 billion.

The company attributed the decline to the falling prices of its major products, while global demand from the automobile, home appliances, aluminum and construction industries also weakened.

On a positive note, the number of plants under routine maintenance would fall from 13 last quarter to six this quarter, which would raise the average utilization rate from 86 percent to 92 percent and improve sales figures, FPC president and chairman Jason Lin (林健男) said.

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