Formosa Plastics Group (台塑集團), Taiwan’s biggest diversified industrial company, allocated an additional US$174 million of working capital for its plants in the Chinese city of Ningbo (寧波).
The funds brought the group’s investment in the eastern city south of Shanghai to more than US$1 billion, Lee Chih-tsuen (李志村), a member of the group’s executive board, said by telephone from Taipei yesterday. Lee denied a report in the Economic Daily News yesterday that the funds would be used to expand production capacity.
Formosa Plastics Group, based in Taipei, has built petrochemical, plastics processing and electronics material plants in China, including those in Ningbo, to tap demand from the world’s third-biggest economy.
The group controls Formosa Plastics Corp (台塑), Taiwan’s biggest maker of polyvinyl chloride, or PVC, and Nan Ya Plastics Corp (南亞塑膠), the world’s biggest processor of plastics for imitation leather and pipes.
Formosa Plastics Corp’s profits improved in the second quarter compared with the first after raw-material costs dropped, Lee said.
The company will report first-half earnings on Thursday, Lee said by telephone from Taipei yesterday, without giving an estimate. Formosa Plastics posted a net income of NT$2.92 billion (US$89 million) for the January to March period, a statement released on April 29 said.
“Earnings were a lot better, as we had used some expensive raw materials in the first quarter,” Lee said.
China’s increasing demand for PVC is also helping bolster Formosa Plastics’ sales, company spokesman Jerry Lin (林勝冠) said this month. The plastic material is used in construction and consumer goods, such as shoes and handbags. The mainland accounts for about one third of the company’s sales.
Formosa Plastics gained 4.1 percent to NT$61.7 in Taipei trading. The stock has risen 51 percent this year, compared with the 49 percent gain in the benchmark TAIEX index.
China, Taiwan’s biggest overseas market, grew 7.9 percent in the second quarter from a year earlier. GDP will expand 8.1 percent this year and accelerate to 9.1 percent next year, the median forecast of 16 economists surveyed by Bloomberg News showed.
Shin-Etsu Chemical Co, based in Tokyo, is the world’s biggest PVC maker. About 60 percent of the material is used for construction purposes, such as piping.
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