Formosa Plastics Group (台塑集團), the nation’s largest industrial conglomerate, expects quarterly revenue at its four major units to grow slightly this quarter due to higher prices and shipments, but the business outlook for next quarter is bleak, executives from its major subsidiaries said yesterday.
Their comments came after the four units — Formosa Plastics Corp (台灣塑膠), Formosa Petrochemical Corp (台塑石化), Nan Ya Plastics Corp (南亞塑膠) and Formosa Chemicals & Fibre Corp (台灣化學纖維) — posted monthly growth of 5.9 percent in combined revenue of NT$141.78 billion (US$4.4 billion) last month.
In April, the four firms generated NT$108.39 billion in combined revenue.
However, their growth momentum is likely to be short-lived and business could weaken in upcoming months, mainly because of anticipated lower utilization rates due to scheduled maintenance, the executives said.
As some of the company’s plants are to gradually enter their annual maintenance period over the next three months, revenue is to decline sequentially next quarter, Formosa Plastics Corp (台灣塑膠) chairman and president Jason Lin (林健男) told a news conference.
“We have seven plants beginning maintenance from Aug. 24 to Sept. 6, matching our clients’ annual equipment maintenance plans, as demand is likely to dwindle during the period,” Lin said.
Overall factory utilization is expected to fall from this quarter’s 90 percent to 81 percent next quarter, Lin said.
Lin expects demand for petrochemical products to rebound in August or September, benefiting from inventory restocking demand for the Christmas holiday in Europe and seasonal demand from India.
Nan Ya Plastics chairman Wu Chia-chau (吳嘉昭) said he expects the company’s revenue to be flat next quarter from this quarter in a best-case scenario, amid lukewarm demand and a supply glut.
“Global electronics vendors have reduced orders [to our clients] after their sales slumped, which has caused excessive inventory at our domestic customers,” Wu said.
Polyester for electronics is the biggest revenue source for Nan Ya.
“We are conservative about the third quarter,” Formosa Chemicals president Hong Fu-yuan (洪福源) said. “Clients are taking a wait-and-see approach, as most factories are back to normal operations after a maintenance period and inventory remains high.”
If prices continue to drop, Formosa Chemicals’ revenue is forecast to slip next quarter, Hong said, adding that some of the company’s production lines are scheduled to begin maintenance next quarter.
The company hopes the industry’s peak season arrives in August to give a boost to its operations, Hong said.
Formosa Petrochemical president Tsao Mihn (曹明) was not upbeat about the company’s business next quarter, even though he expects Brent crude oil prices to remain at a high of between US$50 and US$55 per barrel at end of next quarter, compared with last month’s US$51 per barrel.
“Demand is a concern,” Tsao said.
The oil refiner is the biggest source of revenue for the industrial group.
Some of Formosa Petrochemical’s oil refinery equipment is also to be taken offline for maintenance, which is to drive down overall factory utlization from 94 percent to 84 percent, Tsao said.
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