The four major units of Formosa Plastics Group (FPG, 台塑集團) yesterday issued a dim outlook for this quarter after mounting trade tensions and tumbling oil prices took a toll on earnings in the final quarter of last year.
The four companies reported that net income last quarter dropped 94 percent sequentially to NT$4.8 billion (US$155.66 million), while net income the whole of last year fell 10.7 percent annually to NT$217.55 billion.
Revenue last quarter also dropped 5.6 percent sequentially to NT$417.64 billion, with the top line last year rising 16.3 percent annually to NT$1.5 trillion.
Formosa Petrochemical Corp (台塑石化), the group’s oil refinery arm, took the brunt of the impact, with its income during the October-to-December period falling 120.2 percent sequentially to NT$4.18 billion in the red — its first quarterly loss since the fourth quarter of 2014.
Brent crude prices last quarter fell from about US$86 per barrel to less than US$50, heavily affecting the company’s product prices and inventory value, Formosa Petrochemical president Tsao Minh (曹明) said.
Although the company’s aggregate top line last year rose 23 percent annually to NT$767.55 billion, the gain was unable to offset steep falls in its product prices, Tsao said.
Prices for its refined oil products also fell US$7.4 per barrel, while a drop in naphtha led to a US$151 per tonne reduction in alkene product prices, Tsao said.
The company last quarter booked NT$3.54 billion in inventory losses to reflect the loss in value of crude products and higher crude procurement costs in the third quarter, Tsao said, adding that there is a delay between the time when raw materials are purchased and refined products are sold.
The refiner’s earnings per share last quarter also fell to NT$0.44 from NT$2.17 in the period ending in September, and ended the year at NT$6.3 compared with NT$8.42 in 2017.
Last year marked the end of a four-year boom in the global petrochemical sector, and the company is bracing for further shocks, Tsao said.
“We are to increase investments in and adoption of artificial intelligence [AI] and Internet of Things [IoT] technologies to boost efficiency and improve industrial safety standards,” Tsao said.
“While there are many external variables, we will work on what is under our control,” he said, adding that AI would help in navigating the complexity of crude procurement, while IoT would help automate the most hazardous production processes.
Meanwhile, Formosa Plastics Corp (台灣塑膠) fared better than its peers last year, reporting a 0.2 percent annual rise in net income to NT$49.5 billion, while Nan Ya Plastics Corp (南亞塑膠) dipped 2.4 percent annually to NT$52.66 billion and Formosa Chemicals & Fibre Corp (台灣化學纖維) fell 7.8 percent annually to NT$55.36 billion.
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