Oil refiner Formosa Petrochemical Corp (FPCC, 台塑石化) yesterday gave a gloomy business outlook for this year, citing the COVID-19 pandemic and tumbling crude oil prices.
“We have suffered immensely since the US-China trade conflict last year ... [and we are facing more] challenges with the ongoing pandemic and drops in oil prices,” Formosa Petrochemical chairman Chen Bao-lang (陳寶郎) told shareholders at the annual general meeting in Taipei.
After posting a 38.7 percent year-on-year decline in net profit to a five-year low of NT$36.8 billion (US$1.23 billion) last year, Formosa Petrochemical reported a loss of NT$9.99 billion for last quarter due to plummeting crude oil prices and weakening demand amid the pandemic.
“It [COVID-19] has dealt a heavy blow to market demand for crude oil, as people have avoided going shopping and flights have been canceled,” Chen said.
Demand shrank further as the oil price dispute that broke out between Russia and Saudi Arabia late last quarter led the oil market to the brink of collapse, Chen added.
In the first four months of this year, the company posted a 27.96 percent annual decline in revenue to NT$159.68 billion.
“Russia and OPEC reached an agreement to cut production from the start of this month, which should help prop up oil prices,” Chen said.
However, a complete recovery in prices appears improbable in the short term, as the US and China continue to expand their petrochemical production, Chen said.
He forecast crude prices of about US$40 per barrel for benchmark Dubai crude by the end of the year, a sizable gap compared with January prices of nearly US$70 per barrel.
“Ultimately it [oil price] would depend on the global economy, which in turn is dependent on the outcome of the current pandemic,” Chen said, adding that the development of a vaccine remains crucial.
Chen expressed the hope that market demand might see a revival in the second half of this year as COVID-19 transmissions slow.
“With Europe and the US reopening their borders, we might see a pickup in economic activity, which would drive demand for oil,” Chen said.
Seeking to drive business growth despite the current gloom, FPCC expanded its domestic presence last month with the addition of 81 gas stations.
With a total of 600 gas stations, Formosa Petrochemical commands about 25 percent of the market.
Meanwhile, construction of the company’s US$9.4 billion ethane cracking and petrochemical complex in the US state of Louisiana is under way.
FPCC’s shareholders yesterday approved a cash dividend of NT$2.9 per share, implying a dividend yield of 3.31 percent based on its closing price of NT$294 in Taipei trading yesterday.
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