Bloomberg News

Formosa Plastics Units Miss Earnings Estimates on Reduced Output

October 03, 2011

Oct. 3 (Bloomberg) -- The four biggest units of Formosa Plastics Group, Taiwan’s largest diversified company, reported third-quarter pretax earnings that missed analyst estimates after accidents reduced output.

Oil refiner Formosa Petrochemical Corp. posted a loss of NT$1.42 billion ($46 million) in the three months ended Sept. 30, its parent said in a statement today. The average of four estimates compiled by Bloomberg was for a NT$14.8 billion profit. Polyvinyl chloride maker Formosa Plastics Corp.’s pretax profit of NT$9.91 billion trailed the NT$16 billion average forecast of five analysts.

Formosa Petrochemical halted its 540,000 barrel-a-day Mailiao refinery after a fire on July 30, which resulted in a 30 percent drop in sales in August from a year earlier. Group members including Nan Ya Plastics Corp. had also shut some production lines after a blaze in May.

“Formosa Petrochemical hardly had any output in August,” said Danny Ho, a Taipei-based analyst at Yuanta Securities Co., who has a “hold” rating on the refiner.

Nan Ya Plastics posted a NT$6.44 billion pretax profit, missing the NT$12.4 billion average of five estimates. Chemical producer Formosa Chemicals & Fibre Corp. reported a pretax profit of NT$7.56 billion, less than half the NT$16.1 billion average of eight estimates compiled by Bloomberg.

Formosa Plastics fell 5.4 percent to close at NT$77.3 before the earnings announcement. Nan Ya Plastics dropped 0.9 percent to NT$65.7, Formosa Chemicals declined 1.8 percent to NT$78.2, while Formosa Petrochemical ended the day 3.8 percent lower at NT$80.70. The benchmark Taiex Index fell 2.9 percent.

‘Outlook Worrying’

Formosa Chemicals President Hong Fu-yuan and Nan Ya President Wu Chia-chau told reporters at a media briefing today that the two companies have yet to resume output at some plants.

China’s monetary tightening also hurts earnings, Hong said. “The outlook is worrying,” he said.

The central bank of China, Taiwan’s biggest export market, has raised interest rates three times this year and ordered lenders to set aside a bigger portion of their deposits to curb inflation running near a three-year high.

Formosa Plastics Group controls more than 100 companies and organizations such as hospitals and schools. The group has sales of NT$2.19 trillion last year and employed about 99,300 people, according to its website.

--Editors: Amit Prakash, Ryan Woo

To contact the reporter on the story: Yu-huay Sun in Taipei at ysun7@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.


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