Formosa Petrochemical Posts Unexpected Loss on Inventory Value
Formosa Petrochemical Corp. (6505) and Formosa Chemicals & Fibre Corp. (1326), units of Formosa Plastics Group, posted unexpected second-quarter losses after a drop in oil and chemical prices drove down their inventory values.
Formosa Petrochemical, Taiwan’s only publicly traded oil refiner, reported a pretax loss of NT$15.6 billion ($523 million) for the three months ended June 30, the parent company said in a statement today. The average of eight analyst estimates compiled by Bloomberg was a profit of NT$2.32 billion. Formosa Chemicals posted a pretax loss of NT$6.14 billion, compared with a profit of NT$4.8 billion that analysts expected.
A decline in oil prices cut the value of stockpiles held by Formosa Petrochemical, which imports all its crude needs. Crude oil in New York dropped 18 percent between April and June on concern demand would be hurt by the global economic slowdown and Europe’s debt crisis.
“A big reason for Formosa’s worse earnings was losses from inventories,” said Danny Ho, a Taipei-based analyst at Yuanta Securities Investment Consulting Co., who has a hold rating on Formosa Petrochemical. “Earnings probably bottomed in the second quarter as the company won’t have stockpile losses in the third quarter.”
Plastics processor Nan Ya (1303) Plastics Corp. reported a loss of NT$2.72 billion. The average of seven analyst estimates was a pretax profit of NT$4.09 billion.
Polyvinyl chloride maker Formosa Plastics Corp. (1301) posted a pretax profit of NT$270 million in the second quarter, less than the NT$5.55 billion average of three analyst estimates compiled by Bloomberg.
Formosa Petrochemical halted its No. 2 and No. 3 naphtha crackers on June 20 because of a power failure. The incident affected 42 of the group’s 66 plants at Mailiao, Formosa Chemicals President Hong Fu-yuan said June 21.
Formosa Petrochemical plans to start the No. 3 naphtha cracker on July 6, Tsao Mihn, president of the company, said in a briefing in Taipei today. The No. 2 cracker resumed production June 29, he said.
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