Formosa Plastics, Nan Ya Expect Q2 Revenue to Outperform Q1, with Further Growth in Q3

(Central News Agency, Reporter Tseng Jen-kai, Taipei, 8th) The four major companies of the Formosa Plastics Group announced their May revenues today, with Formosa Plastics, Formosa Chemicals & Fibre, and Formosa Petrochemical all showing month-over-month declines. However, the group is not pessimistic about the future, with Formosa Plastics and Nan Ya Plastics unanimously forecasting that overall Q2 revenue will be better than Q1, and Q3 will be even better.

Formosa Plastics stated today that the decline in May revenue compared to April was mainly due to discounted supplies of ethylene and propylene from upstream suppliers CPC Corporation and Formosa Petrochemical, which led to lower operating rates for Formosa's various products. With CPC's new No. 3 naphtha cracker resuming operations, Formosa's production and sales volume will increase in June, and revenue is expected to be higher than in May, with overall Q2 turnover seeing significant growth compared to Q1.

Looking ahead, Formosa Plastics indicated that Q3 is a traditional peak season for some petrochemical products. The recent easing of supply shortages for raw materials like ethylene and propylene will allow Formosa to increase its operating rate in Q3, boosting production and sales. Additionally, some petrochemical plants in the Middle East have been severely damaged by war and will have difficulty resuming operations in the short term. This reduction in market supply will alleviate oversupply pressure on Asian petrochemical products, benefiting Formosa's sales. The company expects Q3 revenue to be higher than Q2.

Nan Ya pointed out that in addition to revenue growth from electronic materials in Q2, soaring prices for petrochemical products due to the Middle East conflict have led to downstream panic buying, driving up both volume and price for its chemical, polyester, and plastic processing products. It estimates that June revenue will grow compared to May, and Q2 revenue will increase compared to Q1 and the same period last year. Looking forward, Nan Ya is optimistic, stating that the operating conditions for electronic materials in Q3 will be excellent, and revenue is expected to increase slightly again from Q2.

Formosa Chemicals & Fibre reported that its ARO-3 (Aromatics No. 3) plant in Mailiao was undergoing annual scheduled maintenance in May and has resumed production in early June. The company's three aromatics plant reforming units will operate at full capacity, which will contribute to its revenue and profit in June.

Regarding plastic products, Formosa Chemicals noted that customers had built up larger inventories in the previous two months, and severe overproduction in China is leading to low-priced dumping exports. As a result, downstream businesses are taking a wait-and-see approach and delaying orders, posing significant challenges to revenue and profit. Overall, due to the larger volume from its aromatics plants, the company estimates its June revenue will increase compared to May.

Analyzing international oil prices, Formosa Petrochemical pointed out that in the last week of May, reports suggested that the US and Iran had reached a first-stage MOU agreement. The specifics of the draft agreement led to high market expectations for the reopening of the Strait of Hormuz, with hopes that oil supplies from the Persian Gulf would return to the market, causing a sharp drop in oil prices that week.

However, in the first week of June, it was reported that US President Trump had revised the draft agreement, leading Iran to terminate negotiations, citing Israel's continued attacks on Hezbollah. Iran then attacked a US military base in Kuwait and ships in the strait again, causing negotiations to stall. Formosa Petrochemical expects that oil prices will fluctuate with news of the US-Iran talks. As significant disagreements remain and progress is slow, it anticipates that oil prices will still have downside support. (Editor: Yang Lan-hsuan) 1150608