Formosa Petrochemical Corp Net Income

Formosa Petrochemical Corp., Taiwan's second-biggest fuel supplier, may post its first profit gain in more than a year after the government eased price controls and the company expanded capacity.

Net income probably climbed 1.6 percent from a year earlier to NT$12.7 billion ($385 million) in the three months ended Dec. 31, based on the median estimate of five analysts in a Bloomberg telephone survey. That would be the company's first profit increase since the third quarter of 2005. The oil refiner, based in Mailiao in western Taiwan, will report earnings tomorrow.

Formosa Petrochemical's profit from selling fuels locally has risen as Premier Su Tseng-chang's Cabinet lets larger competitor CPC Corp. link gasoline and diesel prices with crude oil costs. Formosa has matched all the changes by CPC. Su's predecessor Frank Hsieh restricted the state-run refiner from raising prices on concern they would stoke inflation.

``The company's earnings have improved as it followed CPC in raising fuel prices,'' said Audrey Chiu, a Taipei-based analyst at Yuanta Core Pacific Capital Management Co., who has a ``buy'' recommendation on the stock. ``The floating fuel pricing system is benefiting Formosa Petrochemical.''

CPC, formerly known as Chinese Petroleum Corp., has since September linked oil-product prices to benchmark crude oil traded in New York. The prices are reviewed weekly, based on oil costs over the previous seven days.

CPC posted a pretax profit of NT$6.97 billion in the fourth quarter, compared with a loss of NT$1.94 billion a year earlier, according to the Web site of Taiwan's State-Owned Enterprise Commission.

Sales Climb

Formosa Petrochemical's fourth-quarter sales climbed 0.5 percent from a year earlier to NT$132.2 billion, after surging 27 percent in the third quarter, according to filings to the Taiwan Stock Exchange.

Diesel fuel accounted for 29 percent of sales in the three months ended December, compared with 25 percent for petrochemicals and gasoline's 22 percent.

Formosa Petrochemical controls about 25 percent of Taiwan's gasoline and diesel market while CPC has the remainder. The companies also have units that process naphtha, an oil product, into ethylene for making plastics and fiber.

Formosa Petrochemical sells about half of its oil products overseas, Su Chi-yi, executive vice president, said Feb. 12.

Shares of the company climbed 0.5 percent to NT$66.6 by the Taiwan Stock Exchange's 1:30 p.m. close. The stock has fallen 6.98 percent this year, compared with a 2.49 percent decline in the benchmark Taiex index.

Capacity Expansion

Increasing output is helping lift Formosa Petrochemical's earnings, said Yuanta Core Pacific's Chiu.

Formosa Petrochemical completed a 20 percent refinery expansion in August, boosting its total crude processing capacity to 540,000 barrels a day.

The company plans to start a naphtha processing unit, able to produce 1.2 million metric tons of ethylene a year, in the second quarter. The plant will boost the refiner's total annual ethylene capacity to 2.94 million tons, according to the company's Web site.

source:www.bloomberg.com