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[OUCC] Oriental Union to counter low prices with other output

Post Date 2019.06.12From:Taipei Times

Oriental Union Chemical Corp (OUCC, 東聯化學), the petrochemical arm of Far Eastern Group (遠東集團), yesterday said it would increase the output of specialty chemicals to maintain profitability in the coming years, as the price of its main product, ethylene glycol (EG), remains low.

Used for making polyester fibers and antifreeze items, EG made up 79 percent of the company’s total sales last year, while specialty chemicals, including ethanolamine, ethylene carbonate and ethoxylates derivative, contributed 16 percent, the company said.

“We expect the annual revenue contribution of specialty chemicals to increase from 20 percent last year to between 40 and 50 percent over the next three years thanks to higher gross margins than that of EG,” company president Justin Tsai (蔡錫津) told an annual shareholders’ meeting in Taipei.

The utilization rate at the company’s specialty chemical plants is nearly 100 percent, he added.

Shipments of specialty chemicals should surpass last year’s 166,000 tonnes, as the use of ethoxylate derivatives in China has seen an average yearly increase of 7 percent over the past few years, Tsai said.

Oriental Union, a midstream company in the petrochemical industry, extracts ethylene from crude oil to make EG and more than 170 specialty chemical products.

This year, the company would increase the annual output of EG by 8 percent to 805,000 tonnes, as the use of EG in China has seen an average yearly increase of 9 percent over the past few years, Tsai said.

Although the price of EG remains low, there would be a margin of profit if the price of crude oil hovered at about US$60 per barrel, the company said.

Due to low prices for EG, the company’s revenue for the first five months of the year fell 17.47 percent to NT$10.94 billion (US$348.01 million) from NT$13.26 billion a year earlier, Oriental Union said.

To counter fluctuations in EG prices, the company said that it would develop other high-margin products — such as propylene oxide (PO) and EO-PO copolymer, which are used in manufacturing low-foaming surfactant in the textile, metal and electronics industries.

The company said it is looking for investment opportunities in the US, where low-priced shale gas would lower the cost of making EG.

Shareholders yesterday approved a plan for the company to distribute a cash dividend of NT$1.75 per share, an implied payout ratio of 87.06 percent based on last year’s earnings per share of NT$2.01.

Oriental Union reported that net income in the first quarter fell 68.11 percent year-on-year to NT$190.9 million due to sluggish EG prices.

Earnings per share over the period declined from NT$0.69 to NT$0.22 and gross margin dropped 13.13 percentage points to 4.11 percent, data released by the company showed.