The Formosa Plastics Group (FPG), one of the leading conglomerates in Taiwan, has decided to pay its employees year-end bonuses equivalent to 4.06 months’ salary, after having paid year-end bonuses of seven months’ salary last year.
The decision came after the four major entities of the FPG — Formosa Plastics Corp., Nan Ya Plastics Corp., Formosa Chemicals & Fibre Corp., and Formosa Petrochemical Corp. — saw their combined net profit fall by 62.5 percent from a year earlier to about NT$90.1 billion (US$2.96 billion) in 2022, citing weakening end-user demand amid geopolitical tensions and rate hike cycles by the major central banks in the world to fight growing inflation.
FPG’s year-end bonuses are usually closely watched by the market, because they tend to set the trend in Taiwan’s industrial sector.
According to the group, the four major entities posted an average earnings per share before tax of NT$3.37 in 2022.
Based on a formula for calculating year-end bonuses, the four entities use the average NT$4.1 in EPS before tax as a threshold to issue year-end bonuses equivalent to 4.5 months’ salary. Whenever the EPS before tax rises or falls by NT$1, the bonuses will be raised or cut by an amount equivalent to 0.6 month’s salary.
The maximum year-end bonuses are set at seven months’ salary and the minimum at three months, according to the formula.
In the fourth quarter of last year, the four major subsidiaries of the FPG all incurred losses, the group’s data indicated.
Formosa Plastics, the flagship entity of the FPG, said the reduced purchasing power suffered by end-users worldwide amid aggressive tightening by the major central banks squeezed the company’s bottom line in the October-December period as it posted NT$7.34 billion in net losses.
For 2022, Formosa Plastics reported NT$5.69 in earnings per share, down by 49.3 percent from a year earlier.
Nan Ya Plastics Corp. said it posted NT$660 million in net losses in the fourth quarter, and its earnings per share for the entire 2022 fell by 60.5 percent from a year earlier to NT$4.05.
Nan Ya Plastics said the lower profitability in 2022 largely reflected weakening demand for plastic products in the wake of inflation, the Russian invasion of Ukraine, and the COVID-19 pandemic, but solid demand for electronics items supplied by its subsidiaries, such as printed circuit boards and copper clad laminates, offset the slowdown.
For its part, Formosa Chemicals & Fibre posted NT$7.46 billion in net loss in the fourth quarter, citing a fall in crude oil and other raw material prices in the second half of the year amid growing inflation and rising interest rates. In 2022, the company raked in NT$1.27 in earnings per share, down by 80.6 percent from a year earlier.
In the fourth quarter, Formosa Petrochemical was impacted by China’s zero tolerance COVID-19 policy, which pushed down petrochemical product demand, while its utility business was affected by rising fuel costs. As a result, the company incurred NT$9.89 billion in net losses, and its earnings per share for 2022 tumbled by 70.8 percent from a year earlier to NT$1.51.
The four entities remained cautious about the market outlook in the first quarter of this year with Formosa Petrochemical forecasting that crude oil prices are likely to move lower in the first half of the year.
Formosa Petrochemical said the U.S. Federal Reserve was very likely to continue its rate hike cycle in the first half of the year and boost its key interest rates to over 5 percent to rein in consumption, while the U.S. economy, the largest in the world, could see a contraction of 0.5 percent this year that would cap demand for oil products.
However, with China expected to experience a peak in COVID-19 infections in the first quarter and its economy likely to rebound afterward, global demand is expected to recover and push up crude oil prices in the second half of the year, Formosa Petrochemical said.
Source: Focus Taiwan News Channel