Four Formosa Companies

Overview Key strengths Key risks The four Formosa companies' good market position for various petrochemical products throughout the Greater China. A deeper industry downturn could weaken the four companies' profitability more than we assumed for 2024-2025. Good operating efficiency and product diversity underpinned by a high degree of vertical integration on a combined basis. The combined entity's performance and cash flow remain sensitive to volatile crude oil and commodity chemical prices. Good financial flexibility with sizable liquid non-core assets.Good access to capital markets and adequate liquidity supported by solid banking relationships. Asset concentration risk from the largest single-site complex in Mai-Liao, Taiwan.Elevated debt leverage with limited financial headroom for an extended downturn. Ongoing weakness in China's property market could delay

...Weak profitability could last throughout 2024. Ongoing weakness in China's property market could delay a significant rebound in demand growth. Meanwhile, aggressive capacity additions in China coupled with weak demand could keep utilization low. These factors, along with high oil prices could increase pricing pressure on to the four core Formosa companies--Formosa Plastics Corp., Nan Ya Plastics Corp., Formosa Chemicals & Fibre Corp., and Formosa Petrochemical Corp. We forecast the four companies' profitability will remain in a trough in 2024....

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