CPDC: more conservative strategy

07 December 1998 00:00  [Source: ACN]

China Petrochemical Development Corp (CPDC) has revised its medium-term strategy because of concerns over the domestic economy.

The acrylonitrile, caprolactam and acetic acid major conducted several scouting missions earlier this year for overseas assets in addition to submitting a bid for Hanwha Energy. CPDC withdrew its bid for Hanwha Energy when the scale of the troubled South Korean refiner's debts became clear.

A company source told ACN: 'We have decided to adopt a more conservative strategy until it becomes clear whether the Taiwanese economy will or will not suffer a sharp downturn because of the Asian crisis.

'The unpredictability of product prices and the danger of saddling ourselves with more debt during this period of uncertainty are other reasons behind our shift in policy.'

Despite the shift in short-term strategy, the source adds that in the longer term, CPDC remains committed to back-integration to a refinery to secure captive supply of raw materials and to extend its product range.

It is also scheduled to bring onstream a 120 000 tonne/year caprolactam plant in Kaohsiung, Taiwan, which will raise its caprolactam capacity to 236 000 tonne/year, at end-1999 and has reached the test-run stage at a 36 000 tonne/year nylon chip plant at Toufen. also in Taiwan. Both these plants will be powered by CPDC's new co-generation facilities which are also at the test-run stage.

These projects, the total cost of which is NT$17bn (US$524m), are being funded through retained earnings and an NT$6bn syndicated loan.

The new caprolactam plant is now 50% mechanically complete. Employing DSM technology, the company says that it will be the largest caprolactam facility in the world.

'This will place us in a better position to compete against imports which carry very low import duties,' says the source.

CPDC, as is the case with many other Taiwanese chemical companies, has seen its performance decline during 1998. In the first three quarters of last year, it recorded a net profit of N$1.5bn. However, in Q1-Q3 this year, it incurred a net loss of NT$504m.

A chemicals analyst says the decline in performance is partly due to non-operating losses of NT$400m which CPDC has incurred on its shareholding in BS Engineering, a company which is part of the group to which it belongs - the Core Pacific Group.

However, CPDC could enjoy a significant non-operating gain from 8 ha of land which is situated within a proposed trade and economic park in Kaohsiung.

If approval is granted for construction of the park, the value of the land will greatly increase. CPDC says that in such an event, it will either sell the 8 ha or manage the land through a development company.

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