JG Summit’s naphtha plant shut for at least two years

Photo from JG Summit Holdings/FACEBOOK

MANILA, Philippines — The petrochemicals unit of JG Summit Holdings Inc. will remain shuttered for at least two years. The conglomerate cited prevailing challenges in the global market.

During this period, JG Summit will focus on “preserving the assets in the plant complex while evaluating strategic options for the business moving forward,” the Gokongwei-led company said in a stock exchange filing on Wednesday.

“Our decision to extend the shutdown of our petrochemical unit will also help reduce the drag on our profitability,” JG Summit president and CEO Lance Gokongwei said.

The group first announced the indefinite commercial shutdown of JG Summit Olefins Corp. (JGSOC) in January. It had to “evaluate various options” to mitigate the impact of challenging market conditions.

READ: Gokongweis exit loss-making petrochemical business

Indefinite closure

JGSOC currently operates a naphtha cracker plant. Naphtha crackers are commonly used in plastic production. But analysts point out that these are less favored compared with more cost-efficient ethane crackers.

The closure, however, will not affect the trading of liquefied petroleum gas under Peak Fuel Corp.

JGSOC continued to bleed during the first quarter with a P3.3-billion loss, unchanged from the same period last year. This was due to one-time costs associated with the shutdown.

As a result, JG Summit saw a 61-percent plunge in its earnings, which settled at P4.3 billion. The P7.9-billion one-time gain recognized last year from the merger of Robinsons Bank with Ayala-led Bank of the Philippine Islands also contributed to lower profitability.

READ: JG Summit Q1 profit plunges by 61% on petrochem losses

Excluding this gain and losses from JGSOC, the holding firm’s core net income slipped by 7 percent to P7.4 billion.

Sustained demand

Meanwhile, sustained leisure demand—particularly for travel, mall and hotel offerings—lifted JG Summit’s top line by 1.7 percent to P98.2 billion.

Gokongwei said they were banking on improving consumer sentiment “brought about by the tempering inflation coupled with the favorable forex and oil prices” to help boost top-line growth and improve margins the rest of the year.

Snack maker Universal Robina Corp. had its net income slip by 2 percent to P4.1 billion. This was due to lower foreign exchange gains during the quarter. Without this impact, core profit was up by 5 percent to P3.9 billion.

Revenue, meanwhile, rose by 7 percent to P45.3 billion as the branded consumer foods business delivered higher volume.

Developer Robinsons Land Corp. benefited from growth in its investment portfolio, helping cushion the impact of lower residential revenues. Both its earnings and revenues were flat at P3.5 billion and P10.7 billion, respectively.

Expansion-related costs dragged the bottom line of Cebu Air Inc., the operator of budget carrier Cebu Pacific, by 79 percent to P466 million.