Moody’s views Formosa Group negatively

Moody’s Investors Service said it revised to negative from stable the outlooks of the four companies that together comprise the Formosa group, namely Formosa Petrochemical Corp., Formosa Chemicals & Fibre Corp., Formosa Plastics Corp. and Nan Ya Plastics Corp. The agency also affirmed the A3 issuer ratings of the four entities.

"The negative outlook reflects the group's elevated leverage versus global peers in the petrochemical industry, and the uncertainty on the pace of the group's deleveraging amid slow global economic growth and industry challenges," said Chenyi Lu, a Moody's vice president and senior credit officer, in a press release.

Moody’s noted the group’s adjusted debt/EBITDA increased to over 5x in 2023 from 3.6x in 2022, which is high for the A3 category.

On the positive side, “Moody's expects the group's revenue to increase by about 7% in 2024 and about 6% in 2025, driven by modest sales volume increases and higher average selling prices underpinned by moderately improving demand in 2024 and 2025. In addition, its revenue will benefit from restocking efforts by its customers following the significant inventory corrections in the supply chain in the second half of 2022 and 2023,” the agency said.

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