GOKONGWEI-LED JG Summit Holdings, Inc. said its petrochemicals unit, JG Summit Olefins Corp. (JGSOC), is now on an indefinite commercial shutdown amid “unfavorable global market conditions.”
“Given persisting unfavorable market conditions in the global petrochemical industry, JGSOC is now on an indefinite commercial shutdown,” JG Summit said in a statement on Thursday.
“JGSOC continues to evaluate various options to mitigate the adverse effects of challenging market conditions and will make the appropriate decision in due course,” it added.
JG Summit said that JGSOC will continue to sell its existing product inventory during the commercial shutdown.
The conglomerate added that the liquefied petroleum gas operations of JGSOC’s unit, Peak Fuel Corp., will continue.
In November last year, JG Summit infused up to P17.1 billion into JGSOC to cover maturing obligations.
This as JGSOC widened its net loss for the first nine months of 2024 to P11.4 billion amid “unfavorable global market conditions.”
In January last year, JGSOC inaugurated a P150-billion expanded petrochemical facility in Batangas City.
The company markets its petrochemical products to over 30 countries. Some of its products include the olefin raw materials ethylene and propylene, which are used as feedstock for downstream polyethylene and polypropylene polymer plants.
Market analysts said that JG Summit should consider exiting the petrochemicals business amid the surging losses.
“Unless market conditions change significantly to make the company profitable, they should consider exiting that business,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message after being sought for analyst comment.
According to Mr. Colet, JGSOC’s indefinite commercial shutdown is the “best decision” under the circumstances as it has been a “heavy drag” to JG Summit.
“After years of massive losses and no clear prospects for a sustainable turnaround, there was really no other rational choice but an indefinite shutdown,” he said.
“This should be ultimately positive for JG Summit as the group can now channel more time and resources to their other businesses,” he added.
AP Securities, Inc. Research Analyst Jose Antonio B. Cipres said that JG Summit should instead shift its capital expenditure budget to other profitable segments.
“Exiting the business is something worth considering at this point in time given the current state of continued losses,” he said in a Viber message.
“Not sure as to how long the earnings would continue to be dragged, but it’s safe to assume that losses should start coming down by the first quarter this year,” he added.
Aside from petrochemicals, JG Summit is engaged in agro-industrial and commodities, real estate and hotel, air transportation, and banking.
For the first nine months, JG Summit saw a 16% increase in net income to P17.9 billion as revenue climbed by 10% to P277 billion.
JG Summit shares fell by 0.12% or two centavos to P17.28 apiece on Thursday. — Revin Mikhael D. Ochave