JG Summit Holdings Inc., the flagship of the Gokongwei Group, is infusing additional capital of up to P11 billion into its wholly-owned subsidiary JG Summit Olefins Corporation (JGSOC).
In a disclosure to the Philippine Stock Exchange (PSE), the firm said its board of directors has approved the proposed infusion which is primarily intended to pay off JGSOC maturing obligations and to support its operations during a period of declining market demand and rising input costs.
The capital infusion will be done through a subscription of additional shares in JGSOC to be issued out of existing unissued shares. JGSOC will issue 1.67 billion new shares at P6.57 per share equivalent to 20.73 percent of its outstanding capital.
JGSOC is engaged in acquiring, designing, constructing, erecting, assembling, rehabilitating, expanding, commissioning, operating and maintaining a naphtha cracker plant and related facilities for the production of polymer grade ethylene, polymer grade propylene, pyrolysis gasoline, mixed C4, pyrolysis fuel oil and their by-products.
It operates the first and only naphtha cracker plant in the country, which produces the olefin raw materials ethylene and propylene used as feedstock by the downstream polymer plants.
The cracker’s products like pyrolysis gasoline or “pygas” and mixed C4 are raw materials to produce C4 olefins and aromatics products from its butadiene and aromatics extraction plants, respectively.
JGSOC has a 250-hectare fully integrated manufacturing complex in Batangas City that houses the Naphtha Cracker Plant, the Polymer Plants, the Aromatics Extraction Plant and the Butadiene Extraction Plant.
The firm’s revenues remained largely flat at P25.5 billion for the first nine months of 2023 as increased volumes, especially in the third quarter after its cracking operations resumed in June, cushioned the impact of lower petrochemical selling prices versus last year.
For the third quarter, the petrochemicals business posted topline improvement of 106 percent year-on-year at P11.2 billion, coming off a low base in 2022.
Disciplined cost control and production efficiencies along with positive margins for its relatively newer products – Aromatics and Butadiene – as well as LPG Trading under its subsidiary Peak Fuel Corp. offset the slight decline in topline.
As such EBITDA improved to a P0.5 billion loss in the third quarter of 23, better than the P1.3 billion and P1.6 billion losses it registered in the second quarter of 2023 and third quarter of 2022, respectively. This helped narrow JGSOC’s net losses to P8.8 billion in the first nine months of 2023.
The company is embarking on an organization-wide transformation program that targets realizable performance results within 2024.