FORMOSA PLASTICS GROUP 2018Annual Report The Mailiao Harbor Chinese white dolphins (Sousa chinensis) can be seen taking a leisurely swim, reflecting the balance that has been achieved between economy and ecology. CONTENTS 2018 Financial Highlights (In Thousands of US Dollars, persons) 1 2018 Financial Highlights Income Before Number of Company Capital Assets Equity Sales Income Tax Employees 2 Preface Formosa Plastics Corp. 2,071,305 15,533,289 11,569,583 6,157,759 1,856,186 6,132 10 Formosa Plastics Corporation Nan Ya Plastics Corp. 2,580,556 17,522,129 12,223,740 6,146,812 1,881,388 12,599 20 Nan Ya Plastics Corporation Formosa Chemicals & Fibre Corp. 1,907,131 15,460,496 12,032,957 8,902,227 1,768,420 5,049 Formosa Petrochemical Corp. 3,099,587 13,039,347 10,989,432 24,907,859 2,424,408 5,285 26 Formosa Chemicals & Fibre Corporation Nan Ya Technology Corp. 1,009,742 6,610,680 5,365,805 2,742,002 1,352,505 3,157 32 Formosa Petrochemical Corporation Nan Ya PCB Corp. 210,251 1,172,577 967,390 763,415 -18,961 5,629 38 Formosa Plastics Group-US. Operations Formosa Sumco Technology Corp. 126,199 806,590 708,461 532,266 207,963 1,339 Formosa Ta eta Co., Ltd. 548,161 2,619,318 2,242,319 897,845 171,014 4,706 41 Other Investments Formosa Advanced Technologies Corp. 143,892 412,409 369,521 285,866 56,973 2,406 Non-Prot Organization—Medical Care Mai-Liao Power Corp. 713,630 1,685,427 1,456,341 704,658 20,849 413 Subtotal of Public Companies 12,410,454 74,862,262 57,925,550 52,040,708 9,720,744 46,715 42 Chang Gung Memorial Hospital Other Domestic Companies 1,420,185 18,733,425 16,440,139 5,472,621 1,010,990 30,416 Non-Prot Organization—Education Subtotal of Domestic Companies 13,830,638 93,595,688 74,365,689 57,513,329 10,731,734 77,131 46 Chang Gung University Companies in U.S.A 1,142,906 12,866,513 10,908,624 6,417,285 1,172,147 4,171 Companies in China 5,553,424 10,889,601 6,759,903 9,674,513 291,078 19,027 50 Chang Gung University of Science and Technology Other Foreign Companies 6,619,527 16,713,920 7,175,635 4,663,932 -175,597 15,048 54 Ming Chi University of Technology Subtotal of Foreign Companies 13,315,857 40,470,034 24,844,162 20,755,731 1,287,628 38,246 Total of Formosa Plastics Group 27,146,496 134,065,722 99,209,851 78,269,060 12,019,362 115,377 • NOTE:The financial data shown above is extracted from the individual financial statements of each The Mailiao Harbor company. Under the guidance of the environmental sustainability policy announced by the Chairman of FPG’s Executive Board, the FPG Mailiao Harbor has actively promoted low-pollution ships and harbor sustainable management. On September 7, 2018, it received EcoPorts Certification from the European Sea Ports Organization (ESPO). The Mailiao Harbor is the first industrial port in Asia to win such an honor. In the future, the Mailiao Harbor will continue to push forward various green-port environmental protection measures, and will strive to become an international model for industrial ports and the best example of moving toward Underwater Ecological Diversity ecological sustainable development. Financial Highlights 1 In 2018, the global economy grew in first three quarters, driving Preface up the demand of petrochemical products. Crude oil prices continued to rise due to reduced production by oil production countries including the Organization of the Petroleum Exporting Countries (OPEC) and Russia. The Brent crude oil price was once soaring to US$ 86 per barrel. Since the fourth quarter, the trade war between China and US swiftly impacted the worldwide demand of the oil. The price trend was Chairman reversed and downward correction was continued to a point WenYuan Wong that could collapse the oil market. By the end of the year, the crude oil price was dropped to US$ 50 per barrel. In Taiwan, the economy in the first half of 2018 an increase of 17.8% from previous the year; the profit grew as a result of the global economic recovery. This before tax was NT$ 329.8 billion, a decrease of 4.9% led to the stable growth in trade and in the economy. compared to 2017. Private consumption and gross domestic product The petrochemical products benefited from the (GDP) was above 3%. Starting from the 3rd quarter, global economic recovery in the first half of the year. the China-US trade war continued to ferment and the The international crude oil prices rose steadily, and global prosperity and final demand was uncertain. pushed up petrochemical production and prices, Affected by the China’s economic slow-down, the which made the group’s first three quarters profitable. growth of Taiwan’s export trade was impacted and However, since the 4th quarter, the international lost its momentum through the 2nd half of the year. crude oil price went down and the number of orders In November and December, the annual growth rate fell sharply. The group faced significant losses on of export trade turned negative. inventory valuation, falling price on main products in Overview of Business Operations transit, and price spread on refining and petrochemical products. The combined 4th quarter profit of the four Formosa Plastics Group's revenue for 2018 was main companies was reduced by 90% compared to NT$ 2,405.4 billion, which was 20.0% higher than the 3rd quarter, which resulted in a slight decline in 2017. While an improvement from the market was the overall profit. affected by the China-US trade war and the significant drop in the international crude oil prices. The In response to the changes in international situation, market slowed down in the 4th quarter and the FPG has continuously adjusted the production model Group’s profit was greatly affected by the reduced and the combinations of the refining and petrochemical demand for petrochemical and plasticized products. products based on the product price differences. FPG Mailiao Harbor is the first industrial port in Asia In turn, the profit before tax was NT$ 369.4 billion also developed high-value and differentiated products, to win EcoPorts Certification this year, a decrease of 5.7% compared to 2017. and has gradually introducing artificial intelligence 2018 FORMOSA PLASTICS GROUP Profile (AI) to production process optimization and quality 1. Taiwan Region Scan QR code to watch the video testing. A total of 153 AI projects have been initiated In 2018, Formosa Plastics Group’s combined revenue and are under various stages of development. The from subsidiaries in Taiwan was NT$ 1,767.6 billion, annual benefits of the five AI projects, piloted by the 2 2018 Annual Report Perface 3 business performance was heavily influenced according to statistics of the Ministry of Economic by these negative factors and was not as good as Affairs, the industrial water consumption is only 5%. expected. However, the agricultural water supply accounted for 92% to Yunlin County and Changhua County. 4. Vietnam Region FPG has proactively reduced water consumption Formosa Plastics Group has been operating in by process water saving management, to reduce the Vietnam for many years. In addition to the evaporation losses and many other measures. The secondary processing plant of textile, fiber and water-saving in the Mailiao Industrial Complex has plastics in the KCN Dong Nai, the two blast furnaces been reduced to 27,000 tons per day. located in Ha Tinh Province were commissioned on According to the “Directions for Application schedule in May 2017 and May 2018. The completion of Review on Proposal of Water Usage” announced by Ha Tinh steel plant phase I project was announced the Ministry of Economic Affairs, water recycling completed and put into full operation. rate (R1) for Mailiao Industrial Complex is 98.8%, In 2018, FPG's combined revenue for all plants each drop of water can be reused up to 7.3 times. in Vietnam was NT$ 124.6 billion, which was a growth Which indicated that the water recycling rate of the of 239% compared to 2017. That was benefited from Mailiao Industrial Complex was significantly better Ecological Park of Formosa Ha Tinh Steel Corporation the combined transferred orders received from the than other petrochemical-related industries’ whose US and Japan’s SPP pellets customers. In addition, water recycling rate (R1) is 70~90% in Taiwan. textile spinning business turned losses into profits. four major companies in 2018 were expected to increased demand for petrochemical products. In addition to the use of “Spend Less” for The combined revenue and profit performance of reach NT$ 200 million. Obviously, AI applications FPG’s production quantity and sales in US region water saving, FPG also has actively promoted Formosa Industries was outstanding. Ha Tinh steel will also become the trend in the future world. were both improved compared to 2017. The crude “Broaden Source” to develop more water sources. plant was in early stage of commissioning, the oil prices continued to rise in the first three quarters, By increasing rainwater collection areas and In terms of product marketing, FPG will continue initial unit cost was high and the amortization of driving up product prices and increasing profits. modifying rainwater storage tanks to effectively to develop the “Solution”, which provides instant various expenses was still considerable.