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S&P downgrades core Formosa Plastics units due to pandemic headwinds

S&P Global Ratings downgraded the issuer credit ratings of Formosa Plastics Corp. and Formosa Chemicals & Fibre Corp. to BBB+ from A-, saying the businesses and their parent company will grapple with weak demand and limited profitability recovery in the next two years due to the impact of the COVID-19 pandemic on the global economy and oil prices.

"The pandemic's prolonged negative effect on the oil and chemical markets will deeply hit [Formosa Plastics] group's performance over the next few quarters," said the rating agency, which also revised the companies' outlooks to stable from negative.

The rating agency expects the Formosa Plastics group's revenue to fall by 25% to 30% in 2020, before recovering by 20% to 25% in 2021. The group's EBITDA margin is forecast to shrink to 10% to 11% this year and widen to a range of 12% to 14% in 2021.

S&P Global Ratings also downgraded Formosa Petrochemical Corp. and Nan Ya Plastics Corp. to BBB+ from A- as part of the ratings action.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings.