Gokongweis mull exit from petrochemicals

After prolonged plant shutdown

MANILA, Philippines — Conglomerate JG Summit Holdings Inc. is considering a potential exit from its petrochemicals business and its sale after announcing a prolonged shutdown for at least two years.

“We’re on indefinite shutdown right now. We’re going to put the plant on indefinite shutdown for at least two years,” JG Summit president and CEO Lance Gokongwei told The STAR in an interview.

“At that point, we will explore options, which include the full sale of the business, or a joint venture, or at least preserving it for at least two years, hoping that the cycle will turn around at some point,” Gokongwei said.

He said the petrochemicals group has faced the adverse effects of challenging market conditions, with close to about P100 billion in debt.

“I think the direction is that we recognize we are probably not natural owners of this group. We realize our core is consumer-related business. This is a very industrial B2B (business-to-business)-type of business,” Gokongwei said.

“Last year, we lost P17 billion on that facility,” he said.

For potential buyers of the group’s petrochemical business, in case it goes on sale in the future, Gokongwei said that it should be someone looking at the Philippines as a manufacturing base for Southeast Asia.

Gokongwei, however, said a deal of such size would take years to negotiate, “if ever.”

“But I think the number one criteria is that they have to have privileged feedstock, meaning they have to have a source of naphtha that is very competitively priced and that they can just use our facility to convert their feedstock to higher value petrochemicals,” he said.

Last January, JG Summit Olefins Corp. (JGSOC) announced that it is on an indefinite commercial shutdown, given the unfavorable market conditions in the global petrochemical industry.

The prolonged shutdown for at least two years, which was approved by JG Summit’s board yesterday, comes amid persisting market challenges in the industry.

During this period, JG Summit said the focus would be on preserving the assets in the plant complex, while evaluating strategic options for the business moving forward.

Meanwhile, its liquefied petroleum gas trading arm, Peak Fuel Corp., will continue to operate.

“Right now, the demand for petrochemicals, especially with all this news about tariffs and all that, there seems to be overcapacity on one part, globally. Second, manufacturing demand is also slowing down because of all these tariffs, especially in our main export country, China. They have gone from being undersupplied to oversupplied, so that has caused petrochemical margins to reach unsustainable levels for us to continue operating at least for the next couple of years,” Gokongwei said.

A wholly owned subsidiary of JG Summit, JGSOC is engaged in acquiring, designing, constructing, operating and maintaining a naphtha cracker plant and related facilities for the production of products such as polymer grade ethylene, polymer grade propylene, pyrolysis gasoline, mixed C4, pyrolysis fuel oil and other products and their by-products.

The company has undertaken transformation initiatives to support the business amid the global oversupply.

In the first quarter, JGSOC saw a decline in petrochemical sales as production stopped with the plant shutdown initiated in January 2025.

Its total revenues fell by 46 percent year-on-year to P7.6 billion during the quarter, even with the 24 percent expansion in its fuels trading business providing a cushion.

The plant shutdown alongside slightly positive polymer margins this year helped EBITDA and core losses to narrow by P209 million and P332 million, respectively.

Its bottomline, however, remained flat at a P3.3 billion loss due to non-recurring costs that were incurred to facilitate the shutdown.

Overall, JG Summit’s core profits  fell by 65 percent to P4.4 billion in the first quarter from P12.6 billion in the same period in 2024 due to the absence of last year’s P7.9 billion Robinsons Bank-Bank of the Philippine Islands merger gains.

Excluding the merger gains and the losses from its petrochemical business, JG Summit’s core net income declined by  seven percent year-on-year to P7.4 billion, mainly driven by the increased costs associated with the significant fleet investments made by its airline in the second half of the previous year.

After taking into account non-core items, JG Summit said that its bottomline ended the quarter at P4.3 billion coming from P11 billion last year.

Sustained leisure demand coupled with recovering domestic consumption, meanwhile, boosted JG Summit’s revenues by 1.7 percent to P98.2 billion in the first quarter from P96.6 billion a year ago.

From January to March, JG Summit saw robust uptake for travel, malls and hotel offerings as well as green shoots in consumption for its food and beverage products, which outweighed the expected decline in residential and petrochemical revenues.

Without the results of its petrochemical unit, whose production was halted indefinitely beginning January of this year, JG Summit’s top line grew by 10 percent year-on-year.

“We continue to build on the momentum brought about by the strategic interventions we have implemented in the second half of last year. Our decision to extend the shutdown of our petrochemical unit will also help reduce the drag on our profitability,” Gokongwei said.

“We are hopeful that the encouraging trends we are seeing in improving consumer sentiment brought about by the tempering inflation coupled with the favorable forex and oil prices will help accelerate demand and translate to better top line growth and improving margins for the balance of the year,” he said.