Philippine Billionaire Gokongwei Family Doubling Down Into Loss-Making Petrochemical Unit
by Ian Sayson · ForbesJG Summit Holdings—the flagship of billionaire Lance Gokongwei and his family—will pour 17.1 billion pesos ($293 million) of additional capital into its struggling petrochemical venture.
The board-approved capital infusion will used primarily to pay off maturing debts of wholly-owned JG Summit Olefins Corp., the conglomerate said in a stock exchange filing. JG Summit pumped 11 billion pesos a year ago to maintain the unit’s debt-to-equity commitment with creditors.
JG Summit Olefins, founded in 2008, runs the first and only naphtha cracker plant in the Philippines. It’s the surviving entity after a merger in 2022 with JG Summit Petrochemical Corp., which was started in 1994 by the late John Gokongwei, founder of the conglomerate.
The venture—which produces polyethylene and polypropylene in a 250-hectare industrial complex in Batangas, south of Manila—has been a drag on JG Summit, booking an 11.4 billion peso net loss in the first nine months of the year despite a 53% jump in sales to 39 billion pesos. The business has been hobbled by weak demand and a global supply glut that has dampened product pricing and caused negative margins.
“Building a local petrochemical industry has been a very expensive advocacy for the group,” John Gatmaytan, chairman at Luna Securities, said. “The main problem is it's cheaper to source abroad like China, Taiwan and Thailand.”
MORE FOR YOU
Matt Gaetz Abruptly Resigns From Congress After Trump Picks Him As Attorney General
Republicans Win Control Of The House—Giving Trump Unified Government
Today’s NYT Mini Crossword Hints And Answers For Thursday, November 14
JG Summit Olefins continue to incur losses even as the Philippines in 2022 slapped a three-year duty on imports of high density polyethylene pellets amid a flood in cheap imports. The company has accumulated losses of more than 40 billion pesos since 2021.
Despite the losses from its petrochemicals business, JG Summit posted a net profit of 17.9 billion peso in the first nine months of the year, up 16.3% year-on-year.
JG Summit was founded by the late tycoon Gokongwei in 1954 as a corn starch manufacturer. The group has since grown to become one of the country’s largest conglomerates with interests in airlines, food and beverage, banking and utilities. Lance, along with sisters Robina, Lisa, Faith, Hope and Marcia inherited the tycoon’s fortune. The siblings have a combined net worth of $1.9 billion, placing them at No. 11 on the list of the Philippines’ 50 Richest when it was last published in August.