The year 2022 closed with the world in a state of turmoil, pummeled by severe challenges including the looming threat of ever-rising inflation and interest rates, simmering geopolitical tensions, palpable climate change manifested in the increase of extreme weather conditions, an upward spiral in commodity prices and the lingering after-effects of COVID-19. 2023 will be an equally challenging year. In addition to the existing concerns about inflation, interest rates and their effects on growth, other prevailing worries include how to mitigate climate change, supply chain security, the pace of technological innovation, and the race to net zero emissions. Having weathered this volatile economic climate, Far Eastern New Century Corporation (FENC) has lived up to stakeholders’ expectations with corporate resilience and the relentless impetus for innovation and transformation which helps in building sustainable competitiveness in a turbulent world.
The world’s political and economic landscape is evolving more quickly than ever. Politically, the tension between the United States and China, the world’s two biggest economies, has not yet abated. The results of the 2022 midterm elections in the U.S. have tipped the balance between Democrats and Republicans and the presidential election in 2024 is bound to attract the world’s attention. With the conclusion of the 20th National Congress of the Communist Party of China, wherein national development strategies were publicized and the leadership for the next five years was chosen, China is expected to remain stable politically. The European Union, the world’s third-largest economy, has seen several of its member states usher in new leaders, whose leadership styles are anticipated to wield significant influence on international affairs. Olaf Scholz is Germany’s chancellor of the new coalition government; Giorgia Meloni is the first woman to hold the office of Prime Minister of Italy; Rishi Sunak is the UK’s youngest prime minister in more than two centuries and Emmanuel Macron is the first French president to be reelected in 20 years. Japan, the pivotal nation in Asia, is stepping up its communication with its allies to safeguard national security. India, as it continues to reap the highest demographic dividend, overtook the United Kingdom for the first time to be the fifth largest economy and will, the UN predicts, dethrone China as the most populous country in the world. Taiwan held local elections in late 2022. Whilst it remains to be seen how the results might affect economic development, it is evident that Taiwan remains a focal point of the world economy because of its leading position in supplying chips to the semiconductor industry.
Economically, in the past year, commodity prices skyrocketed, throwing demand and supply off balance. Adding fuel to the fire was the ongoing war between Russia, a major energy supplier, and Ukraine, Europe’s breadbasket, which steepened energy and food prices and pushed the cost of living to an all-time high. To curb inflation, following the lead of the US Federal Reserve, central banks worldwide have been raising interest rates, a double-edged sword that might leave major countries heavily indebted and on a downward spiral that ends in stagflation. Mindful of the gray rhino effect, governments have implemented various economic measures to counter potential crises. The Fed forges ahead with rate hikes and strives to shrink its balance sheet. China touts “Common Prosperity” and “State-owned Enterprise Dominance, Private Enterprise Retreat,” when faced with excess capacity in the manufacturing sector and stagnancy in the property market. European leaders scramble to address energy shortages as Europe appears stuck in the bottleneck of energy transition. Businesses have had to put rigorous plans in place to ensure adequate cash flow and undertaken lean management initiatives to improve production and sales, keep inventory at reasonable levels and ultimately reduce operational risks.
Environmentally, 137 countries around the world have pledged to achieve net-zero emissions, as set forth in the Paris Agreement, and 90% of them hope to attain carbon neutrality by 2050. Net zero emissions has become a global consensus. Governments, multinational enterprises, and environmental organizations are committed to promoting a comprehensive transformation across all industries toward net zero emissions. The EU Carbon Border Adjustment Mechanism is set to kick off this year. The United States has introduced the Inflation Reduction Act to combat the climate crisis. China will include energy emissions-intensive sectors in its national emissions trading system (ETS) and start to levy a carbon tax by 2025. Japan is considering a carbon border tax for international polluters. Taiwan also announced its path to net-zero emissions by 2050 and supporting strategies. This wave of global resolve to tackle environmental challenges is unstoppable. In addition, the vigorous development of digital technology has changed the behavior of global consumers. During the height of the COVID-19 pandemic, concerns over supply chain disruption and the emergence of remote lifestyles accelerated digital transformation.
Despite these kinds of political, economic and environmental challenges, Far Eastern New Century has been conscientious, accelerating the deployment of eco-friendly products and intelligent transformation. As an agile organization, the Company is proactive in the face of uncertainties and risks and has clearly demonstrated its ambitions in sustainable development as befits a world-class corporation.
Leveraging its solid foundation of 70-plus years of experience in the business world, FENC operates in a resourceful and strategic manner. The Company’s production business expands in size and strength, the investment business develops on a stable financial footing, and the property business continues on a steadily profitable trajectory. It has truly brought the strengths of its diversified assets into full play. In the politically and economically tumultuous year of 2022, FENC still managed to deliver impressive earnings results: the consolidated revenue reached a record high of NT$264 billion, an 11% growth from the previous year; the consolidated net income amounted to NT$13.34 billion with the net income attributable to shareholders of the Company NT$8.16 billion, an EPS of NT$1.63. The 24th term Board of Directors in the 7th meeting proposed a cash dividend of NT$1.35 per share. The Company’s cash dividend yield is around 4%.
The Production Business has a broad scope of operations, expanding its presence overseas with the latest technologies and cutting-edge intelligent equipment. We have a streamlined system from feedstock production to sale, taking full advantage of the synergy of vertical integration. The upstream Petrochemical Business remains watchful of current trends in the global market and optimizes production in accordance with the company’s production and sales plan to ensure a reliable supply of key feedstocks. Midstream, the Polyester Business leads the global pack with a thorough deployment strategy on all fronts, including business scale, eco-friendly performance and innovation ability. Downstream, the Textile Business enjoys technological advantages over competitors and has conquered the global market with smart, functional and sustainable products. FENC, as a leading supplier of virgin and recycled polyester, is a global benchmark in the polyester industry.
The Company has moved forward at a prudent and steady pace, diversifying risks by setting up production sites in pivotal locations around the world. The strategic deployment in multiple regions enhances its logistic flexibility for the supply chains in Asia and Americas. This two-pronged approach of localized production and supply chain shortening has been tailored to meet the challenges of supply chain management in the post-COVID era. Currently, its production sites are distributed in the United States, Japan, China, Taiwan, Vietnam, Malaysia, and the Philippines. The diversity in geographic locations enables the Company to make timely adjustments to production volume depending on market demand and supply. FENC has built one of its three major production sites in Vietnam to access markets where preferential tariff treatment applies, making full use of the country’s involvement in the CPTPP, EVFTA, and RCEP. Our facilities in Vietnam are fully integrated and equipped with a complete range of product lines. In recent years, the Company has been expanding its presence in the Americas. The newest and largest PTA-PET integrated plant in the Americas - Corpus Christi Polymers - is under construction. APG Polytech produces PET, and Phoenix Technologies International produces recycled PET (rPET). Diversified geographic distribution of production sites can reduce the impact and disruptive economic events in a single market.
The Company has advanced steadily, setting itself up as a global leader in rPET, leaving competitors trailing in pursuit of green. Since the establishment of its first PET bottle recycling plant in Taiwan in 1988, it has been aggressively building its recycling business for the last 30-plus years and now ranks second in the world. With production sites spanning Taiwan, Japan, the United States, and China, it continues to expand its global production capacity. In addition to the ongoing expansion of the facilities in the U.S. and Japan, new sites are also being developed simultaneously in the Philippines, Vietnam, and Malaysia. The goal is to become the world’s largest rPET producer. The Company is also the only food-grade rPET supplier in Taiwan that has been certified by world-class beverage brands. In addition, it has also obtained third-party certification of recycled materials, such as Global Recycled Standard (GRS), and has been approved by US FDA, EU EFSA and regulators in Japan and Canada. Green products currently account for about 30% of the revenue of the Production Business.
Trailblazer in Sustainable Development
The Company has applied the most advanced technologies in mechanical, chemical and biological recycling to the development of unrivaled and innovative materials for a wide array of purposes, ranging from environmentally-friendly packaging, epidemic control, functional clothing and footwear to high-end vehicle accessories. In the 2022 FIFA World Cup, 9 national teams wore jerseys made of FENC’s exclusive eco-friendly recycled ocean polyester yarns with tear-resistant weaving technology. As the market for electric vehicles grows rapidly, high-end materials are widely used to reduce the overall weight of a vehicle for the sake of energy efficiency and carbon reduction. We supply Continental AG with tire cord fabric made of PET recycled from waste bottles. Our world’s first-of-its-kind eco-fabric made from solution dyed nylon 6,6 filament in combination with recycled waste gases not only won the recognition of Best Product in the Accelerated Eco category by the ISPO Textrends Award, but also demonstrated Taiwan’s strength in innovation to the world with ITMF’s first “Sustainability and Innovation Award” for sustainable development. With its outstanding performance in the circular economy, FENC was placed first in the global plastic industry circularity rankings announced by Australia’s Minderoo Foundation in 2023. The Foundation's research team gave the highest score to the Company, observing that FENC has developed a comprehensive strategy for circular operations, and its executives attach great importance to sustainability and circular initiatives with aggressive targets, resulting in fast-growing production of recycled products, outperforming 400 other plastic companies worldwide.
The Company has championed the global cause of carbon neutrality with concrete actions. Taking 2020 as the base year, it has set the target of reducing carbon emissions by 20% by 2025 and 40% by 2030, and aims to attain the goal of net zero emissions by 2050. An estimated NT$20 billion will be invested from 2022 to 2030 in the implementation of five major strategies for reduction in carbon emissions, including improving energy efficiency, seeking fuel alternatives, developing CCUS technologies, raw material transition, and developing renewable energy. The intercompany and interdepartmental Energy Task Force conducts the greenhouse gas emissions inventory by collecting data from FENC’s 21 production sites throughout the world and closely monitors international trends in carbon inventory, carbon pricing, and carbon border taxes, etc. The Task Force actualizes the vision of net zero from all angles, including feedstock, manufacturing process and product lines, and coordinates R&D efforts regarding sustainability issues, such as reductions in carbon emissions and waste minimization.
The Company has long been committed to sustainable development in three aspects: environmental, social and governance, having a complete structure of sustainable governance and a high caliber management system, actively shouldering corporate social responsibilities. It has been recognized by multiple organizations at home and abroad for outstanding performances in innovation, corporate governance, sustainable development, investor relations, and operation and management. FENC has received numerous Taiwan Corporate Sustainability Awards (TCSA) from the Taiwan Institute for Sustainable Energy, including Top 10 Taiwanese Companies Sustainability Model Award for three consecutive years, the Corporate Sustainability Report Award‒Platinum Award, Climate Leadership Award, Circular Economy Leadership Award, People Development Leadership Award, and Growth through Innovation Leadership Award. Moreover, FENC was conferred the 11th Asia Responsible Enterprise Awards (AREA) in four categories—Investment in People, Corporate Governance, Corporate Sustainability Reporting and Circular Economy Leadership, earning the most honors among the Asian recipients. FENC is the only corporate issuer in Taiwan to issue four sustainability-related financial instruments, including green bonds, sustainability bonds, social bonds, and sustainability-linked bonds. It is also the first Taiwanese non-financial corporation that has registered in the Sustainable Bonds Database at the International Capital Market Association (ICMA). FENC has been acting as a pioneer and model enterprise in sustainable finance. It was recognized for its exceptional performance by The
Asset, a well-known international financial magazine, and won four awards at the 2022 Triple A Country Awards for Sustainable Finance and Triple A Sustainable Capital Markets Awards including Best Issuer for Sustainable Finance (Taiwan), Best Blue Loan (Taiwan), Best Issuer (North Asia), and Best Sustainability-Linked Bond (Manufacturing). Additionally, it has been incorporated as a constituent of multiple sustainability indexes, including MSCI ESG Leaders Indexes and FTSE4Good Emerging Index. In the field of investor relations, FENC was given the Most Honored Company award in 2022 by Institutional Investor Magazine. In addition, it was also selected by FinanceAsia as Asia’s Best Managed Company, and by Asiamoney as Asia’s Outstanding Company. To top it off, FENC has been ranked in the top 5% of the listed companies in the Corporate Governance Evaluation conducted by Taiwan Stock Exchange for the fifth straight year.
FENC’s diversified investment portfolio ranges from cement and building materials, construction, transportation, polyester materials, retail, and telecom and technology, to financial and banking services with each subsidiary an outstanding company in its own right. With forward-looking planning, the Company does its utmost to promote business exchange and integration among the subsidiaries in various industries to maximize potential benefits. Far EasTone Telecom (FET), which accounts for the largest proportion in the investment portfolio, ended 2022 with extraordinary operating performance thanks to robust penetration of 5G services and drive for growth from the new economy. Strong demand for corporate cloud services and the IoT and the call for digital transformation also added to FET’s success. Its merger with Asia Pacific Telecom has expanded the economic scale of the telecommunications business and promises to increase growth in profit. Our cement business is one of the top ten largest on either side of the Taiwan Strait in terms of clinker capacity. In Taiwan, we are doing well not only in the cement sector, but also in reinvestments, including ready-mixed concrete, electric power, and stainless steel, etc. Asia Cement (China) has been making breakthroughs and rising above competition in the industry since it underwent an organizational restructuring. Our retail business has a total of 47 stores in Taiwan and China. Far Eastern Department Store (FEDS) continues to lead the market trend. FEDS Zhubei Store opened officially in 2022, its new model of operation succeeding in driving the growth of the local economy. Growth was seen in revenue from last year, which in turn led to an increase in profits. Far Eastern International Bank (FEIB) accelerated the transformation of digital financial business. The growth in interest and fee incomes drove up its revenue and led to an increase in net income. The Company will press ahead with plans to integrate the Group’s resources, maximizing investment benefits and creating profit margins.
The Company holds a total land area of 570,000 pings (1,884,306 m2) in Taiwan. To improve the efficiency of resource utilization and investment performance, Far Eastern Resources Development Corporation was set up and put in charge of real estate development, and the sale, rental and management of property. Its development projects include commercial and residential buildings, shopping malls, telecom parks, hypermarkets, resort hotels, etc. Assets of growing value are mostly concentrated near the metropolitan center and transportation hubs of the Greater Taipei area. Properties currently leased out include Taipei Far Eastern Plaza in Taipei City, Taipei Far Eastern Telecom Park (Tpark) and the Mega Tower—the tallest super highrise in New Taipei City. Among them, Tpark, covering an area of 24 hectares in Banqiao District, New Taipei City has three completed commercial buildings TPKA, TPKC, and TPKD, whose occupants include ICT companies home and abroad such as Google, Ericsson, and Far EasTone. TPKE is under construction and has been leased in its entirety by a well-known international company. It is scheduled to be completed and ready for occupation by 2023. Still, there are several buildings under development and planning. The newly completed residential building, Eco Park, was awarded First Prize and Prize in the Category of Planning and Design for Residential Super Highrise of the Chinese Architectural Golden Stone Award, adding a new page to the overall development of Tpark. The Company is also developing a spa resort located in Jiaoxi Township, Yilan County. This 10-acre project has obtained approval for land rezoning, and applications for building permits are being processed. The proposal for rezoning of the lot on Yuandong Rd., Zhongli District, Taoyuan City was approved by the Taoyuan City Government. It has been developed into a distinctive area for art and culture, residence, commerce, and healthcare. Included in this project is the FE International Conference Hall, whose functions will include commemoration, exhibition, and art performance. As various developments continue to progress, returns on these investments will increase the Company’s profits.
In response to opportunities and challenges in the post-pandemic world, the management team has formulated strategies for sustainable development, adopted novel technologies, facilitated development of industrial synergy and spared no effort in expanding the Company’s presence in the global market. They will continue to innovate in pursuit of growth with sustainability in mind and exert themselves for FENC’s dominance in the business world.
As a leader in the production of eco-friendly polyester, the Company promotes circular economy initiatives across different areas, implementing the strategy of 5Rs (Refill, Reduce, Replace, Renew, Recycle). It has deployed all-encompassing circular technology to recycle waste from land, sea and air. This recycles second-hand clothes and waste PET bottles on land and in the ocean by both mechanical and chemical means, for use in multiple applications and manufactures new products from captured industrial waste gases. It is also innovative in creating business models. In Japan, we have launched the Bottle to Bottle project to form a 100% PET closed loop. In Taiwan, as a leading packaging manufacturer, we have partnered with convenience store chains in the promotion of the circular economy by setting up recycling kiosks on store premises, bringing the concept of a green and sustainable ecosystem closer to the general public. With the ambition to be the world champion in the circular economy, FENC has been making relentless efforts in recent years to expand production sites for recycled products and maximize business opportunities for sustainable development.Striving for Net Zero Carbon Emissions
To accelerate digital transformation, intelligent management systems have been introduced and the deployment of intelligent manufacturing strengthened. Specifically, smart factories are being established to bolster manufacturing, where robots and AI models are adopted. To realize intelligent management, a wide range of systems have been installed, including OMI Platform, intelligent recruitment system, WebHR integration system, customer contribution E- management system, and BI big data platform. While promoting digital transformation, the Company attaches even more importance to management and control of information security, putting in place a complete framework of unified defense for cybersecurity, designating a task force for this defense, and formulating information security policies. Information security is managed and monitored from different angles, ranging from technology, organization to the physical environment. As security control measures are implemented, the Company is able to verify compliance with information security regulations and build a corporate-wide risk profile, which ensures continuous management of operation and resilience in information security and ultimately upholds the CIA triad of data protection, i.e., confidentiality, integrity, and availability.
To realize our conviction of giving back to society, the Company has committed itself to charity in four major areas—science and technology, arts and culture, medical care, and education. In science and technology, the Far Eastern Y. Z. Hsu Science and Technology Memorial Foundation, with “Technology and Innovation” as its founding purpose, incentivizes and cultivates talents for research and development in science and technology. It hosts the Y. Z. Hsu Science Awards to encourage the commitment of Taiwanese intellectuals to technological R&D and innovation to advance the country’s overall economic development and improve people’s quality of life. In arts and culture, the Far Eastern Memorial Foundation has long supported the development of artistic and cultural production with the hope that it can contribute to social well-being or national development, sponsoring domestic and international art, cultural and architectural programs and hosting the Far Eastern International Forum for Architecture. At the forefront of healthcare, the Far Eastern Memorial Hospital (FEMH) provides medical services of the highest quality with innovative medical technology. During the pandemic, it also demonstrated its professional capability and moral compass by undertaking various epidemic control tasks in COVID hot spots, doing its utmost to fulfill our social responsibility to protect public health. In the field of education, Yuan Ze University, known for innovative teaching and research excellence, has been included in the world’s top 500 schools of business management. As a university with international prestige, it has set up a graduate institute of medicine in partnership with FEMH to cultivate interdisciplinary talents for the healthcare industry. Furthermore, to recruit and educate the potential workforce, the Company has developed industrial internships and HR training programs that draw on the Group’s abundant resources and strong bonds between industry and academia.
Founded 74 years ago, FENC has gone through countless political and economic turmoils. At every critical moment in history, it has consistently remained calm and grasped the opportunities presented by change. With Sincerity, Diligence, Thrift, Prudence and Innovation as its overarching principles of business operation, it shoulders the responsibility of leading industrial transformation towards sustainability. It is poised to embrace a new world and deliver breakthroughs amid unprecedented challenges with the innovation of business models, optimization of human resources, managerial excellence and proactive adaptation to climate change. As the Company continues to hone its competitive edge in sustainability, not only will it enhance the brand value of FENC, but will also maximize benefits for shareholders, employees, and society, and hence motivate industrial peers to follow its lead on the path to sustainable development.