In this fast-evolving era of unprecedented challenges, ranging from the COVID-19 pandemic to tensions between the US and China, financial instabilities, the plunge of oil futures into negative territory, massive disruption in supply chains and tectonic shifts in industry, Far Eastern New Century Corporation (FENC) has utilized its agility and managerial expertise to navigate through the major crises of 2020, to find itself fully prepared for the post-COVID-19 New Norm and poised to once again flex its corporate muscle.
Modern communication technology has rendered the world ever more interconnected politically, economically and environmentally. The coronavirus pandemic brought the world to its knees in 2020 and the spillover effects still pose a great threat to the globe. The border controls implemented to stop transmission greatly reduced international and domestic travel flows whilst numerous cities were either once or repeatedly placed under lockdown or curfew. The world economy suffered massive turbulence and a lack in growth momentum with the world’s top developed economies—the US, the EU and Japan—all registering declines in GDP. Since Joe Biden was sworn in as the US president, the new administration has been seeking to restore order at home and in the world by participating actively in international organizations, and attempting to preserve its strategic primacy in the Indo-Pacific region. The competition between the US and China has intensified, with battles fought on various fronts, including trade, technology, weapons and diplomacy, and nearly developed into a new cold war, creating enormous pressures on global supply chains. The UK Prime Minister Boris Johnson and the President of the European Commission, Ursula von der Leyen, finally signed an agreement, ending the UK’s EU membership after 47 years and making Brexit official. Japan’s longest-serving Prime Minister, Shinzo Abe, was succeeded by former Chief Cabinet Secretary, Yoshihide Suga, and the new cabinet’s economic and fiscal policies are still taking shape. China's influence on the world continues to increase and the momentum for its economic growth is relatively stable, even though it is caught between souring relations with the US and the pandemic. The Fifth Plenary Session of the 19th Central Committee of the Communist Party of China was held in 2020 to formulate the “14th Five-Year Plan” and the “Long-Range Objectives Through the Year 2035”, in which the idea of “dual circulation” was adopted as the core concept for future economic growth in China.
Even under the lurking threat of COVID-19, the launch of 5G has been instrumental in the creation of long-distance business opportunities. Substantial benefits have also been brought by trade diversion as a result of the US-China trade war and have maintained Taiwan’s economic momentum. However, on the flip side, as an export-oriented economy, the country faces multiple challenges internally and externally, including exclusion from regional economic integration, reconfiguration of global supply chains, and the strong appreciation in the New Taiwan dollar.
Regional economic cooperation is a major trend in the development of world trade. The CPTPP came into force in 2018, and the RCEP was signed in 2020. This ongoing rapid integration of global trade and economies will shape the future of the corporate world. Moves made by central banks around the world, especially those by the new chair of the US Federal Reserve, remain a focus of attention. Meanwhile, governments are being put to the test as to whether they can still manage inflation effectively with easing monetary policies in place. In terms of power, the world's energy system is transforming rapidly, massive changes taking place in both demand and supply. Renewable energy is booming in combination with emerging trends for countries to implement carbon-reducing policies and seek green alternatives for power. Electric vehicle (EV) sales have taken off throughout the world. In the field of environmental protection, since the “Paris Agreement” was adopted at the United Nations Climate Summit, governments have taken concrete actions to respond to climate change and invested in green recovery plans to reduce carbon emissions. Carbon neutrality, energy transition and the circular economy are not merely international trends, but are also enterprises’ stepping stones to success in competition. Public health issues are attracting global attention. Vaccines are essential to crushing the pandemic worldwide and understandably determine the economic outlook in 2021.The cards have been reshuffled for a new game in the post COVID-19 period, and to win the game, enterprises must leverage megatrends, including 5G technology, AI, IoT, EVs, smart healthcare and renewable energy. A corporation needs to accelerate their process of transformation, capitalizing on the opportunities created by this crisis.
FENC has taken on formidable challenges and again demonstrated tenacity during trying times. The onset of COVID-19 has brought with it the toughest of tests for the management, and yet we have, once again, proven our agility during emergencies and adaptability to emerging trends as staunch guardians of the Company’s global brand image.
FENC operates across the three major businesses of Production, Property and Investments. In the Production Business, the Company differentiates itself from its peers through vertical integration, diversification of production sites, and continuous green transformation. In the Property Business, it has attracted relocation of major international companies with highly-acclaimed land developments and launched various projects with huge income potential. The Investments Business has been generating stable income by monitoring current societal trends and drawing on the Group’s synergy. Despite the havoc wrought by the COVID-19 pandemic, each business segment has proactively caught diverse business opportunities. The operating profit from the Polyester Business reached a record high of NT$ 4.07 billion and the revaluation gain on Investment Properties reached NT$ 2.2 billion. In 2020, the consolidated revenue reached NT$ 206.77 billion and net income NT$ 12.98 billion. The net income attributable to shareholders of the Company is NT$ 8.06 billion, translating into a basic EPS of NT$ 1.62 based on the IFRS rule. The 23rd term Board of Directors in the 12th meeting proposed a cash dividend of NT$ 1.35 per share, also a record high cash dividend payout ratio in recent years.
Production Business: Operate Flexibly with Global Deployment, Create Synergy with Vertical Integration, Sustain Business with Innovation
- Establishing a solid business presence in the world
By closely monitoring global economic developments the Company has built a robust business worldwide. It has prudently established bases in diverse locations including Taiwan, China, Vietnam, the United States, Japan and Southeast Asia. As regional trade agreements continue to spur the location of supply chains, such a diverse deployment gives the Company immense flexibility to make timely adjustments and strategic investments allowing for rapid delivery of its products. It regulates the pace of development in sync with market dynamics to mitigate risks in economic cycles and strengthen its competitive position in the global market. The expansion of product bases has been aligned with green transformation and FENC will continue to establish a solid presence by deploying strategic investments around the world.
- Maintaining world-class leadershipThe Company operates businesses across various industries. It is the leading global polyester supplier, the world’s second largest provider of recycled PET (R-PET), the third largest in PET resin and Asia’s leader in polyester sheets. It is also the world’s third largest producer of nonwoven fiber, number one in hygiene fibers, recycled filament and ocean polyester and Asia-Pacific’s largest producer of Nylon 6,6 filament. Additionally, it is the world’s largest supplier of medical-grade PE/PP and PE/PET composite fibers.
- Delivering synergy with a streamlined system
The Company aims to maintain its leadership in the polyester and textile industry. It has been able to maintain an edge over competitors with a vertically integrated network of production and sales. The streamlined system features seamless cooperation from raw material procurement through production and sales to maximize the benefits of vertical integration. Upstream, petrochemical feedstock is pivotal to vertically-integrated production and FENC is thus afforded unrivaled advantages in operation, with their synergy between a consistent supply of high quality feedstock and horizontal support in different production sites. Midstream, the Company is the global leader in polyester production and has committed itself to R&D in innovative materials and fibers and the expansion of green industries. Downstream, its textile operations have engaged in product transformation, diversification of production sites and optimal balance of their customer portfolio. Harnessing its R&D capabilities in new materials, FENC is able to provide customers with rapid and innovative services and has become a strategic partner of many world-class brands.
- Capturing new markets with green ambition
The Company has operated in the recycling industry for 30 plus years with production sites in Taiwan, China, Japan and the United States, and continues to expand its capacity in Southeast Asia and the Americas. Based on the circular economy and its green products, such as exclusively developed ocean-recycled yarn and eco-friendly elastic polyester fiber TOPGREEN®, have earned international acclaim as they have been chosen by global sportswear brands as raw materials to promote environmental sustainability. FENC is in the world’s top 2 for recycled polyester and is the leader in food-grade R-PET resin in terms of capacity. In 2020, the Company developed TopGreen® ChemCycle—the latest recycling technology to chemically convert polyester waste into rPTA and was thus awarded the highest honor Two Star by the Environmental Protection Agency of the Executive Yuan in the “2020 Awards for Excellent Enterprises of Circular Economy.” TopGreen® ChemCycle has been adopted by the largest beverage maker in Japan, Coca-Cola Bottlers Japan Inc., and will also be used to produce a wide array of brand-name products, speeding the growth of the recycled polyester industry. In 2020, FENC became the first in Taiwan to issue sustainability bonds and also the first to issue sustainability-linked loan & commercial paper in Asia. The Company intends to implement strategies of sustainable development by making green investments. The secured funds are linked to its pursuit of sustainable development goals and earmarked for specific projects, which forms a closed-loop from the source to the end use of funds and thus makes FENC an innovative role model for sustainability financing in Taiwan and also creates favorable outcomes for the government, enterprises, and investors.
- Proactively fighting COVID-19
Since the outbreak of the COVID-19 pandemic, the Company has responded proactively. Internally, measures were swiftly adopted and policies were carefully formulated to prevent transmission. Employees were requested to work remotely, teams divided up to work in separate locations. An information platform incorporated a system of employee health self-declaration has been set up. Employees are provided with facemasks to ensure their own health and safety and mitigate the threat of the pandemic on business operations. Externally, the Company has supplied professional medical products essential to the prevention and control of the pandemic, and has fully cooperated with the government's production allocation scheme to ensure a stable supply of epidemic prevention materials.
- Growing the business with commitment to Environmental, Social and Corporate Governance (ESG)
FENC demonstrates its commitment to sustainability by continuously investing in innovation and technology to optimize its ESG performance. In order to maintain sustainability, the Company set up a “Sustainability Committee” with the ambition of becoming a global leader in sustainability practices. FENC has earned numerous accolades for its outstanding performances from prestigious organizations around the world, such as the World’s Best Practice Award in the 2020 Global Corporate Sustainability Awards (GCSA) and five titles in Taiwan Corporate Sustainability Awards (TCSA), including Taiwan's Top 10 Model Enterprises for Sustainability, Best Report of the Year, English Report Gold Awards, Circular Economy Leadership Awards, and People Development Awards. The Company, with its “Promote Circular Economy to Pursuing Sustainable Growth Project”, also won the Grand Prize in the category of Outstanding Project for Environmental Friendliness and Excellent Award in the Category of Manufacturing Industry” in the 16th CSR Annual Survey of Global Views Monthly. It has been ranked consistently in the top 5% of the listed companies in the Corporate Governance Evaluation conducted by Taiwan Stock Exchange. In addition, it is included in multiple international sustainability indices, such as the MSCI ESG Leaders Indexes, FTSE4Good Emerging Index and Taiwan Sustainability Index. Moreover, FENC has attained the Leadership Level in CDP Questionnaires of Water Security, Supplier Engagement Rating and Management Level in CDP Questionnaires of Climate Change.
Property Business: Developing Properties to Unlock Asset Potential
The Company has abundant land assets, owning a total land area of 570,000 pings (1,884,306 m2) in Taiwan, including Taipei Far Eastern Plaza and other lots with tremendous development potential scattered in the districts of Banqiao, Wugu Taishan across New Taipei City. To actualize and increase the return on land resources, Far Eastern Resources Development Corporation was set up and put in charge of land development, rental and sale. Taipei Far Eastern Telecom Park (Tpark) covers an area of 74,000 pings (244,629m2) in Banqiao and is positioned as a hub for 5G and AI-related industries that aims to accommodate iconic development projects. It is currently in the third stage of development. By the end of 2020, Google had settled well into its newly-completed office campus—TPKD, an architectural design that blends environmental sustainability with technological innovation, which will bring prosperity to local communities and advance economic development. This will also ensure the Company maintains a stable rental income stream. In addition, several other development projects are under construction and planned to completion in the next one to three years, including another R&D building—TPKE, Zone B and Zone C of residential complexes constructed by Far Eastern Construction. They are expected to create clustering effects and enhance the overall asset value of Tpark. Another development project for FENC’s old textile plant in Neili will begin soon. Building plans include the Far Eastern International Convention Center, a smart hospital, residential & commercial districts and parks, and have great potential in creating benefits.
Investment Business: A Broad Investment Portfolio to Ensure Income Growth
FENC has built a diversified investment portfolio that ranges from telecommunications, cement production, land and sea transport, department store retail chains, financial and banking services to construction. It enables the Company to not only tap into the growth in the domestic market but also reinforce its presence in the international market. Each subsidiary operates with sound management and continues to engage in transformation and upgrading. Together as a whole, they deliver maximum synergy embodying the principle of “sharing resources in pursuit of prosperity for all” and contribute considerable income to FENC. The telecommunications business is the primary focus of the Company’s investment business. Far EasTone Telecom (FET) has three strategies in the new era of 5G—New Economy, 5G Applications and Diversified Partnership. Operating with an innovative business model by joining forces across the various sectors of finance, retail, entertainment, etc., it plans to construct an all-in-one mobile life circle and thereby accelerate comprehensive adoption of 5G services. In response to the change in consumer behavior induced by the pandemic, Far Eastern Department Stores (FEDS) has reintegrated online and offline resources and keeps precise track of consumer trends with its smartphone app, which enables an upgrade from digital to AI operation. The soon-to-open New Century Shopping Mall in Zhubei promises to impress visitors with brand-new distinctive features. Asia Cement (ACC) has an annual capacity of 5 million tons in Taiwan and 35 million tons in China, and this, combined with its investment in Sanshui Cement ranks it among the world’s top cement producers. FENC will continue to innovate its management of the investment portfolio and advance the subsidiaries to an even higher level of success so as to create consistent and increasing returns on investments for shareholders.
Business Goals and Prospects
The Company is poised to leverage emerging trends in the new normal and write a new chapter of prosperity in the post-COVID-19 era. It continues to stride towards the goal of sustainable development with innovative thinking, superior know-how and excellent management.
- Pursuing Substantial Growth by Focusing on New Fibers
- Increasing market share in hygine and health care supplies
FENC is a world-class supplier of fibers for hygiene and healthcare applications. A pandemic-induced structural reform has been undertaken, shifting the Company towards innovation of epidemic prevention materials and increasing the proportion of hygiene and healthcare supplies in production. Cutting-edge manufacturing technology is widely applied to the production of healthcare supplies, including upstream essential materials for hospital-grade face masks, hospital-grade protective clothing, face shields, goggles and blood collection tubes, etc., to safeguard the health of frontline healthcare professionals. This strategic move has also brought in a considerable revenue. In addition, ultra-fine denier fiber has been developed for diapers and sanitary napkins to provide extreme comfort for users. FENC is currently the world’s number one supplier of non-woven staple fiber for hygiene applications.
- Penetrating the high-end market for vehicle materials
The global market for electric vehicles has taken off. As a result, the industry of high value-added vehicle materials has tremendous potential for growth. To capture the opportunities, Oriental Industries (Suzhou) supplies high value-added nylon 6,6 industrial yarn for production of safety airbags, tire cords and seatbelts, making the Company a leader in this niche market.
- Raising visibility on the world stage with top-of-the-line design of athletic apparel
FENC upholds its commitment to innovation in product development, increasing the proportion of high value-added products of exclusive design. In partnership with Adidas for the 2022 World Cup, FENC is expected to once again shine on the world stage by supplying TopGreen Ocean and the latest TopCool Petal filaments for the football strips of five national teams.
- Expanding Continuously to Reinforce Global Presence
The Company is keen on branching out globally to strategic locations so as to overcome the challenges and make real the opportunities presented by economic integration in different regions around the world. Its global deployment allows greater flexibility in business operation and immediate responsiveness to the needs of major accounts and is also conducive to sales growth for all. Looking forward, Phase II expansion in Vietnam is underway, including the Dyeing & Finishing Plant Phase II, the Polyester Filament, the Staple Fiber Plant and the third Apparel Plant. New production lines are being established at Corpus Christi Polymers in Texas to increase the PTA and PET capacity. The Company’s joint venture with Yihua Petrochemical on PTA production in Yangzhou, China and the 400,000-ton PET expansion project was planned to be launched when appropriate. Its recycling facilities in Japan have also been expanded to enhance FENC’s stature in the country’s circular economy. The Company will continue to establish footholds in a variety of different locations worldwide to avoid reliance on any particular market and mitigate vulnerability to disruptive economic shocks.
- Promoting Industrial Upgrading by Undertaking Digital Transformation
To accomplish digital transformation, FENC has taken the lead in the industry by being the first in acquiring multiple smart equipment and manufacturing processes and constructing smart supply chains for manufacturing. With the aid of data exchange, cloud computing and automation technology, the Company has managed to craft advanced manufacturing processes and build smart factories. It has also set up an intelligent management system and organized training to enhance employee capacity for digital operations. Real-time Power BI dashboards have been used to speed up decision-making. AI has been infused into the development of the Company’s various management systems, including active energy management, real-time online quality prediction, and big-data sharing platform for apparel, dyeing and finishing. As the Company incorporates Industry 4.0 into its operations, automation technologies and AI have made their way into production, warehousing and distribution. The new mode of manufacturing is expected to further increase operational efficiency. At this critical juncture for digital transformation of leading enterprises around the world, we will continue to support the implementation of AI projects with considerable funds earmarked to ensure a promising future.
- Capturing Green Business Opportunities
FENC has been committed to developing technology to realize business opportunities in the circular economy. By broadening the scope of green product applications, the Company aspires to serve as a total solution for brand customers. It has rolled out several signature projects to promote the concept of circular economy, including Bottle-to-Bottle recycled PET, Bottle-to-Fiber recycled polyester filaments and Bottle-to-Other Packaging recycled packaging solutions. FENC intends to partner with global brand companies in the establishment of green supply chains. A case in point is the partnership with 7-ELEVEN Japan and Coca-Cola on a bottle recycling program in pursuit of a common vision—World Without Waste initiated by Coca-Cola. Having the largest R-PET plant in Japan, the Company planned to construct the third production line next year. Meanwhile, it is also aggressively expanding its R-PET capacity worldwide with new facilities planned in the United Sates, Vietnam and the Philippines.
- Maintaining Competitiveness with Innovation in Management
The management team coordinate the company’s business activities around the world with agility and efficiency. As a multinational enterprise, it has established a highly-efficient mechanism for risk management and control to cope with unexpected global crises and mitigate risks in a timely manner with a holistic approach and thus safeguard the security and stability of its business operations. It has also introduced a smart mobile system that manages projects with AI across organizational functions, such as finance and accounting, human resources, documentation, sales and payment, etc. It has a globalized HR education and training system that prepares future business leaders for their upcoming responsibilities. It has sound financial policies in place that oversee investment and asset management. FENC remains committed to environmental sustainability, corporate governance and high energy efficiency and continuously improve its management practices to maintain its competitiveness in the corporate world.
- Focusing R&D Effort on Empowering PossibilitiesFar Eastern Group R&D Center is a well-equipped research organization. In addition, to harness the latest R&D progress in the industry, the Company acquired an R&D center in Ohio, US. An international R&D taskforce has been formed to consolidate resources and expertise across the Pacific Ocean and entrusted with bringing revolutionary products to market. The R&D Center focuses on polyester, environmental protection, energy conservation, and reduction in carbon emissions. It has long engaged in the development of green, eco-friendly PET-based materials, high-end advanced materials, functional fibers/fabrics, and R-PET applications and technologies. In the short term, it works closely with business units to roll out upgraded products. In the mid and long-term, it intends to consolidate the Group’s R&D resources and core competencies, focusing on the fields of new green materials and applications, bio-based products, and high-end fibers. It will keep up the drive for innovation by locking in on supplying new materials and fibers to promising industries of the future.
Setting an Example for the Corporate World by Doing Good for SocietyAs it pursues growth in business, FENC also spares no effort in contributing to social stability and public well-being. The Company gives back to society by engaging in businesses of public interest, endeavoring to advance people’s welfare and enhance the competitiveness of the local communities where FENC operates with its core competencies and capital investment. FENC has demonstrated a 50-year commitment to the advancement of public welfare, having established three educational institutes, two hospitals and four foundations that sponsor a variety of charitable causes across fields such as education, healthcare, culture and technology. At the forefront of healthcare, the Far Eastern Memorial Hospital (FEMH) remains devoted to patient-centered care throughout nearly four decades of medical practice, and seeks to further enhance it with the introduction of AI. In the field of education, Yuan Ze University, as a comprehensive university that offers multidisciplinary programs, planned further broaden its scope of education offerings by establishing a college of medicine and nursing in cooperation with FEMH. The Graduate Institute of Medicine has been approved by the Ministry of Education and plans to begin its enrollment of the brightest minds in the medical field in 2021. To encourage innovation, the Y. Z. Hsu Science and Technology Memorial Foundation presents awards to acknowledge outstanding achievements in various fields, including nanotechnology, ICT, optoelectronics, biotechnology & pharmacology, green technology, and artificial intelligence. In addition to supporting intellectual development to upgrade industrial performance, FENC also seeks to promote public health and fitness in local communities and exert a positive influence on people’s physical well-being by hosting an annual FENC Classic Marathon. This sports event is now entering its twelfth year. Furthermore, the Company works persistently on CSR and ESG to contribute to a brighter future for society and the world as a whole.
As the world settles into a new normal in the post-COVID-19 era, FENC will counter emerging challenges with an innovative mindset, fearless in the face of rapid and capricious shifts, whether they are changes in the political, economic, or mother nature. Moving forward, the Company still firmly adheres to its overarching principles of sincerity, diligence, thrift, prudence and innovation. We will reimagine how to construct a business model that enables the Company, the environment and society to all thrive. We will repurpose business management to maximize value for all the stakeholders—employees, shareholders and society alike. We will reinvent the business prospects, navigating the reconfigured business landscape with green innovation, while remaining agile. In the post-pandemic era FENC will open another new chapter of prosperity after seven decades of success, breaking through with action and triumphing over the new norm.