JG Summit’s Olefins Corp on 'indefinite commercial shutdown'

JG Summit [JGS 16.16 ?6.5%; 387% avgVol] [link] confirmed reports that it has placed its money-burning subsidiary, JG Summit Olefins Corp (JGSOC), on an “indefinite Commercial shutdown.” JGS said that it “continues to evaluate various options to mitigate the adverse effects of challenging market conditions and to minimize impact to JGS operations and business.” JGSOC has been losing billions each year since the pandemic, and JGS has been forced to inject massive amounts of capital in recent years to prevent JGSOC’s bankruptcy. In January of 2024, JGSOC opened a new petrochemicals manufacturing complex in Batangas, and at the opening, President Marcos said that the plant would “directly and indirectly employ 6,200 individuals”, and that the plant would “enrich our economy by P215 billion [in FY25]”. The expansion project cost US $1.3 billion to construct.

MB BOTTOM-LINE:  It’s not exactly clear what JGS will do, except that it will attempt to sell its remaining inventory. JGSOC has been a terrible drag on JGS’s profitability over the post-pandemic period. This closure comes at a brutal time for the corporation, considering that it just began full commercial operations of the facility less than a year ago. I don’t have insight into the Gokongwei Family’s long-term plans, but I have respect for their willingness to shut it down to avoid incurring more losses. JGSCOC has a massive footprint in terms of both land and buildings, so I’m interested to watch and see what the family will do. Will they exit the business by selling it all off in one batch, or chop it up and repurpose the assets in a painfully slow process that could take years? Any JGS followers have any ideas? This is not a stock that I watch closely.