Strengthen Agility, Generate New Value for the Far Eastern

To keep up with the changing environment, based on its core competence, the Far Eastern Group has strived to adjust its operating strategies, upscale its manufacturing business, and agile its investment portfolio. The Company has garnered numerous accolades at home and from abroad in recognition for the outstanding performance.

The year 2016 was characterized by a multitude of political and economic dynamics worldwide as major political events such as the Brexit vote and Trump victory took the world by surprise and thorny issues such as political turmoil in the European Union and disputes in the South China Sea remain unresolved.  The global economy was also in a state of flux last year, when, despite the economic recovery in the United States, Europe’s stagnant economy, China’s slowing growth and Japan’s prolonged slump were clearly evident.  In 2017 the world is beset with new issues and challenges with the global business climate hugely affected by political, economic and environmental factors as well as fluctuations in raw material prices.  In the United States, the Trump Administration has introduced new, sometimes controversial, policies and on the other side of the pond, the process for the United Kingdom to leave the European Union has kicked off.  At the same time, China has been actively seeking to transform its economy.  All this is happening against the backdrop of a growing populist sentiment against globalization.

On the political front, a series of elections are scheduled to take place in major European countries such as France, Germany, the Netherlands and Italy.  The outcomes will potentially have a massive impact on the solidarity of the European Union.  In China, the 19th National Congress of the Communist Party, which is held every five years, will take place in the autumn.  The change in the makeup of the party’s leadership core is certain to gain lots of global attention.  The U.S. President Donald Trump’s “America First” agenda and protectionist approach are elusive, adding new variables to regional cooperation and competition.  The tensions on the Korean Peninsula have remained unabated.  While North Korea continues to conduct missile tests, an unprecedented political storm rages on in South Korea.  Economically, the United States and China have a direct bearing on the future of the global economy and any signs of escalating tensions between these two superpowers draw enormous media scrutiny.  As fluctuations in exchange rates are under the microscope everywhere, central banks’ policies, particularly the Federal Reserve’s decision to adjust interest rates, remain a focus.  The U.S. and Chinese governments’ increased public expenditure has increased inflationary pressure on their economies.  Also noteworthy is a wave of protectionism rising globally, adding uncertainty to key trade negotiations.  With regard to energy prices, the OPEC countries agreed to reduce oil output to hike up prices and the rapid development of shale gas technology and renewable energy such as wind and solar power will place further stress on the demand for oil.  Although commodity and crude oil prices have increased compared to two years ago, the global economy remains vulnerable to continued volatility in raw material prices.  As for the environment, since the Paris Agreement was finalized at COP21, governments around the world have set targets and formulated policies to reduce carbon emissions and mitigate the impact of climate change, while businesses have begun to focus more on environmental protection to pursue sustainability.

As China cements its role in the world’s trade and economic activities, the country’s growth momentum requires close observation.  In response to the slowdown in consumption, government spending, investment and exports, the Chinese government is now shifting toward encouraging production of consumer-oriented and high-quality products to boost the domestic economy.  Across the strait, Taiwan is confronted with various issues, pertaining to change of government, political tensions between Taipei and Beijing, shifts in financial, economic and labor policies as well as potential power shortages.  In addition, costs associated with labor and the environment are climbing in Taiwan and as a result of the slow progress of regional economic collaboration worldwide, corporations in Taiwan are now facing greater challenges concerning tariffs and the overall business environment.  However, opportunities still abound in the fast-changing world, which has entered an age where technology, energy, industrial structures and modes of competition are evolving faster than ever.  Cloud services, big data analysis, Internet of Things, virtual reality, augmented reality, artificial intelligence and the merging of the virtual and physical worlds are altering our way of living at an unprecedented rate.  And, in the face of this new era, companies are expected to speed up transforming and upgrading their businesses to take advantage of these emerging opportunities.

In order to keep abreast of the times, the Far Eastern Group (FEG) has adopted risk management strategies, accelerated the transformation of our products, and continued to innovate our business models.  As a leading world-class polyester supplier, Far Eastern New Century (FENC) from securing feedstock to manufacturing and selling products, we are able to take advantage of our networks in Taiwan, China, Vietnam, Japan and elsewhere in South East Asia to achieve global reach.  Our upstream, midstream and downstream businesses have been vertically integrated, making us the most competitive in terms of manufacturing process and technological capabilities.  We also lead in introducing smart manufacturing (Industry 4.0) and eco-friendly products.

Far EasTone Telecommunications (FET) has continued to increase its share in the 4G market and provide services utilizing tri-band carrier aggregation (700/1800/2600MHz) on its way toward the 4.5G future.  The penetration rate of FET’s 4G monthly service subscribers ranks top of the three largest telecom operators in Taiwan.  Now FET is aiming to build 5G networks and IoT products, enhance the vertical integration of ICT systems as well as develop a wider array of products and smart applications to pursue higher revenues and profits.  Asia Cement (ACC) is a top tier cement company that provides high-quality products and maintains high profitability.  The change in the landscape of China’s cement market provides the industry with great momentum for growth and ACC (including ACC China) has made it into the top ten cement companies in China.  Our retail business has generated more profits because of its increasing economies of scale.  Established 50 years ago, Far Eastern Department Stores today is not only the oldest listed chain department store in Taiwan, but also a large-scale retail group in China, which has merged online and offline retail channels and moved into the new territory of high-tech retail to tap into business opportunities online.  Our retail businesses are always poised to respond to and act upon shifting trends in the market.

FEG has established two health care institutions, four foundations and 3 schools, covering medical, technological, cultural and educational areas, in a bid to fulfill our social responsibilities.  As the one and only accredited medical center in New Taipei City, Far Eastern Memorial Hospital has not only passed evaluations with flying colors but also received multiple awards for its exceptional health care services.  In an effort to enhance Taiwan's competitiveness, Far Eastern Y. Z. Hsu Science & Technology Memorial Foundation has held Y. Z. Hsu Scientific Award for years and granted over NT$120 million to 238 brilliant scholars at home, while Far Eastern Memorial Foundation has spared no effort in rewarding achievements in architecture, organize conferences on national policies and raise awareness about water resources.  For example, the foundation held the water-themed exhibition, "Water of Taiwan, Fountain of Life,” which attracted more than 300,000 visitors, to educate people on the importance of water conservation.  We also worked with the education center of Beitou Refuse Incinerator Plant to promote recycling and raise environmental awareness.  To encourage people to live a healthy life and care for others, we held a marathon race with more than 7,700 runners signing up for the event.  In order to inspire the world to strive for low-carbon transportation, we have shared our success stories of building and implementing the electronic toll collection system (ETC), which has brought over US$2 billion worth of socio-economic benefits.  Our ETC project won the Global Road Achievement Award in the category of traffic management and ITS.  Countries such as the Philippines, Malaysia and Russia are all eager to collaborate with us and learn from our experience.  For over six decades, the Company has been committed to meeting our social responsibilities, contributing to our country and bringing hope and happiness to society at large.

As there are plenty of investment opportunities in the global market, FEG will take a prudent and steady approach to seeking merger and acquisition chances at home and abroad to pursue growth and upgrade our business as a whole.  Over the past 67 years, the Company has remained resilient in the face of adversity and grasped every opportunity to bring about changes despite political and economic vicissitudes.  At the Company, we value sincerity, diligence, thrift, prudence and innovation, which are the overarching principles that guide our business operations.  In response to an increasingly globalized and urbanized world where populations continue to age and technology has become integral to every part of our life, we will strive to adopt innovative business models, optimize human resources, adapt to climate change and mitigate its impact, strengthen public and industrial safety, maximize the benefits of resource allocation and achieve synergetic growth.  In this way, we will be well-positioned to overcome the challenges ahead and generate greater value for the Company.
 (Abstract from Far Eastern New Century Corporation “2016 Message to Shareholders”)＃