Industry oversupply, low sale prices and stubbornly high raw material costs have seen polyester product-maker Far Eastern Polychem Industries post a 49.27 per cent year-on-year fall in net profit despite a surge in turnover. In the nine months to September 30, the Growth Enterprise Market-listed firm posted a HK$91.49 million profit, down from HK$180.36 million in the same period last year. Turnover rose to HK$1.44 billion from HK$1.03 billion. The company said it had suffered a continuing decline in the unit selling prices of polyethylene terephthalate (PET) chips and the continuously high raw material costs amid high crude prices. 'Although the demand for PET chips in the [mainland] has maintained double-digit growth over the past year, additional capacity within the industry came on stream during the last quarter,' Far Eastern Polychem said. Total annual production capacity of PET chips amounted to 715,000 tonnes, exceeding the annual demand of about 700,000 tonnes, it said. Far Eastern Polychem suffered from a 280.27 per cent rise in distribution costs to HK$76.55 million as transport expenses grew on an increase in exports and freight insurance premium. The company sourced 63.52 per cent of its turnover in the nine months from PET chips, 10.23 per cent from polyester filaments, 12.68 per cent from finished fabrics and 13.55 per cent from polyester staple fibres. Its PET chips are mainly sold to soda bottle and hot-filled bottle makers. Chairman Hsu Shu-tong said the company expected the cost of purified terephthalic acid, one of its key raw materials, to fall in the fourth quarter as 1.3 million tonnes of annual production capacity would probably come on line in the second half of the year. But prices of its PET chips are also forecast to fall as the fourth quarter is traditionally a slack season. 'The directors expect a very tough season for the domestic PET chip market in the [mainland], which is expected to bottom out in November 2002,' the company said, adding it would set up warehouses to cut transport costs and focus on specialty products to raise profit margins.