CEO Morning Brief

Lotte Chemical Titan Posts Second Straight Quarterly Loss of RM355 Mil at 3QFY22

Publish date: Fri, 28 Oct 2022, 08:35 AM
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TheEdge CEO Morning Brief
Lotte Chemical Titan posts second straight quarterly loss of RM355 mil at 3QFY22

KUALA LUMPUR (Aug 27): Lotte Chemical Titan Holding Bhd (LCT) posted a net loss of RM355.5 million or 15.61 sen per share in the third quarter ended Sept 30, 2022 (3QFY22), compared to a net profit of RM48.48 million or 2.41 sen per share in 3QFY21, despite higher revenue.

This is LCT's second straight quarterly loss. In comparison, it made a wider net loss for the quarter under review compared with the RM145.92 million loss in 2QFY22, on revenue of RM2.82 billion.

LCT attributed the quarterly loss to a decline in margin spread of 26%, write down of inventories to net realisable value of RM71.9 million and the share of loss from associated company, Lotte Chemical USA Corp, compared to share of profit a year ago.

LCT’s quarterly revenue, however, grew 6.12% to RM2.37 billion from RM2.24 billion in the previous corresponding quarter mainly due to the increase of average product selling price.

“Average plant utilization recorded at 69% compared with 76% in the corresponding quarter mainly due to business optimization as feedstock cost increased and demand in downstream fabrication industry remained subdued.

“Fabricators continued to experience labour shortage issues and weaker demand for finished goods amid global recession fears,” said the group in a bourse filing on Thursday (Oct 27).

For the cumulative nine months (9MFY22), LCT made a net loss of RM397.425 million versus a net profit of RM871.14 million, although its cumulative revenue increased 11.3% to RM7.95 billion from RM7.15 billion.

Commenting on the group’s performance, LCT president and chief executive officer Park Hyun Chul said its customers continue to be cautious in their purchases due to the rising interest rate environment, which affects the demand for LCT’s finished products.

“Even though the direct export of our products to China is opportunistic, the decline in demand for petrochemical products from China has indirectly disrupted the supply and demand dynamic in the region,” Park explained.

“Furthermore, the crude oil market sentiment remains mixed on global recession fear and the Russian–Ukraine crisis, causing naphtha prices to fluctuate in line with crude oil prices. Due to a drop in margin spread as a result of weakened market demand and other external factors, we recorded a net loss in this quarter even though our revenue was up by 6%,” he added.

Hence, maintaining a strong financial resilience is crucial for LCT during this challenging period, said Park who added that the group is always embedding a sustainability plan within its operations as a critical driver for business growth and for creating value for its stakeholders.

“We continuously exercise an effective optimisation plan by balancing our production outputs and economic efficiencies. Internally, our business fundamentals remain strong. With our healthy cash balances and zero borrowing position, we can ride through the volatility and overcome the challenges to materialise our vision to become the top-tier petrochemical company in Southeast Asia,” Park noted.

Currently, LCT is conducting a measurement to establish its greenhouse gas emission baseline and the exercise is expected to be completed by end 2022.

Thereafter, the company will also develop a carbon emission management roadmap to achieve its carbon neutrality, Park added.

LCT’s share price rose 5.8% or eight sen to RM1.47 on Thursday, giving it a market capitalisation of RM3.4 billion. Since the beginning of this year, the counter has tumbled 39%.

Source: TheEdge - 28 Oct 2022

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