Lotte Chemical Titan posts fourth loss-making quarter in a row amid margin squeeze

KUALA LUMPUR (April 27): Lotte Chemical Titan Holding Bhd kicked off its financial year 2023 with another loss-making quarter — its fourth in a row — due to tighter profit margin amid weakened market demand arising from a volatile external environment that is pressured by high interest rates and recession fears.

It incurred a net loss of RM224.76 million for the first quarter ended March 31 (1QFY2023), compared with a net profit of RM104 million in the same quarter a year ago, as revenue sank 29% to RM1.97 billion from RM2.76 billion following lower average selling prices and sales volume.

As such it posted a loss per share of 9.87 sen for the quarter, as opposed to earnings per share of 4.57 sen previously, its bourse filing showed.

The group's average plant utilisation dropped to 70% for 1QFY2023, compared to 85% a year ago, due to the group’s business optimisation measure.

“The supply of petrochemical products is expected to increase in view of new capacity coming on stream this year. Barring unforeseen circumstances and taking into consideration plant utilisation rate and business optimisation, the operating rate guidance for FY2023 is 75% to 80%. This guidance may change from time to time,” Lotte Chemical Titan said.

In a separate statement, the group's president cum chief executive officer Park Hyun Chul said the petrochemical industry entered 2023 with continued external challenges, resulting in customers remaining cautious in their purchases.

“The business environment is expected to remain challenging in the near future,” he said.

Nevertheless, Park believes the group is equipped with sufficient financial strength to ride through these challenges.

“We will continue to focus on business sustainability with an effective optimisation plan and maintain a disciplined approach to managing our costs and financial liquidity,” he said.

Park also updated that the group’s subsidiary, PT Lotte Chemical Indonesia, has completed the funding structure of the Lotte Chemical New Ethylene Project in Indonesia in March by securing a 12-year term loan facility of US$2.4 billion (RM10.7 billion), after a US$1.6 billion equity injection by both Lotte Chemical Titan and its parent company, Lotte Chemical Corp.

By its completion in 2025, this new plant in Indonesia is expected to enlarge the group’s total capacity by 65%.

Lotte Chemical Titan shares closed three sen or 2.3% lower at RM1.30 on Thursday (April 27), giving the group a market capitalisation of RM3.01 billion.