Lotte Chemical Titan 1Q profit plunges 77%


LOTTE Chemical Titan Holding Bhd’s (LCT) net profit for the first quarter ended March 31, 2019 (1Q19) plunged 77.14% year-on-year (YoY) to RM55.83 million from RM244.2 million a year ago, due to margin squeeze resulting from a fall in product selling prices.

In an exchange filing to Bursa Malaysia yesterday, the group said product market prices were lower as a result of the diversion of polyolefin supply from the US into South-East Asia following the US-China trade war.

“Other factors contributing to the decline include royalty expenses to holding company of RM9.3 million, foreign-exchange loss of RM18.7 million and share of loss from associates of RM13.4 million which is mainly due to loss on fair value changes in interest-rate swap entered by Lotte Chemical USA Corp,” the company noted.

LCT’s earnings per share for the three months was lower at 2.46 sen from 10.74 sen in 1Q18.

Its revenue for the quarter also decreased 1.81% YoY to RM2.17 billion from RM2.21 billion in the same period last year.

The company’s olefins and derivative products segment recorded a RM142.2 million decrease in revenue from RM577.7 million in 1Q18 to RM435.5 million, primarily due to the decline in selling price in the quarter and partially offset by a higher sales volume. 

As for the polyolefin products segment, its revenue increased by RM97.9 million from RM1.64 billion in 1Q18 to RM1.73 billion.

“This was primarily due to an increase in sales volume as a result of new plant capacity and partially offset by a decrease in average product selling price,” LCT said.

The company said the results of its operations for the financial year ending Dec 31, 2019, are expected to be primarily influenced by the demand and supply balance of petrochemical products in the market; its ability to maximise production outputs and operational efficiency; as well as feedstock prices correlated to crude oil prices.

“Historically, polyolefin prices will move in tandem with feedstock prices on a lagging basis, provided demand and supply for polyolefins are balanced,” it said.

Moving ahead, the company noted that crude oil is expected to remain volatile, pending unresolved conflicts in the Middle East region and any new agreement on the US-China trade negotiations. 

“Domestically, new additional capacities are expected to create short-term supply and demand imbalances.

“The additional supply is also expected to be gradually absorbed by the high consumption growth in the South-East Asia region,” it noted.

LCT added that the economic environment is expected to remain challenging with the recent downgrade in International Monetary Fund’s outlook for the global economy in 2019, citing impact from global trade tensions.

“Bracing for the global trade impact, emerging markets and the South-East Asia region will experience similar headwinds where economic activities are expected to slow down in 2019,” it noted.