by S BIRRUNTHA/ pic by BERNAMA
LOTTE Chemical Titan Holdings Bhd (LCT) intends to sell a 49% stake in PT Lotte Chemical Indonesia (LCI) to its parent Lotte Chemical Corp (LCC) for US$65.4 million (RM273.37 million).
LCT stated the proposed divestment is due to the adverse business environment of the petrochemical industry — namely, the rise of crude oil prices and the ongoing US-China trade war.
The chemical company stated the combination of these two events had caused a compression in LCT’s profit margins, which in turn has adversely affected cashflow from operations.
The company will still hold a 51% stake in the Indonesian unit after the share sale, its exchange filing to Bursa Malaysia last Friday noted.
LCT said excluding unforeseen circumstances, the proposed divestment is expected to be implemented by the first quarter of 2020.
The proposed divestment will see LCC take part directly in LCI’s Integrated Petrochemical Facility (IPF) Project.
As LCC is a reputable name in the petrochemical industry, it was said to enhance the credibility of LCI in completing the IPF.
After the completion of the front-end engineering design study and a feasibility study, both of which were completed after LCT’s initial public offering in 2017, the total cost of the IPF is US$4.4 billion.
According to LCT CEO and president Lee Dong Woo, LCT will be able to have a healthy gearing ratio and remain financially resilient during the construction period with LCC’s support via capital contribution for the construction of the IPF.
“With LCC’s participation, the amount of debt needed by LCT to fund the Lotte Chemical Indonesia New Ethylene project is significantly reduced, and LCT will be able to share with LCC the risks associated with the project.
“This will also enable the company to pursue further growth opportunities in key markets, support ongoing operations and continue to declare dividend payments going forward,” he said.