As a result of the disposal, the petrochemical producer’s 4Q19 PAT rises from RM8.3m to RM190.4m

By HARIZAH KAMEL / Pic By MUHD AMIN NAHARUL

LOTTE Chemical Titan Holding Bhd’s (LCT) net profit jumped to RM187.76 million in the fourth quarter ended Dec 31, 2019 (4Q19), from RM7.22 million the previous year, largely due to the sale of a stake in LCT’s US ethane-cracker project.

As a result of the disposal, the petrochemical producer’s 4Q19 profit after tax (PAT) rose from RM8.3 million to RM190.4 million, it said in a Bursa Malaysia filing yesterday.

“The main reason for the increase in profit before tax (PBT) from loss before tax of RM27.1 million to PBT of RM142.4 million is mainly due to a one-off gain on the disposal of equity interest in LACC LLC (LACC) to Eagle US2 LLC (Eagle US) of US$33.2 million (RM139.5 million), capitalisation of depreciation of right-of-use assets of RM6.6 million and lower write-down of inventories to net realisable value by RM31.1 million,” it added.

LACC is a joint venture (JV) between LCT’s associate company, Lotte Chemical USA Corp (LC USA) and Eagle US for the development of a US ethane-cracker plant.

In October last year, LC USA entered into a securities purchase agreement with Eagle US to transfer at least 34.79% of its equity interest in LACC to Eagle US for US$816.47 million, with the bulk of the money to be used for plant expansion and downstream business.

Following the closure of the transfer on Nov 12, 2019, LC USA now owns 53.23% equity interest in the JV, while Eagle US, an entity within Westlake Chemical Corp, holds the remaining 46.77% equity interest.

Meanwhile, LCT’s revenue fell 15.8% to RM1.97 billion in 4Q19 from RM2.34 billion a year ago due to lower average product selling price, although sales volume rose on improved production quantity.

Overall production quantity increased due to stable plant operation, while the average plant utilisation rate improved from 81% in 4Q18 to 86% in 4Q19.

For the financial year ended Dec 31, 2019 (FY19), profit slumped 43.9% to RM 439.73 million from RM783.33 million the year before, mainly due to margin squeeze resulting from lower product selling prices.

Other contributing factors include higher depreciation, higher distribution expenses and higher foreign-exchange loss.

Its FY19 revenue fell 8.7% to RM8.44 billion from RM9.24 billion a year earlier as average product prices slipped.

The company said it will make an announcement on the FY19 dividend at a later date.

In a separate statement, the Bursa Malaysia-listed South Korea-controlled group “cautioned that the industry would remain challenging” due to persisting global market uncertainties from geopolitical tensions in the Middle East, as well as a softening global economic outlook.

Its plants are scheduled for a statutory turnaround around end-February to early April 2020, except for one cracker and one polypropylene plant.

“The petrochemical industry is undergoing a very challenging phase amid the global market uncertainties. Notwithstanding that, in line with our vision and sustainable growth strategies, the company is actively pursuing further growth opportunities locally,” LCT president and CEO Dr Lee Dong Woo (picture) said.

Over the next five years, the group will focus on its key growth strategies to achieve its vision of becoming a top tier petrochemical company in South-East Asia.