Lotte Chemical net profit down 34% in third quarter

Lower usage: Lotte Chemical’s plant in Pasir Gudang, Johor. The group says plant utilisation in the third quarter was lower at an average of 77 compared to 92 a year ago.

PETALING JAYA: A lower sales volume, higher unit production cost and overall reduced profit margin spread led to a 33.9% fall in Lotte Chemical Titan Holding Bhd’s net profit to RM230.3mil for the third quarter ended Sept 30.

The group said plant utilisation during the period was lower at an average of 77% compared to 92% a year ago due to a statutory routine turnaround, conducted every five to six years, for its Cracker 1 plant in Malaysia.

In Indonesia, its polyethylene plant load was reduced during the quarter due to poor polyethylene economics as a result of tight ethylene supply and high cost.

In a filing with Bursa Malaysia, the group said overall average production cost rose on higher feedstock cost.

Group revenue for the quarter, however, increased marginally by 0.6% to RM2.02bil, mainly due to higher selling prices.

Its olefins and derivative products segment saw a lower revenue of RM311.4mil during the quarter due to the drop in sales volume, while its polyolefin products segment saw revenue rising to RM1.7bil as a result of the increase in the segment’s selling price by 4.7%.

For the nine-month period ended Sept 30, net profit plunged 33% year-on-year to RM686.08mil from RM1.02bil previously.

This is mainly due to higher production cost as a result of the statutory routine turnaround activities for its Malaysian complex, a water interruption incident in April 2017 and an overall lower profit margin spread.

Revenue for the period was also down 4.7% to RM5.7bil on the back of a lower sales volume.

Despite the challenges posed during the period, the group noted that it was able to generate a sales revenue of RM5.7bil and cash generated from operating activities of RM1.3bil.

The average product selling price during the period also trended upwards in tandem with rising feedstock prices.

Moving forward, the group expects to record a positive performance for the financial year ending Dec 31, 2017 (FY17).

It said the results of its operations for FY17 would be influenced by the demand and supply balance of petrochemical products in the market, the group’s ability to maximise production outputs and operational efficiency, and feedstock prices.

“We anticipate the petrochemicals market will continue to be resilient in the near term, with demand growth for petrochemicals to outpace the rate of new supply additions in the region,” it said.

In the fourth quarter of FY17 (Q4’17), the group expects demand for polyolefin products to be stable, as the Latin American market continues to look out for supply outside of the US.

“We expect our production output in Q4’17 to be higher compared to Q3’17 in view of no major planned plant shutdown and the expected commissioning of our new TE3 plant in the fourth quarter,” it added.

Lotte Chemical shares closed seven sen lower to RM5.18 yesterday.

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