Lotte Chemical Titan posts second-quarter net profit of RM105mil

PETALING JAYA: Lotte Chemical Titan Holding Bhd has posted a net profit of RM104.85mil in the second quarter ended June 30, 2019, which was a sequential improvement from the first quarter due to better overall performance.

In a filing with Bursa Malaysia, the petrochemicals giant said its net profit rose by 88.7% from RM55.83mil in the first quarter ended March 31, 2019, also supported by higher foreign exchange (forex) gains and other non-operating income recorded for the quarter.

Its revenue dipped to RM2.13bil from RM2.17bil quarter-on-quarter, mainly due to slower sales coinciding with the festive season and delayed deliveries. Earnings per share was at 4.61 sen compared with 2.46 sen previously.

Lotte Chemical Titan said average selling prices for both olefins and polyolefins remained at depressed levels from a year ago, which had compressed profit margins amid softening global economic growth with the ongoing external uncertainties.

“Meanwhile, the reshuffling of global trade flows, which resulted in an increased supply of lower-priced polymers from the US into the Asean region, also continued to weigh on product prices.

“To brace for the challenging environment, the company continued to maximise its operating efficiencies whereby the plant utilisation rate further improved to 89% in the quarter, better than the 87% recorded in the previous quarter and notably higher than 82% a year ago, ” it said.

Lotte Chemical Titan said its strategy was to continuously seek to maximise profits by focusing on better-margin products and emphasising on various plant-optimisation programmes to boost overall efficiency and production.

However, the second quarter 2019 net profit of RM104.85mil was down 66.7% from RM315.02mil a year ago. Its revenue declined by 6.5% to RM2.127bil from RM2.275bil.

It said the lower profit was due to a margin squeeze resulting from a fall in product selling prices.

“The lower selling price is mainly due to the diversion of the polyolefin supply from the US into South-East Asia as a consequence of the US-China trade war, as well as the softening of global economic growth, ” it said.

The company said it was also impacted by higher distribution expenses, lower forex gains by RM38.3mil and a share of loss from associates.

Lotte Chemical Titan said higher distribution expenses arose from an increase in the sales volume, a higher unit distribution cost and an increase in royalty expenses by RM8.9mil.

This was partially offset by higher insurance proceeds received/receivable of RM45.7mil for furnace damage claims as compared to RM31.2mil for gas turbine claims in second-quarter 2018.