Lotte Chemical posts 1Q net loss of RM170.06mil

KUALA LUMPUR: Lotte Chemical Titan Holding Bhd recorded a net loss of RM170.06mil for the first quarter of its financial year ended Dec 31, 2020, on the back of a contraction in sales revenue and lower product selling prices.

It said net earnings succumbed to margin compression and higher provision for the write down of inventory to net realisable value, resulting in a negative performance. For comparison, the group recorded a net profit of RM55.83mil in the previous corresponding quarter.

First-quarter sales revenue came to RM1.46bil, which marked a 33% decline from RM2.17bil in Q1 FY2019, on lower average selling price and sales volume.

The group said this was owing to movement restrictions in the region, which resulted in sluggish demand for its products. It added that the lockdown of major cities in China since January disrupted critical global supply chains and caused severe impact to the global economy.

"The operation of some of the main customers were affected due to the distinctive measures introduced in the region to allow only essential businesses to operate," it said.

Moreover, there was a reduction in production volume owing to major statutory turnaround activities conducted from end-February to early April. The average plant utilisation rate was 66% in Q1 FY2020 as compared to 87% in Q1 FY2019, it said.

On a segmental basis, olefins and derivatives recorded a 43% drop in revenue year-on-year to RM246.8mil, incurring a pre-tax loss of RM130.8mil as compared to a pre-tax profit of RM16.1mil previously.

The polyolefin segment posted a 30% fall in revenue to RM1.22bil from RM1.73bil in Q1 2019. The segment recorded a pre-tax loss of RM127.9mil due to the narrower margins, as compared to a pre-tax profit of RM97.2mil in the previous corresponding quarter.

Lotte president and CEO Lee Dong Woo maintained that the company remains financially resilient with a net cash position of RM4bil as well as RM271mil in generated cash flow from operations in the quarter.

He added that the group is also deemed an essential service and hence continues to supply raw materials to its customers during this period.

"Moving forward, our Company will continue to focus on operational and financial performance optimisation initiatives amid the extremely volatile external environment.

"We will also be undertaking a strategic review on the timing and progress for our Indonesia LINE project in light of the pandemic impact to the global economy," he said.