Higher ASP Sees Lotte Chemical Profits Surge By 300 Percent

LOTTE Chemical Titan Holding recorded bumper profits of RM 384 million for the quarter ended 30 June 2021, a massive jump of 300% compared to RM 96 million registered in the corresponding quarter last year. The chemical giant attributes the notable to the substantially higher product margin spreads seen from a year ago.

Despite Covid-19 restrictions, Lotte Chemical showed strong quarterly performance with ebitda earnings also jumping to RM 585 million in the quarter, more than doubling from RM 262 million registered in same quarter last year. Similarly, operating profit also markedly improved by 274% to RM 445 million from operating profit of RM 119 million recorded in the 2nd quarter of 2020. At the same time, the Company also generated much stronger operating cash flows amounting to RM 1 billion for the 1st half of 2021 comparing to RM 512 million generated in the corresponding year period.

According to President & CEO Mr Park Hyun Chu the stellar performance were mainly attributable to the much higher product average selling prices (“ASP”) relative to the rising naphtha feedstock costs in 2021, in line with global Brent crude oil prices. Polymer product ASPs have experienced strong upward price momentum since bottoming at around USD 800/MT in the 2nd quarter of last year during the height of the global pandemic. The ASPs were recorded at about USD 1,300/MT in the 2nd quarter of 2021, maintaining the price levels seen during first quarter of this year. Notably, two of the company’s key products, namely the low-density polyethylene and polypropylene, which comprised of about 53% of the company’s total polymer capacity, are still recording relatively healthier margins, to-date.

The much higher earnings are on the back of notably improved sales revenue amounting to RM 2.54 billion in the 2nd quarter, marking a 61% increase from RM 1.58 billion recorded in corresponding quarter of prior year. For operating performance, the overall plant operating rate was stable at 86% in the quarter. However, the Group’s year-to-date operating performance improved to 87% from 76% in the corresponding period last year, as the Company undertook a major statutory plant turnaround for ten of its total twelve Malaysian plants in early 2020. The Company has stated that it will conduct statutory plant turnaround for the remaining two plants in Malaysia in the 3rd quarter of 2021. It has also provided group operating rate target of about 85% for 2021, which is higher than the 82% operating rate recorded in 2020.

Revenue for the first half of 2021 grow to RM 4.9 billion from RM 3 billion remarkably, its year-to-date PAT recorded a tremendous improvement, swinging from net loss of RM 74 million last year to PAT of RM 825 million in 2021, improving more than twelve-fold. Similarly, operating profit also jumped by fourteen-fold to RM 953 million from operating loss of RM 71 million during the corresponding period last year. The huge turnaround in its business performance is primarily attributable to rising product ASPs which has boosted key earnings for the Company. In addition, the Company’s performance is further supported by performance turnaround in its U.S associate’s operations on the back of improved operating performance driven by higher ASP for MEG product.

For the rest of the year, President Park is cautiously optimistic on the petrochemical market outlook with some balancing market factors weighing on the sector. As the sector moves in tandem with economic growth, it would likely be supported by the overall global economic recovery expected in the second half.

The World Bank in its recent economic outlook report has noted that the global economy is set to rebound strongly in 2021 following the devastating pandemic impact in 2020. However, the recovery is on the back of highly unequal access to vaccine supplies as well as the uneven relaxation of pandemic-control measures in different countries. Major economies such as China and U.S have seen robust reopening and recovery pace this year. On the other hand, emergence of new infection waves across Asia would likely to pose some downside risks to the full recovery extent in the region.

“Moving forward, our Company will continue to focus on operational and financial performance optimisation initiatives. 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 added.

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