Lotte Chemical Titan posts FY19 net profit of RM439.7m, cautious on outlook

Published on 30 Jan 2020. | Source: thestar.com.my

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KUALA LUMPUR: Lotte Chemical Titan Holdings Bhd, which posted a lower net profit for the financial year ended Dec 31, 2019, cautioned that the petrochemicals business would be challenging.

It said on Thursday the challenges were due to persisting global market uncertainties arising from geopolitical tensions in the Middle East as well as softening of the global economic outlook.

Its net profit for FY19 was RM439.73mil, a decline of 43.8% from RM783.33mil in FY18 following with the drop in sales revenue during the period.

LCT said that volatile naphtha feedstock costs which were in tandem with the global crude oil price, relative to the depressed product prices for the year, continue to compress operating margins during the year.

Its revenue fell by 8.7% to RM8.44bil from RM9.24bil due to the notable drop in the company’s average product selling prices (ASP) in FY 2019.

“However, the impact was partially mitigated by the increase in sales volume which was driven by continuous improvement in overall operating rates and higher production during the year, ” it said.

LCT stated that the continuing of US-China trade conflicts which intensified in 2019 has diverted flows of cheaper polymer supplies, mainly polyethylene (PE), into ASEAN countries which then depressed the regional polymer prices.

“Earnings before interest, tax, depreciation, and amortization (Ebitda) reached RM891.2mil amidst a multitude of market turbulences impacting the petrochemical industry in 2019. The company will make an announcement on the dividend for FY 2019 at a later date, ” it said.

In the fourth quarter, its net profit surged to RM187.75mil from RM7.22mil a year ago. Its revenue fell by 15.5% to RM1.97bil from RM2.33bil a year ago. Earnings per share were 8.26 sen compared with 0.32 sen.

“On quarterly basis, operational income from Lotte Chemical USA (LCUSA), which had commenced commercial operation on an integrated basis since August 2019 and a one-off gain recorded from the partial disposal of equity interest by LCUSA in the US Cracker joint venture project, contributed to increase in PAT to RM190.4mil, from RM8.3mil in preceding year quarter.

“In addition, lower provision made for the writedown of inventory cost to net realizable value also helped improved Ebitda by 12% to RM120.7mil in FY 2019, from RM108.1mil during the corresponding quarter in the preceding year, ” it said.