MOSCOW (MRC) -- Lotte Chemical (Seoul, South Korea) reports a first-quarter net loss of 90 billion South Korean won (USD73.7 million), compared with a net profit of W224 billion in the same period of the previous year, according to Chemweek.
The company recorded an operating loss of W86 billion versus an operating profit of W298 billion a year earlier. Sales were W3.2 trillion, a drop of 9.6% year on year (YOY).
Lotte Chemical says its olefins segment registered an operating loss of W12 billion in the first quarter compared with an operating profit of W191 billion in the year-ago quarter. Revenue decreased by 10.4% YOY to W1.6 trillion for this segment due to a decline in product prices.
Lotte Chemical says that an explosion at its petrochemical complex at Daesan, South Korea, reduced group profit. The complex at Daesan, based on a naphtha cracker, accounts for 21.8% of Lotte Chemical's sales. It says the sharp drop in oil prices led to inventory-valuation losses in the segment. The coronavirus disease 2019 (COVID-19) pandemic weakened demand in the company's polyethylene-polypropylene segment. However, demand for packaging and medical items grew. Demand for ethylene glycol (EG) declined. Lotte Chemical projects profit to improve in the second quarter due to the “low cost of feedstock.”
Lotte Chemical's aromatics division swung to an operating loss of W41 billion, versus an operating profit W58 billion a year earlier. Sales were down 39% YOY to W438 billion, versus W718 billion a year earlier. Sales were pressured by a decrease in product prices caused by falling oil prices and operating-rate adjustments at overseas subsidiaries.
Aromatics profit decreased due to oversupply caused by China’s new large-scale paraxylene (p-xylene) plants starting operation despite improved demand during the polyester peak season. Operating profit for the advanced materials unit declined 65% to W31 billion. Polyester demand in China is weak due to COVID-19, but this was partially offset by the rise in demand for sanitation and disposable items since February. The company projects profit to improve gradually in the second quarter on the onshore polyester peak season despite continued oversupply.
Operating profit for the advanced materials unit increased 32.2% YOY to W41 billion. Sales for this unit grew by 14.7% YOY to W809 billion. Profit at the acrylonitrile-butadiene-styrene (ABS) unit improved on the drop in raw material prices. The polycarbonate (PC) unit performed poorly owing to “oversupply and weak demand in compounding,” the company says. The COVID-19-related lockdown led to a decline in sales for construction materials. A decline in worldwide car production weakened demand for the company’s mobility unit. Earnings for this unit are expected to decrease in the second quarter. Lotte expects compounding volumes to decline owing to the shutdown of client companies in the US and Europe for sectors such as home appliances and automotive.
The company’s Lotte Chemical USA business unit achieved an operating profit of W14 billion, down 57.5% quarter on quarter (QOQ), on lower sales of W109 billion, down by 14% QOQ. The company says that profit was hurt by a maintenance turnaround of its ethane cracker at Lake Charles, Louisiana. The cracker, which was inaugurated in May 2019, has capacity for 1 million metric tons/year (MMt/y) of ethylene. COVID-19 and the low oil price led to a decline in the price of EG. Lotte projects profitability for this business unit will decrease due to “feedstock price rise and weak product prices.” Weak demand and continued oversupply of EG are is expected, it says. Demand for polyester in the US and Europe is expected to remain low. However, the company anticipates demand for disposable sanitation items and food packaging to rise.
The company’s other overseas unit, Lotte Chemical Titan Holding (Kuala Lumpur, Malaysia), reported a net loss of 169.4 million ringgit ($38.9 million) for the first quarter, versus a net profit of RM55.8 million during the corresponding period in the previous year, due to a margin squeeze resulting from a decline in selling prices. Revenue was down 33% YOY to RM1.4 billion, also due to lower selling prices and sales volume, which were caused by weakening demand following the different levels of COVID-19 related movement controls established locally and across Southeast Asia since late January.
As MRC wrote previously, on 4 March, 2020, Lotte Chemcial shut its naphtha cracker after an explosion at the plant in the southwestern city of Seosan, which injured 31 people. The explosion, which was triggered by a fire at a compressor in Lotte Chemical’s naphtha cracker at around 3 a.m. local time (1800 GMT), was soon contained and under control, the company said then in a statement. The cracker may resume production this October, although initially the restart was planned in a couple of weeks after the accident.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 557,060 tonnes in the first three month of 2020, up by 7% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments rose because of the increased capacity utilisation at ZapSibNeftekhim. Demand for LDPE subsided. At the same time, PP shipments to the Russian market was 267,630 tonnes in January-March 2020, down 20% year on year. Homopolymer PP and PP block copolymers accounted for the main decrease in imports.
South Korean Lotte Chemical is a global petrochemical company, established in 1976. It produces low density polyethylene (LDPE), high density polyethylene (HDPE), linear low density polyethylene (LLDPE), polypropylene (PP), functional resins, styrene monomer (SM), polyethylene terephthalate (PET), etc.