MOSCOW (MRC) -- Lotte Chemical (Seoul, South Korea) says recovering petrochemicals demand and rising selling prices for its major petchem products have helped to more than double its fourth-quarter net profit year on year (YOY) to 97.2 billion South Korean won (USD86.5 million), according to Chemweek.
The 104% rise YOY in net earnings came despite a 12% decline in sales to W3.2 trillion. Operating profit for the quarter ended 31 December rose 49% compared to the prior-year period to W212.5 billion. Sales were up 6% sequentially on the third quarter, but net earnings were 51% lower quarter on quarter (QOQ). Operating profit rose 19% QOQ.
Operating profit at its largest business segment, basic chemicals, was down 19% YOY to W89 billion but up W10 billion sequentially, while sales fell 22% YOY to W1.35 trillion but were up 10% on the third quarter. Production and sales increased QOQ due to the restart of its Daesan steam cracker in December following a fire, with key product spreads improving “due to tight supply and robust demand,” it says. “Demand remained firm on expectations that the global economy would recover,” it says.
Lotte says it expects base olefins earnings and sales to improve with its Daesan plant operating normally in the first quarter of 2021, with demand expected to be good as the global economy continues to gradually recover. Although some steam crackers in the region will restart during the quarter, a number of turnarounds are also scheduled that are expected to offset some of the QOQ supply growth, it says.
Lotte’s aromatics division reported an operating loss of W6 billion, narrowing from a loss of W23 billion a year earlier, but swinging from a profit of W6 billion in the third quarter. Sales slipped 20% YOY to W391 billion but rose QOQ by W15 billion. Profitability decreased due to strong raw material prices and weak off-season demand, it says. For the first quarter, the market is forecast to continue to be oversupplied, but profitability is expected to improve.
Lotte’s advanced materials unit turned in a strong fourth quarter performance, with sales rising 25% YOY and 2% QOQ to W885 billion, while operating profit more than doubled to W83 billion compared to the prior-year period but fell 17% sequentially. The slight decline in profitability from the third quarter was due to rising feedstock prices, despite solid demand from the home appliances sector and an expanded mobility business performance on recovering automobile market demand. Lotte says the sector's profitability is expected to remain robust in the first quarter of 2021, with continuing good demand and the possibility of product price increases that were partially delayed in the fourth quarter. Production and sales costs rose in the fourth quarter, and are expected to be reflected in product prices during the first quarter, it says.
The company’s Lotte Chemical Titan Holding business unit reported fourth quarter operating earnings of W67 billion, swinging from a prior-year loss of W3 billion and also an increase over the third quarter. Sales were down 5% YOY to W524 billion and also down slightly on the third quarter.
Its Lotte Chemical USA business unit swung to an operating loss of W400 million from an operating profit of W33 billion a year earlier, but narrowed sequentially from a loss of W22 billion in the third quarter. Sales slipped 16% YOY to W106 billion but improved 65% QOQ. The narrowed operating loss was due to a plant restart and expanded product spreads, it says, while Lotte expects operating profit to return to positive territory in the first quarter due to the elimination of one-time costs associated with hurricanes and improving profitability due to stabilizing feedstock prices and rising product prices. Product prices “are expected to rise continuously” due to tight supply and a rising oil price, it says.
For the full-year 2020, Lotte Chemical’s net earnings plunged 75% compared to 2019 to W185.4 billion won, operating profit declined 68% YOY to W353.3 billion, and sales fell to W12.2 trillion, down 19%. Sales were hurt by low demand amid the COVID-19 pandemic and a fire at its Daesan petchems complex, which accounts for 21.8% of its total sales, it says.
Lotte Chemicals says it is also continuing to focus on maximizing the cracking of liquefied petroleum gas (LPG) as feedstock, having expanded its use to 20% of total company feedstock by the end of 2020, saving an estimated W30 billion in costs, it says. The company is aiming to expand LPG feedstock usage to 30% of the company’s total feedstock supply by 2023, with planned investments at its Daesan cracker, it says.
As part of its recently unveiled 2030 ESG strategy Lotte Chemical says it is also aiming to produce 360,000 metric tons/year of recycled polyethylene terephthalate (rPET) by 2023, as well as 260,000 metric tons/year of recycled polypropylene (rPP), recycled acrylonitrile-butadiene-styrene (rABS), and recycled polycarbonate (rPC).
As MRC reported earlier, Lotte Chemical Titan (part of Lotte Chemical) has shut its No. 2 cracker in Malayisia because of a technical issue. The company encountered technical problems at this cracker, located in Pasir Gudang, Malaysia, which produces 522,000 tons/year of ethylene and 360,000 tons/year of propylene, on 14 January, 2021, and was forced to lower its capacity utilisation. But then the facility was shut and is expected to remain off-line for 2-3 weeks.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and PP.
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020).
Lotte Chemical runs two naphtha crackers in South Korea. One cracker is located in Daesan county in Seosan which can produce 1.1 million tonnes per year of ethylene with the other 1.2 million tonnes per year cracker in the southwestern city of Yeosu.