LCTitan: Business ops, finances not affected by SC penalties

This article first appeared in The Edge Financial Daily, on December 20, 2018.
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KUALA LUMPUR: Lotte Chemical Titan Holding Bhd (LCTitan) sees no material effect on the group’s business operations or financial condition from the penalties imposed by the Securities Commission Malaysia (SC).

In a filing with Bursa Malaysia yesterday, LCTitan also said its board of directors is conducting internal reviews and seeking external advice on the matter.

On Tuesday, the SC maintained its decision to reprimand and impose penalties on LCTitan and its two executive directors (EDs) for the failure to inform the regulator of material developments prior to the company’s listing in July last year, after dismissing review applications by LCTitan and other relevant parties.

The penalties imposed amounted to RM2.19 million in total.

The parties reprimanded are LCTitan and its EDs Lee Dong Woo and Lee Kwan Ho, reporting accountant Ernst & Young (EY), and the principal adviser to the listing exercise Maybank Investment Bank Bhd (Maybank IB).

The SC imposed a RM560,000 penalty on the group for the alleged breaches. It also reprimanded and fined the two EDs RM441,000 each for alleged breaches.

Additionally, the SC reprimanded and fined EY RM297,500, and Maybank IB RM450,000 for failing to carry out appropriate due diligence on LCTitan.

To recap, LCTitan did not reveal to the SC that the 11 days of water cuts at its plant in April had resulted in a significant impact on the group’s earnings.

Shortly after its debut on Bursa Malaysia on July 11, LCTitan announced that its net profit slumped 72% to RM113.62 million year-on-year for the second quarter ended June 30, 2017. Revenue fell 11.2% to RM1.78 billion on lower sales volume arising from Hari Raya festivities.

The group’s share price took a nosedive after the unpleasant surprise, falling by a third to RM4.10, compared with its initial public offering (IPO) price of RM6.50.

LCTitan’s IPO was the biggest since 2012. Although the group had disclosed the water supply disruption in its IPO prospectus, the significance of the impact was not made clear as the market did not expect the incident to have taken a heavy toll on its profit.