KUALA LUMPUR (Oct 28): Lotte Chemical Titan Holding Bhd saw its net profit plunge 87.22% quarter-on-quarter (q-o-q) to RM48.84 million in the third quarter ended Sept 30, 2021 (3QFY21) from RM382.29 million on lower gross profit margin arising from higher feedstock costs.
As a result, earnings per share fell to 2.14 sen versus 16.81 sen in the immediate preceding quarter, said the integrated producer of olefins and polyolefins company in a bourse filing on Thursday.
Quarterly revenue declined by 12.03% to RM2.24 billion from RM2.54 billion mainly due to lower average product selling price and demand following the rise of Covid-19 cases in the region.
The group also declared a special single-tier dividend of 18 sen per share, which amounted to approximately RM410 million distributable dividend to its shareholders, to be paid on Nov 26.
The special payment, which represents about 50% payout from its earnings, translates into an attractive yield in excess of 6% based on its share price of RM2.74, last traded on Oct 27. This special distribution will be independent of its dividend policy and its board of directors upon closing of the financial year will determine the subsequent final dividend payable for the financial year ending Dec 31, 2021 (FY21).
On a yearly basis, its net profit dropped 37.99% from RM78.77 million mainly due to under provision of deferred tax expenses caused by tax adjustments arising from tax audit and certain non-tax deductible expenses as well as lower earnings before interest, taxes, depreciation and amortisation (EBITDA).
Quarterly revenue increased by 15.26% from RM1.94 billion last year mainly due to the increase in average product selling price following the firmer feedstock costs.
Lotte Chemical's EBITDA fell 14.19% to RM239.82 million versus RM279.48 million in the previous year.
The group's profit before tax improved by 51% from RM98.4 million to RM148.1 million.
"The improvement was mainly driven by profit from share of results of its associated company, Lotte Chemical USA Corp, amounting to RM35.6 million compared with a loss of RM46.9 million in the corresponding quarter. The gain from foreign exchange differences has further contributed to the increase in profit before tax.
"Average plant utilisation rate recorded 76% compared to 90% in the corresponding quarter due to statutory turnaround carried out for two plants in Malaysia, namely a cracker plant and polyethylene plant. The statutory turnaround has been completed successfully and within schedule," said the group.
For the nine-month period ended Sept 30, 2021 (9MFY21), the group returned to the black with a net profit of RM871.14 million from a net loss of RM2.57 million.
Meanwhile, 9MFY21 revenue climbed 43.54% to RM7.15 billion from RM4.98 billion a year earlier.
In a separate statement, the group's president and chief executive officer Park Hyun Chul said the company is cautiously optimistic about the petrochemical sector's outlook amidst some balancing market factors weighing in.
"As the sector moves in tandem with economic growth, it would likely be supported by the post-pandemic economic recovery expected for the remaining of the year and continuing in 2022. However, there are new domestic capacities expected to come online this year, which may have some downward pressure on the polymer ASPs (average selling prices).
"The positive outlook would be very much dependent on the continuation and effectiveness of vaccination as well as the pace of economic reopening, globally and domestically. As such, we expect certain elements of volatility to remain for the petrochemical sector moving ahead," he said.
On a separate note, Lotte Chemical has announced that it is commencing construction of the large scale expansion project, known as the Lotte Chemical Indonesia New Ethylene (LINE) Project in Merak, Cilegon, and Banten Province, Indonesia.
The LINE Project, which is a joint venture with its parent company, Lotte Chemical Corp, will serve as the key expansion drive for the company with the aim to further solidify its position as one of the largest petrochemical companies in the Southeast Asian region upon its completion.
"Moving forward, our company will continue to focus on operational and financial performance optimisation initiatives to brace the volatile and ever-changing external environment. We will continue to be vigilant and explore value-accretive opportunities to further drive our growth while at the same time, remain steadfast to focus on our key growth strategies as we seek to become a top-tier petrochemical company in the Southeast Asia region," he added.
At Thursday's noon break, shares of Lotte Chemical fell six sen or 2.19% to RM2.68. This gives the group a market capitalisation of RM6.2 billion based on its latest issued shares of RM2.28 billion.
The stock has risen 26% from RM2.13 over the past one year.