Lotte Chemical sees 28.6% drop in Q1 net profit on margin squeeze, forex losses

PETALING JAYA: Lotte Chemical Titan Holding Bhd's net profit for the first quarter ended March 31, 2018 fell 28.6% to RM244.20 million from RM342.15 million a year ago, mainly due to margin squeeze, forex valuation losses and higher effective tax rate.
Revenue, on the other hand, rose 15.7% to RM2.21 billion from RM1.91 billion on the back of higher sales volume.
Lotte said in a filing with the stock exchange that feedstock price increased from end 2017, while product price subsequently picked up with lagging effect.
It also incurred RM44.6 million of forex losses due to the revaluation of its US dollar IPO funds against the ringgit held for the Indonesia project's capital injection arising from a strong ringgit against the greenback during the quarter under review.
The forex losses, however, was partially offset by the forex gain of RM34.9 million from operations in Q1 2018.
Lotte's effective tax rate increased from 11.30% in the first quarter of 2017 to 18.50% in the quarter under review in the absence of reinvestment allowance.
Looking ahead, the group anticipates the petrochemicals market will continue to be resilient in the near term with demand growth for petrochemicals to outpace the rate of new supply additions in the region.
"Supply is expected to be tighter in view of turnaround season in Asia region and demand is projected to pick up in preparation for Ramadan and Hari Raya especially in the domestic market as well as Indonesia and other Muslim countries - Pakistan and Bangladesh."
Barring any unforeseen circumstances, Lotte expects its performance for the financial year ending December 31, 2018 to remain positive.
At midday break, its shares rose 0.96% to RM6.29 with some 443,100 shares done.