PETALING JAYA: Lotte Chemical Titan Holding Bhd saw a net loss of RM170.06 million in the first quarter ended March 31, 2020 compared with a net profit of RM55.83 million a year ago on notable operating margin compression and higher provision for write down of inventory cost to net realisable value as a result from the lower product average selling price (ASP) coupled with sudden drop in its inventory value to market price.
Its revenue fell 33% to RM1.46 billion from RM2.17 billion in the previous year’s corresponding quarter.
The company noted that the sudden plunge in global crude oil prices has intensified volatility in its naphtha feedstock costs while its ASP were being further depressed by sluggish demand amid regional movement containment measures sparked by the pandemic. The lockdown of major cities in China since January had disrupted critical global supply chain and caused severe impact to the global economy.
Operationally, the company had undergone turnaround activities since end-February for majority of its plants in Malaysia which was completed within schedule in early April and the plants involved have resumed normal operations. Hence, the overall operating rate for its complex was lower in the quarter which led to lower production volume.
Its president & CEO Dr Lee Dong Woo said the company would also be impacted as the petrochemical industry correlates with and is heavily dependent on the overall consumption patterns which drive the global economic growth.
“Nonetheless, our company maintains strong financial resilience, being comfortably in a net cash position with RM4 billion cash as well as generated about RM271 million cash flows from operations in the quarter. In addition, we are able to continue our operations and supply key raw materials to our customers during this period as we are deemed an essential service, which provides vital raw materials to the plastic packaging and healthcare sector in Malaysia,” he said in a statement.
Moving forward, the company will continue to focus on operational and financial performance optimisation initiatives amid the volatile external environment. It will also be undertaking a strategic review on the timing and progress for its Indonesia Line project in light of the pandemic impact to the global economy.
“Notwithstanding the current challenges, we will continue to be vigilant and explore value-accretive opportunities to further drive our growth to achieve our vision of being a top-tier petrochemical company in Southeast Asia.”
