Release Date: May 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lotte Chemical Corp (XKRX:011170, Financial) reported a significant improvement in operating profit, narrowing the loss by KRW107.5 billion compared to the previous quarter.
- The company's EBITDA improved by KRW74.1 billion, reaching KRW173 billion, indicating better operational efficiency.
- Lotte Chemical Corp's asset-light strategy has led to improved financial indicators, with a reduction in borrowings by KRW412.9 billion and an increase in cash and equivalents by KRW148.2 billion.
- The Advanced Materials business saw a substantial increase in operating profit, up KRW43.2 billion quarter-over-quarter, driven by stabilized feedstock prices and improved demand.
- The company is making strategic investments in hydrogen energy and advanced materials, which are expected to enhance competitiveness and financial structure in the long term.
Negative Points
- Despite improvements, Lotte Chemical Corp (XKRX:011170) still posted a net loss of KRW246.3 billion for Q1 2025.
- The Basic Chemicals segment experienced production disruptions due to a power outage at the Daesan plant, contributing to an operating loss of KRW107.7 billion.
- Global policy volatility and economic downturns are increasing uncertainty in the business environment, affecting the company's outlook.
- Scheduled maintenance at the Daesan plant and major overseas subsidiaries in Q2 may limit performance improvements.
- The LINE project, while progressing, requires significant investment, with KRW700 billion to be executed this year, adding financial pressure.
Q & A Highlights
Q: Can you share your outlook for the second half of 2025, particularly regarding the Basic Chemical business and the impact of oil prices?
A: Kwak Giseop, Head of the Corporate Planning Division, Basic Chemicals business unit, explained that due to oversupply and weak demand, the petrochemical industry outlook remains challenging. However, stimulus measures by the Chinese government and stabilization of oil prices may lead to gradual improvement, narrowing losses compared to last year.
Q: What impact will the introduction of COTC technology in Korea have on your NCC, and how are you responding?
A: Jo Hyun Kwoun, Head of the Monomer division, noted that while COTC plants have competitiveness, they are limited by the type of feedstock they can use. Lotte Chemical is diversifying its feedstock and increasing the use of cheaper LPGs to enhance competitiveness.
Q: Why is there a difference in performance between Lotte Chemical and LOTTE GS Chemical, and what led to the profitability of the aromatics business?
A: Kwak Giseop explained that LOTTE GS Chemical's flagship product, butadiene, had better market conditions. The aromatics business turned profitable due to cost savings from shutting down one of the PET plants and better market conditions for PI products.
Q: What is the status and impact of the LINE project on your operations and financials?
A: Kwak Giseop stated that the LINE project will start with the Naphtha Cracker in May 2025, followed by downstream operations. The project cost is $3.9 billion, with expected annual depreciation and amortization of KRW180 billion. The project aims to meet domestic demand in Indonesia and expand into high-end products.
Q: How are changes in US tariff policies affecting your business, particularly in Advanced Materials?
A: Woo Hyun Cho, Head of the Corporate Planning Division, Advanced Materials, mentioned that US exports account for a mid-single-digit percentage of sales. They are negotiating price increases and exploring local production to mitigate tariff impacts. The Polymer division expects minimal impact due to limited overlap with US products.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
