PHOTO: LOTTE CHEMICAL
The company had posted a profit of Rs412 million in 2017. Its earnings per share grew to Rs2.93 in 2018 compared to Rs0.27 a year earlier.
Lotte is the manufacturer and supplier of purified terephthalic acid (PTA), a raw material for textile, wrapping industries and multi-purpose plastics, with capacity to produce 500,000 tons per annum at its plant situated at Port Qasim, Karachi.
In late 2016, the Organisation of the Petroleum Exporting Countries (OPEC) announced a major cut in crude production, slashing the output by 1.2 million barrels per day from the start of 2017. The decision left a domino effect on the petrochemical market.
“PTA is made from petrochemical paraxylene and both have shown price paradox. Paraxylene’s cost declined but PTA prices rose in the international market, which gave Lotte a chance to make a fortune,” said Shankar Talreja, analyst at Topline Securities.
“Lotte Chemical has also been the beneficiary of rupee depreciation as its margins are dollar-denominated, so it has realised more.”
However, the chemical producing company’s other expenses increased from Rs54 million in 2017 to Rs555 million in 2018. In the same manner, its finance cost jumped from Rs52 million to Rs505 million.
Both expenses rose due to the exchange loss on foreign payables coupled with an increase in the Workers Welfare Participation Fund, said Talreja. Companies are required to contribute the welfare fund according to their profit levels.
Other income of Lotte Chemical increased from Rs248 million in 2017 to Rs514 million in 2018. The other income rose in the wake of a huge pileup of surplus cash, which the company invested in treasury bills that brought higher returns following an increase in the policy rate, said Talreja.
The PSX’s KSE-100 index closed at 40,506.98 points on Thursday with a drop of 37.13 points. The chemical sector led the volumes with trading in 33 million shares, a majority of which was in Lotte Chemical. The company’s stock price fell Rs0.33 and closed at Rs16.65 with trading in 25.6 million shares.
“The result announcement sparked profit-booking, but buying interest at a slight discount kept the interest alive in Lotte Chemical,” Arif Habib Limited said in its market report.
Published in The Express Tribune, February 15th, 2019.
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