Corporate results: Lotte Pakistan profits take a stumble

Net profit falls 8% to Rs4.18b as company posts loss in final quarter of 2011.


Our Correspondent January 27, 2012

KARACHI: After enjoying a buoyant cycle since 2009, Lotte Pakistan PTA has posted a drop in annual profits as primary margins decreased.

The company saw its profit margins decline to such an extent that it posted a loss of Rs411 million in the final quarter, almost triple the losses estimated by analysts.

Net profit fell 8% to Rs4.18 billion in 2011 compared with Rs4.53 billion in 2010, according to a notice sent to the Karachi Stock Exchange on Friday.

The company’s overall gross margin declined by 5 percentage points to 12% against 17% last year, according to Topline Securities. Meanwhile, Global Securities believe that realised margins have clocked in at $83 per ton, a discount of 33% to international primary margins of $124 per ton.

Lotte Pakistan PTA is a supplier of purified terephthalic acid (PTA), an essential raw material used in the polyester industry. PTA is sold to the Polyethylene Terephthalate (PET) sector while the rest goes to polyester staple fibre and other sectors. PET is used in the plastics industry for the production of bottles and bed sheets.

Moreover, the company maintained its dividend payout of Rs0.50 per share.

The company’s stock price fell Rs0.82 - near its lower limit of the day – to close at Rs8.8 during trade at the Karachi Stock Exchange.

Net sales rose 36% to Rs57.6 billion in 2011 against Rs42.4 billion in the preceding year.

Other income plummeted by 117% to Rs22.9 million in 2011, which was expected from lower cash balance.

The best is behind us

“The business cycle has seemed to reverse for the PTA industry and the best in terms of margin is behind us,” says Arif Habib Securities analyst Syed Abid Ali. This is mainly due to the aggressive PTA capacity expansion in the region, which is comprehensively outpacing the supply addition of paraxylene, the major raw material for producing PTA. Asian PTA capacity will increase by 14.5 million tons during 2011 to 2013 while paraxylene addition will stand at 7 million tons.

Besides this PTA over supply situation, slowdown in textile exports from China due to EU debt crisis and subdued economic growth in the US is also painting a gloomy picture on the margin outlook, said Ali.

The current year will be another difficult year for PTA manufacturers as both the PTA capacity additions and economic woes in EU and US are likely to keep margins under pressure, added Ali.

Published in The Express Tribune, January 28th, 2012.

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