After making more than Rs2 billion in the same quarter last year, Lotte Pakistan PTA profits nosedived 93% to Rs151 million amid falling prices of its primary product during January to March 2012.
The massive decline was on account of reduced primary margins amid oversupply of the product emerging in the Asian PTA (purified terephthalic acid) industry.
PTA is widely used in making polyester fibres along with food and beverage containers. Polyester fibres are used to make fabrics for apparel and home furnishings such as bed sheets and curtains. It is also spun together with natural fibres such as cotton to produce a cloth with improved properties such as wrinkle resistance.
Demand from the PSF sector has shifted towards cotton amid bumper crop and lower prices.
The result is still better than market expectation as analysts expected the company to post a loss. The stock value increased by Rs0.16 to Rs8.79 at the Karachi Stock Exchange on Tuesday.
PTA prices fell 18% to average $1,190 per ton in the review period compared with US$1,457 per ton in the same quarter last year.
Overall gross margins dipped to 2% compared with 24% in the same quarter last year.
Reduced earnings also attributed to 52% decline in interest income to Rs130 million against Rs272 million in the period under review. The company’s cash balance has declined due to capital expenditure associated with its power project.
Published in The Express Tribune, April 26th, 2012.