Lotte’s gross margins remained in the negative in spite of higher anticipated PTA-paraxylene (PX) margins of $112 per ton in the second quarter of 2013.
The results lagged below street estimates as the market was expecting an uptick in profitability. No payout was announced by the company.
Sales witnessed a drop of 2% to Rs25.9 million in the period owing lower international PTA prices, which is unfavourable for the company as it puts too much strain on already squeezed gross margins. According to Yousuf Rehman, analyst at Global Securities, international PTA prices declined 9% in the second quarter of 2013 to average $1,050 per ton in the period.
Lotte’s gross margins remained in the negative in spite of higher anticipated PTA-paraxylene (PX) margins of $112 per ton in the second quarter of 2013. According to Rehman, negative margins can be attributed to higher PX inventory in the period as PX prices, which averaged $1,600 per ton in the first quarter, suddenly dipped 10% to average around $1,420 per ton.
“We believe the company may have utilised a portion of the higher cost PX inventory, hence Lotte experienced a gross loss in the period,” said Rehman in a note to clients. Lotte Chemicals reported a gross loss of Rs156 million in the six-month period.
Financial income also took a hit as it declined 58% to Rs96 million in the period, owing to a 300 basis-point cut in interest rate and a lower cash balance due to repayment of outstanding debt on the loan provided by its parent initially, and capital expenditure to set up a generation power plant. Lotte Powergen allowed the company to save Rs200 million in energy costs.
Published in The Express Tribune, August 28th, 2013.
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