Lotte Chemical Reports 86 Billion KRW Operating Loss in 1Q... Returns to Deficit After 31 Quarters (Comprehensive)

[Asia Economy Reporter So-yeon Park] Lotte Chemical announced on the 8th that its preliminary results for the first quarter of 2020 (consolidated basis) recorded sales of 3.2756 trillion won and an operating loss of 86 billion won. Sales decreased by 11.3% compared to the previous quarter and by 9.6% compared to the same period last year. Operating profit turned to a loss for the first time in 31 quarters since the second quarter of 2012.

Lotte Chemical stated, "In the first quarter of this year, profitability declined due to a drop in demand caused by the global economic slowdown continuing from the second half of last year and the spread of the novel coronavirus infection (COVID-19). Additionally, the impact of partial plant shutdowns due to the accident at the Daesan plant in March and one-time costs related to maintenance of overseas subsidiaries' facilities were reflected in the first quarter's earnings."

The Basic Materials Business recorded sales of 2.0413 trillion won and an operating loss of 52.4 billion won. It showed low profitability due to overall weak demand, product price declines, and the impact of the Daesan plant accident. The Advanced Materials Business recorded sales of 808.7 billion won and an operating profit of 41 billion won. Although demand from major front industries such as electric and electronics was solid at the beginning of the quarter, profitability slightly decreased as demand in the Chinese market contracted due to the spread of COVID-19.

- Lotte Chemical Titan recorded sales of 422.6 billion won and an operating loss of 69.5 billion won. It showed low profitability due to reduced sales volume from scheduled maintenance of the Naphtha Cracker (NCC) and demand contraction. LC USA recorded sales of 109.2 billion won and an operating profit of 13.9 billion won. Profitability decreased compared to the previous quarter due to one-time costs related to maintenance of the Ethane Cracker (ECC) and product price declines.

Lotte Chemical said, "Although external uncertainties are expected to continue in the second quarter, profitability is expected to improve somewhat due to the full-scale input of low-cost raw materials and gradual demand recovery. Regarding the Daesan plant accident, we are prioritizing the establishment of safety and recurrence prevention measures and are carefully proceeding with recovery work. We will create a turning point to turn the crisis into an opportunity through efforts to improve our structure to strengthen competitiveness."

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