Fierce Competition for Top Post
Lotte Chemical Corp. has posted the highest operating profit in the chemical industry in the first quarter of the year.
The company announced on May 2 that it registered 4.12 trillion won (US$3.82 billion) in sales and 662 billion won (US$614.1 million) in operating profits in the first quarter. Its sales increased 3.2 percent from 4 trillion won (US$3.71 billion) a year earlier, while its operating profits decreased 18.8 percent from 814.8 billion won (US$755.84 million).
Its net profits also dropped 15.3 percent to 543.1 billion won (US$503.8 million) from 641.3 billion won (US$594.9 million) at the same period last year. However, Lotte Chemical ranked first in terms of operating profit in the industry.
An official from Lotte Chemical said, “The olefin sector saw its profitability fall due to the stronger Korean won compared to the previous quarter, but the aromatic sector showed sound profitability with growing demand in China despite the stronger Korean won."
Lotte Chemical Titan Corp. saw its profits decline on account of the stronger Malaysian ringgit, while Lotte Advanced Materials Co. maintained a good performance owing to tight supplies and strong demand, the official added.
By sector, the olefin sector recorded sales of 2.09 trillion won (US$1.94 billion) and operating profits of 412.8 billion won (US$382.93 million). The aromatic sector posted 779.9 billion won (US$723.47 million) in sales and 108.8 billion won (US$100.93 million) in operating profits.
By subsidiary, Lotte Chemical Titan generated 596.6 billion won (US$553.43 million) in sales and 71.9 billion won (US$66.7 million) in operating profits, while Lotte Advanced Materials had 763.2 billion won (US$707.98 million) in sales and 90.1 billion won (US$83.58 million) in operating profits.
Lotte Chemical saw its operating profits slightly fall in the first quarter but it expects to show better results after the second quarter, driven by a positive market outlook.
An official from Lotte Chemical said, “There are uncertainties due to variables at home and abroad but we expect to record strong earnings this year as well as the market continues to show a favorable supply and demand situation. The company’s new businesses at home and abroad are going off without a hitch. We are planning to strengthen the competitiveness of our existing businesses further in order to prepare the ground to create sustainable profits.”
In fact, Lotte Chemical has a positive outlook for market conditions and it is sharpening the competitiveness of its main business, petrochemical basic materials, further. The company is planning to develop the price competitiveness through the economy of scale by expanding its production capacity and eventually increase market dominating power.
Accordingly, Lotte Chemical will boost the annual production of ethylene, one of its major products, to 4.5 million tons through its shale gas-based ethane cracking center (ECC) in Louisiana of the United States to be completed this year and expansion of its production facilities in Yeosu.
The nation’s two leading petrochemical players LG Chem Ltd. and Lotte Chemical are in fierce competition again this year. Both companies continued an upturn in terms of sales in the first quarter.
Lotte Chemical ranked top in terms of operating profits for two years in a row last year, outpacing LG Chem. Lotte Chemical was expected to post lower operating profits than LG Chem according to tentative results. However, the company actually had 1.3 billion won (US$1.21 million) higher operating profits in final results, maintaining lead in terms of operating profits in the industry.
A majority of market experts say the petrochemical market is in good shape this year. External variables, including exchange rates and international oil prices, will be a decisive factor whether Lotte Chemical will able to achieve the highest results or not, just like the first quarter.