Lotte Chemical recorded a deficit in March due to a fall in demand following an explosion at its Daesan plant and the outbreak of the COVID-19.
Lotte Chemical announced on May 8 that its operating loss in the first quarter of this year was 86 billion won (some $70.5 million), shifting to a deficit from 297.8 billion ($244 million) won profit in the same period last year.
Its basic materials business and Lotte Chemical Titan performed worse than expected. Regarding 52.4 billion won ($42.9 million) in operating losses from the basic materials business, Lotte Chemical explained that the company showed low profitability due to weak demand, falling product sales prices and the Daesan plant accident.
Lotte Chemical Titan posted an operating loss of 69.5 billion won ($56.9 million). According to the company, it is due to a drop in sales and weak demand due to regular maintenance of NAFTA cracking center (NCC).
Lotte Chemical's high-tech materials business posted 41 billion won in operating profit and LC USA $13.9 billion in operating profit.
“Demand for major front-end industries in the high-tech materials business remained strong, but profitability declined slightly due to a contraction in the Chinese market,” said an official at Lotte Chemical, adding that the CL USA saw its profitability decline compared to the previous quarter due to a one-off cost and falling sales price of its products due to the repair of ECC.
Meanwhile, Lotte Chemical expects the Daesan plant, which caught fire in March this year, to be able to operate normally within the year.
"We expect most of the losses caused by the accident to be covered by insurance," said Kim Yeon-seop, head of Lotte Chemical's management support division, in a conference call on the company's earnings. "Considering the losses during the period excluded from insurance, the financial losses will not exceed 100 billion won ($81.9 million)."
However, it predicted that the chaotic market situation will continue in the second quarter. "The performance will improve in the second quarter, but the market situation will continue to be somewhat chaotic," Kim said. "We expect the company to enjoy the effect of improving product spread by normalizing demand and maintaining stable low oil prices due to the stabilization of the COVID-19 in the second half."
