Lotte share price 5% down

Company says stop-work order has no material impact

PETALING JAYA: Lotte Chemical Titan Holding Bhd said the stopwork order issued by the Department of Environment (DoE) on one of its reactors at its project site in Pasir Gudang, Johor will have no material impact on its financial performance.

The stock plunged 28 5.3%, to RM4.98 yesterday.

The announcement by Lotte Chemical came after the stock market was closed. The stop-work order was issued on Sunday, the company said in a filing with Bursa Malaysia yesterday.

Lotte Chemical said the stopwork order by the DoE was issued on its catalytic cracking reactor at one of its facilities.

“We are attending to the remedi- sen, or al actions and will provide an update in due course,” it said, adding that the commissioning and commercial startup of its TE3 project remain on target by the end of the year.

“The stop-work order is also not expected to have a material effect on our company’s and group’s earnings, net assets and gearing for the financial year ending Dec 31, 2017,” Lotte Chemical said.

Lotte Chemical’s TE3 project site had been plagued with problems. On Sept 20, it had experienced a minor fire outbreak, due to residual vapour in contact with process steam.

At the current share price of RM4.98, the stock is trading at a historical price earnings ratio of 28.09 times.

A week ago, Maybank Investment Bank Bhd (Maybank IB) had said that Lotte Chemical shares could track costlier petrochemical, amid the rising crude oil price.

While Maybank IB kept a “buy” rating on the stock, with a target price of RM7.85, it said the focus would resume to the recent surge in crude oil prices and the likelihood for petrochemical prices to track crude oil prices.

Since Lotte Chemical was a direct beneficiary of higher petrochemical prices, the research firm reckoned the share price will react positively to crude oil price gains.

Oil dipped below US$56 a barrel yesterday as a rise in US drilling and higher Opec output put the brakes on a rally that saw prices score their biggest third-quarter gain in 13 years, Reuters reported.

Brent crude, the global benchmark, was down 95 cents at US$55.84 a barrel.

It notched up a third-quarter gain of around 20%, the biggest in the third quarter since 2004 and traded as high as US$59.49 last week.

Meanwhile, JP Morgan Chase & Co had said the rise in crude oil price was assumed to be temporary, but margins of refiners and petrochemical firms were expected to improve.

“As oil price weakened, refining margins will improve even though US refiners hit by Hurricane Harvey had been coming back online,” JP Morgan said.