Shares slide on Pasir Gudang plant stop-work order

PETALING JAYA: Lotte Chemical Titan Holdings Bhd shares slumped 5.5% yesterday after it announced that it received a stopwork order for its plant in Pasir Gudang, Johor.

This comes days after news reports cited the Department of Environment (DOE) as having issued a stop-work order on a Pasir Gudang factory identified as the source of a stench which had reached Singapore’s shores.

Lotte Chemical Titan said the order by the DOE is to mitigate and reduce odour emission and eliminate surface oil sheen/ film discharge.

The stock was the third top loser with a drop of 29 sen or 5.5% to an intraday low of RM4.97, wiping out RM507 million of its market capitalisation. A total of 7.1 million shares were traded. Six out of its seven warrants were also in negative territory, with declines ranging from 8.3% to 31.3%.

It was reported that a number of residents in several areas in Singapore complained of a strong chemical gas odour, believed to be from an industrial area in Johor.

On Sunday, the Johor DOE said it had identified a factory as the source of odour pollution in Singapore, without disclosing the company’s name.

Lotte Chemical Titan told Bursa Malaysia yesterday that it was issued a stop-work order by the DOE on the KBR Catalytic Olefins Technology catalytic cracking reactor within its TE3 project.

“We are attending to the remedial actions and will provide an update in due course,” it noted.

Nonetheless, Lotte Chemical Titan said the commissioning and the commercial startup of its TE3 project remain on target by the fourth quarter of 2017.

“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 of our company for the financial year ending December 31, 2017,” it added.

When contacted, Lotte Chemical Titan spokesperson declined to comment.

Inter-Pacific Securities head of research Pong Teng Siew believes that the stop-work order will not have a significant impact on the group’s business operations.

“From the announcement, I think it is just a minor adjustment, it can be addressed quite easily, so it won’t derail their plan to start operating in the fourth quarter,” he told SunBiz.

TE3 is a new plant which is undergoing commissioning ahead of its planned start-up this month. It has a nameplate capacity of 354 kilotonnes a year to lift the group’s total capacity to 3,368 kilotonnes by year-end.

TE3 is expected to enhance its second naphtha cracker plant by installing the KBR Catalytic Olefins Technology to create a larger output of propylene and ethylene. In 2016, Lotte Chemical Titan represented 53% capacity share in polyethylene production as well as 100% and 57% capacity share in polypropylene production in Malaysia and Indonesia respectively.

Lotte Chemical Titan had estimated a loss of not more than RM50,000 to replace burnt cables arising from a fire at the same plant, which was caused by contact between residual vapour from the quench water drain pit and the steam line. There was no damage to the other plants, which are running normally.