Shareholders positive after Lotte’s bumpy start

> First AGM since listing uneventful as investors looked to have taken incidences involving the group in their stride

KUALA LUMPUR: Lotte Chemical Titan Holdings Bhd shareholders remain buoyant on the prospects of the petrochemical firm after a series of unfortunate events – share price slump, stop-work order and fire at its plant – in the first six months of listing marred the fanfare of being one of the largest listings the stock exchange has seen in the last five years.

Shareholders met by SunBiz at the group’s AGM yesterday said they are more relieved now after all the distractions, as the business operations are back on the right track.

They acknowledged that while the share price movement is something beyond the group’s control, its rebound to above RM6 is seen as a good sign for the group which hit a low of RM4.14 just a month into its listing at RM6.50.

“I managed a handsome paper gain after I bought into the stock when it fell to below RM5 last year,” a minority shareholder said.

At yesterday’s market close, the stock gained 2 sen or 0.3% to RM6.23, just 4.2% shy from its initial public offering (IPO) price which was slashed from the RM8 set initially, due to weak market sentiment.

Its share price dipped to a low of RM4.14 last August after announcing a 72% plunge in second-quarter net earnings ended June 30, 2017 on the back of high inventory cost carried forward from turnaround activities as well as higher production cost due to water supply interruption. Giving truth to the adage of trouble coming in threes, in September, Lotte’s Pasir Gudang factory caught fire due to contact between residual vapour from the quench water drain pit and the steam line, causing an estimated loss of less than RM50,000. The same plant was also issued a stop-work order by the Department of Environment in October after being identified as the source of a stench, which reached Singapore’s shores. Looking ahead, Lotte’s executive vice-president of corporate planning Philip Kong ( pix) believes the group will continue to see a reasonable profit margin given strong demand for petrochemical products with limited market supply capacity.

This is despite the rising oil prices, which could put pressure on petrochemical players. As at 7pm yesterday, Brent crude oil stood at US$74.95 a barrel.

“Our business is a margin game. As long as there is strong demand with limited supply, the margin will be maintained. If oil prices go up, the polymer prices will pick up as well,” he told reporters after the group’s first AGM since its listing.

Lotte produces olefins and polyolefins, which are raw materials for plastic product manufacturing.

For the financial year ended Dec 31, 2017, its net profit declined 19.1% from RM1.32 billion to RM1.06 billion, due to lower sales volume resulting from two routine statutory turnaround exercise at the Malaysian site and water disruption in Johor.

For 2018, its utilisation rate is expected to increase to 90% from 75% currently in the absence of plant shut down and water disruption.

Speaking on the integrated petrochemical facility in Indonesia, Kong said Lotte will make a final decision on its planned integrated petrochemical facility in Indonesia within the year or early next year. The estimated cost of the project is between US$3 billion (RM11.7 billion) and US$4 billion (RM15.6 billion) and is scheduled to be completed by 2023. He added that Malaysia and Indonesia, which make up 70% of the overall business, remain the two important markets for Lotte on the back of huge population and a slight premium against the international prices.