Lotte Chemical Posts 281.4 Billion Won Q3 Operating Loss as Basic Chemicals and Advanced Materials Both Slip Into the Red

[Financial News] Lotte Chemical recorded an operating loss of 281.4 billion won in the third quarter of this year, returning to the red after one quarter. Profitability worsened as geopolitical risks in the Middle East heightened volatility in raw material and product prices, while the company was unable to fully pass higher costs on to product prices. Lotte Chemical plans to improve profitability by restructuring its Daesan and Yeosu businesses and expanding its high-value-added materials business.
Lotte Chemical said on the 6th that, on a consolidated basis, it recorded third-quarter revenue of 5.3951 trillion won and an operating loss of 281.4 billion won. Revenue rose 12.7% from a year earlier but fell 5.1% from the previous quarter. Operating results swung to a loss from a profit of 110.1 billion won in the second quarter. Compared with an operating loss of 132.6 billion won in the same period last year, the loss widened by 148.8 billion won. The company posted a net loss of 289.7 billion won.
Among its business segments, basic chemicals posted the largest loss. The segment recorded revenue of 3.7235 trillion won and an operating loss of 216.6 billion won, swinging to a loss from an operating profit of 2.3 billion won in the previous quarter. Spreads narrowed as the pass-through of higher raw material costs to product prices was delayed, and the decline in the exchange rate also affected profitability.
The advanced materials segment also swung to a loss, recording revenue of 1.0893 trillion won and an operating loss of 15.4 billion won. It had posted an operating profit of 132.5 billion won in the previous quarter. Narrower spreads on key products, a negative lagging effect from fluctuations in raw material and product prices, and the lower exchange rate contributed to the weaker results.
Among its major subsidiaries, LOTTE Fine Chemical Co., Ltd. recorded third-quarter revenue of 525.3 billion won and operating profit of 22 billion won. Operating profit fell 64.5% from the previous quarter, affected by lower international prices for key products, a decline in the exchange rate, and reduced sales volume.
LOTTE Energy Materials recorded revenue of 289.7 billion won and an operating loss of 21.3 billion won. Revenue rose 49.2% from the previous quarter as sales volumes increased to North American energy storage system (ESS) customers and global electric vehicle (EV) customers.
The operating loss widened from 16.9 billion won in the previous quarter but narrowed from 34.3 billion won in the same period last year.
Lotte Chemical is pursuing a restructuring of its basic chemicals business and an expansion of high-value-added materials production. H&L Advanced, formed by the integration of LOTTE Daesan Petrochem Corporation and HD HYUNDAI CHEMICAL CO., LTD., launched in September. The company is now working to establish an integrated operating system and generate synergies.
The Yeosu restructuring is underway, with the launch of an integrated company with Yeochun NCC targeted for the first half of next year, following the physical split-off of the plant. Lotte Chemical is currently discussing details with its partners and plans to improve operating efficiency and increase the share of high-value-added products after the integration.
In the advanced materials business, the Yulchon compounding plant began operating all of its production lines in September. This has established an annual compounding production capacity of 500,000 tons, and an additional line dedicated to high-value-added products is scheduled to begin operating in the first quarter of next year.
The outlook for market conditions remains uncertain. Lotte Chemical expects weakness in the basic chemicals market to continue in the fourth quarter amid global supply pressure and a delayed recovery in demand. It expects sales volumes of key products to rise and spreads to improve gradually in the advanced materials segment, but forecasts that a lower exchange rate and higher freight costs will weigh on results.
[email protected] Kim Mi-hee Reporter