Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales increased by 3.2% QoQ to KRW5,248 billion, indicating a positive trend in revenue.
- Operating loss improved by KRW24.1 billion QoQ, showing signs of recovery.
- EBITDA rose by KRW36.4 billion QoQ to KRW207.9 billion, reflecting better operational performance.
- Advanced materials division saw improved sales and profitability due to increased downstream demand.
- Lotte Fine Chemical's revenue and profitability improved, driven by increased sales of corn-based products and expansion in the green materials industry.
Negative Points
- Operating profit posted a loss of KRW111.2 billion, indicating ongoing financial challenges.
- Pre-tax income fell by KRW35 billion QoQ due to a decline in gains from valuations of investment shares.
- Cash and equivalent assets decreased by KRW186.7 billion QoQ, impacting liquidity.
- Liabilities increased by KRW629.3 billion QoQ, raising concerns about the company's debt levels.
- Profitability in the basic chemicals division remained weak due to maintenance and turnaround activities, resulting in an opportunity loss of approximately KRW27 billion.
Q & A Highlights
Q: Can you provide more details on the factors that contributed to the improvement in operating profit despite the overall loss?
A: Sung Nak-Sun, CFO: The improvement in operating profit was primarily due to increased downstream demand for consumer electronics and mobility, as well as positive currency effects. However, the decline in naphtha prices led to increased inventory valuation losses, and there was a one-time expense for partial maintenance of an overseas subsidiary.
Q: What are the expectations for the petrochemical industry in the coming quarters?
A: Sung Nak-Sun, CFO: We expect a gradual improvement in supply and demand due to lower capacity expansion and anticipated interest rate cuts. However, uncertainties such as delayed recovery in short-term demand and rising shipping costs persist.
Q: How does Lotte Chemical plan to improve its financial position amid uncertain market conditions?
A: Sung Nak-Sun, CFO: We will focus on improving cash flow by delaying existing investment plans and reducing non-strategic items. We aim to improve cash flow by KRW1.9 trillion by 2025 through investment adjustments and secure additional cash through operational efficiency projects.
Q: Can you elaborate on the company's shareholder return policy?
A: Sung Nak-Sun, CFO: We paid a dividend of KRW3,500 per share for fiscal year 2023, with a payout ratio of 72%. We will also pay an interim dividend of KRW1,000 per share on August 9. Additionally, we completed a KRW100 billion stock buyback and expanded management stock purchases.
Q: What are the financial highlights for Q2 2024?
A: Yong Ban Kim, Head of IR: Sales were KRW5,248 billion, up 3.2% QoQ, and operating profit posted a loss of KRW111.2 billion, improving KRW24.1 billion QoQ. EBITDA was KRW207.9 billion, up KRW36.4 billion QoQ. Assets were KRW35.7098 billion, and liabilities were KRW15.3388 trillion.
Q: What is the outlook for the basic chemicals division in Q3?
A: Yong Ban Kim, Head of IR: We expect gradual improvement in supply and demand due to reduced new capacity add-ons globally. However, profitability is expected to remain unchanged due to delays in demand recovery and rising freight costs.
Q: How did the advanced materials division perform in Q2, and what is the outlook for Q3?
A: Yong Ban Kim, Head of IR: In Q2, advanced materials posted sales of KRW1.1344 trillion and an operating profit of KRW75.7 billion. For Q3, despite the high season, profitability is expected to remain weak due to new capacity volumes from China and rising maritime freight costs.
Q: What were the financial results for LOTTE Fine Chemical in Q2 2024?
A: Yong Ban Kim, Head of IR: LOTTE Fine Chemical posted revenue of KRW422.1 billion and an operating profit of KRW17.1 billion. Revenue and profitability improved due to increased sales of corn-based products and expansion in the green materials industry.
Q: How did LOTTE Energy Materials perform in Q2 2024, and what is the outlook for Q3?
A: Yong Ban Kim, Head of IR: LOTTE Energy Materials posted revenue of KRW262.7 billion and an operating profit of KRW3 billion. Despite slowing growth in the EV market, we achieved the highest quarterly sales by diversifying customers and expanding market share in North America. For Q3, revenue growth is expected to slow due to declining demand and policy volatility.
Q: What measures are being taken to maximize operational efficiency?
A: Sung Nak-Sun, CFO: We plan to secure approximately KRW400 billion in additional cash this year through securitization of working capital and planned operational efficiency projects. We will also continue our asset-light strategy, expected to generate approximately KRW2.3 trillion in additional cash by 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
