Lotte Chemical Corp. posted an operating profit of 1.611 trillion won in 2015, up 359.6 percent year-on-year with net profit rising to 990.7 billion won, up 589.6 percent YoY, the company said recently.
Total sales reached 11.713 trillion won last year up 21 percent YoY thanks to growth in the sales of its petrochemical products despite a fall in oil prices. Its Q4 operating profit amounted to 308.9 billion won.
Lotte Chemical is seeking more mergers and acquisitions focusing on chemical products as the company expects a fall in oil prices this year.
"Lotte Chemical plans to seal more acquisition deals as the profitability of the company saw a steady improvement thanks to continued cheap oil prices," said an official at a major Seoul investment bank.
The official, who was a member of the advisory team for Lotte's M&A strategy, said plans to generate 40 trillion won in sales by 2018 will happen only if the company bolsters its presence in the chemical market through aggressive M&As.
"Lotte Chemical is reviewing measures for further growth," said a company spokeswoman. But she added that it may revise an earlier business plan as the 40 trillion won target will be reached in the next three years.
Lotte Chemical has acquired Samsung's chemical affiliates for about 3 trillion won.
Lotte brushed aside growing worries by some investors over the increased financial burden for the deal, given its ample cash reserves.
"The Samsung deal won't have a negative impact on Lotte Chemical's financial soundness. We can't say what our cash reserves are as this is classified. The key point is that the Samsung deal will help Lotte become a vertically-integrated company," she said.
During the third quarter, the company reported 3.03 trillion won in sales, a decrease of 18 percent, year-on-year, while sales for the first nine months of this year only reached 9.01 trillion won, a drop of more than 20 percent compared to the same period last year. Lotte Chemical said weak oil prices had a negative impact on its performance.
The acquisition of Samsung's chemical affiliates will help Lotte Chemical increase its sales to 21.2 trillion won, according to officials and market analysts.
While the spokeswoman said Lotte Chemical's top priority is to seek qualitative growth, rather than bulky business expansion, the source at the investment bank and others say Lotte has no other option but to strike more acquisition deals to expand its revenue, focusing on chemical products.
Lotte Chemical Corp, the South Korean plastics manufacturer, is exploring an initial public offering of its Malaysian petrochemicals arm that could raise more than $500 million, people with knowledge of the matter said.
The unit, Lotte Chemical Titan Holding Sdn, could sell stock in Kuala Lumpur as soon as the second half of this year, the people said, asking not to be identified as the information is private.
Shares of Lotte Chemical Corp yesterday jumped 3.4 percent at 2:53pm in Seoul to the highest level in more than two months.
Malaysia has hosted only one IPO of more than $500 million in the past two years, the $885 million share sale from power producer Malakoff Corp. in April last year. First-time share sales in the country raised $1.28 billion last year, compared with $1.25 billion in 2014, the data showed.
“Through listing Titan, Lotte could resolve the burden of its cash shortage,” Yuanta Securities Korea Co analyst Hwang Kyu-won said by telephone yesterday. “Lotte Chemical is now pursuing several businesses, such as the ethane cracker business in the United States, and it also bought Samsung’s chemical business last year.”
Axiall Corporation and Lotte Chemical Corporation announced that the companies have finalized their joint-venture arrangements to construct an ethane cracker. The final investment decision remains subject to approval by both companies’ boards of directors. The companies have formed LACC LLC to design, build and operate an ethane cracker in Louisiana that would produce approximately one million metric tons of ethylene annually once it completes the construction.
Since announcing their intent to partner on the project in February 2014, Axiall and Lotte have also completed a joint FEED study for the plant. The two were now evaluating final project details, including site selection, which is anticipated in Lake Charles, Louisiana. If approved, the plant’s anticipated start-up would be the end of 2018.
If approved by Lotte’s Board of Directors, Lotte Chemical also plans to build a monoethylene glycol (MEG) plant adjacent to the proposed cracker. Axiall would not have any investment in or ownership of that MEG plant. Lotte Chemical currently operates three crackers in Asia that produce more than 2.8 million metric tons of ethylene capacity annually.
Financial terms of the joint venture call for Lotte to lead the project with Axiall having a maximum capital contribution obligation of $225 million towards the cracker during the engineering, procurement and construction phases of the project.
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