KUALA LUMPUR (Dec 13): Lotte Chemical Titan Holdings Bhd (KL:LCTITAN) has announced the temporary shutdown of one of its plants at the Pasir Gudang Complex in Johor, effective Dec 15, to mitigate losses stemming from a prolonged downturn in the petrochemical industry.
LC Titan will consider resuming the operation of the plant, named Naphtha Cracker Number 1 plant, when market conditions become more favourable, according to its bourse filing on Friday. The plant has a nameplate capacity of 430,000 tonnes per annum, LC Titan noted.
“With the shutdown of Naphtha Cracker Number 1, the company’s operating guidance for all its plants in Malaysia and Indonesia for 2024 is between 55% to 60%. This guidance may change from time to time,” LC Titan said, adding that it will provide updates on future developments.
LC Titan noted that the petrochemical industry experienced a prolonged downturn over the past two years as a result of a supply glut, resulting in negative margins for the company.
The shutdown comes slightly over a month after Reuters reported in early November that Thailand's industrial conglomerate Siam Cement Group halted commercial operations at its US$5.4 billion (RM24.2 billion) Long Son Petrochemicals complex in the southern province of Ba Ria-Vung Tau in Vietnam.
LC Titan's profitability relies on the polymer-naphtha spread, while naphtha feedstock prices are highly correlated to crude oil prices. The high-density polyethylene (HDPE)-naphtha spread, an indication of margin level, has been between US$200 and US$300 a tonne since mid-2023.
Having recorded losses for 10 consecutive quarters, LC Titan’s net loss widened to RM246.42 million for the July-September 2024 quarter, compared to RM55.58 million in the corresponding quarter last year.
The larger loss was attributed to inventory writedowns, higher losses from its 40%-owned associate Lotte Chemical USA Corp due to a maintenance shutdown, and increased foreign exchange losses.
Quarter-on-quarter, the net loss slightly narrowed from RM248.89 million in the April-June 2024 quarter. For the first nine months of the year, LC Titan’s net loss expanded to RM673.33 million from RM593.81 million in the same period last year.
Back then, in its financial statement accompanying the latest results, LC Titan said its management is closely monitoring operations and carefully managing financial liquidity to enhance efficiency and maintain product quality.
As of end-September 2024, LC Titan reported RM7.84 billion in loans and borrowings and RM461.09 million in cash, placing it in a net debt position of RM7.37 billion.
Shares of LC Titan fell to an all-time low of 3 sen on Friday, the lowest since its relisting on the stock exchange in July 2017. The stock closed 1.5 sen or 2.33% lower at 63 sen, giving the company a market capitalisation of RM1.45 billion.