Lotte Chemical struggles as losses pile up over the last 14 quarters

LOSS-MAKING Lotte Chemical Titan Holding Bhd has been anything but a titan, and analysts are concerned it could now go bust without financial support or unless a miracle happens and the chemical market makes a sudden recovery.

The threat is very real, as the company has already mothballed one of its two cracker facilities in Johor, as bearish demand-supply fundamentals of the chemicals market have forced it to do so. Losses have piled up over the past 14 consecutive quarters, totalling RM3.28bil. This number is set to grow, as its capacity rationalisation is making slow progress.

Analysts covering the counter expect losses to persist for at least 12 more months. Creditors must be worried, knowing the company has some RM1.5bil in interest costs to settle over the next 15 months, not to mention having to face depreciation charges of about RM700mil-RM800mil on its new facility in Indonesia.

When things don’t go to plan, sometimes a change of course is needed, including downsizing by selling one of the crackers for cash to pay the bills and/or at least cut the losses.

So, while some may point to the company making progress with lowering losses, it’s of little consolation for minority shareholders worried after reading such headlines.

Lotte Chemical was meant to be the star listing in 2017, the largest in five years, but many who bought into it at RM6.50 a share must be regretting it since, with its last close being 54 sen a share.

Brokerage firms have a target price of about 30 sen on the counter – so there is still likelihood to go even lower.

Many must be hoping its ultimate controlling shareholder, South Korea’s Lotte Group conglomerate, will step up should the need arise.

Stopping the bleeding of the profit and loss statement is paramount. Then, a track record of profitable quarters could help rebuild interest in the stock among investors and creditors.