Lotte Chemical Pakistan : Transmission of Quarterly Report for the Period Ended 2023-06-30

People.

Progress.

Profit.

REPORT FOR THE

SIX MONTHS PERIOD ENDED

30 JUNE 2023

Contents
Company Information	03
Directors' Review	04
Independent Auditors' Review Report	06
Condensed Interim Statement of Financial Position	07
Condensed Interim Statement of Profit or Loss	08
Condensed Interim Statement of Comprehensive Income	09
Condensed Interim Statement of Changes in Equity	10
Condensed Interim Statement of Cash Flows	11
Notes to the Condensed Interim Financial Statements	12
02

Company Information

As at 11 August 2023

Board of Directors
Sang Hyeon Lee	Chairman
Young Dae Kim	Chief Executive
IL Kyu Kim	Non-Executive
Jae Sun Park	Non-Executive
Shabbir Diwan	Non-Executive
Rashid Ibrahim	Independent
Khurram Rashid	Independent
Tariq Nazir Virk	Executive
Audit Committee
Rashid Ibrahim	Chairman
IL Kyu Kim	Member
Khurram Rashid	Member
Faisal Abid	Secretary
HR & Remuneration Committee
Rashid Ibrahim	Chairman
Sang Hyeon Lee	Member
Young Dae Kim	Member
Waheed U Khan	Secretary
Shares Sub Committee
Young Dae Kim	Chairman
Sang Hyeon Lee	Member
Khurram Rashid	Member
Executive Management Team
Young Dae Kim	Chief Executive
Tariq Nazir Virk	Director Manufacturing
Waheed U Khan	Director Admin, HR & IT
Ashiq Ali	Chief Financial Officer
Muhammed Talha Khan	General Manager Commercial
Chief Financial Officer
Ashiq Ali
Company Secretary
Faisal Abid
Bankers			External Auditors
Allied Bank Limited			A.F. Ferguson & Co.,
Askari Bank Limited			Chartered Accountants
Bank Alfalah Limited
Citibank NA			Legal Advisor
Deutsche Bank AG			Naz Toosy
Faysal Bank Limited			148, 18th East Street,
Habib Bank Limited			Phase 1, DHA, Karachi
Habib Metropolitan Bank Ltd
Industrial and Commercial Bank of China			Registered Office
MCB Bank Limited			EZ/I/P-4, Eastern Industrial Zone,
Meezan Bank Limited			Port Qasim, Karachi
National Bank of Pakistan
Standard Chartered Bank (Pakistan) Limited		Shares Registrar
United Bank Limited			Famco Associates (Pvt) Limited
			8-F, Near Hotel Faran, Nursery,
Internal Auditors			Block 6, P.E.C.H.S.,
KPMG Taseer Hadi & Co.,			Shahrah-e-Faisal, Karachi
Chartered Accountants

Report for the six months period ended 30 June 2023

03

Directors' Review

For the second quarter ended 30 June 2023

The Directors are pleased to present their review report for the second quarter ended 30 June 2023 together with the un-audited condensed interim financial information of the Company as at and for the second quarter and six months period ended 30 June 2023.

Election of Directors

At the Extraordinary General Meeting of the Company held on 22 June 2023, Mr Sang Hyeon Lee, Mr Young Dae Kim, Mr IL Kyu Kim, Ms Jae Sun Park, Mr Tariq Nazir Virk, Mr Shabbir Diwan, Mr Rashid Ibrahim and Mr Khurram Rashid were elected as Directors of the Company for a three-year term commencing from 23 June 2023.

Following the election of Directors, Mr Sang Hyeon Lee was re-appointed as Chairman and Mr Young Dae Kim as Chief Executive of the Company for a term of three years commencing from 23 June 2023.

Business Overview

Crude Oil (WTI) prices exhibited a bearish trend throughout the second quarter as several unfavorable factors plagued the market. The implementation of stringent monetary policies in major economies, stunted global economic growth, debt default concerns in the U.S., and slower-than-anticipated rebound in Chinese economy raised concerns of weaker Oil demand, thereby exerting downward pressure on the prices. During the quarter, Oil prices were briefly aided by the prospect of tighter supplies with supply disruption from Iraq's Kurdish region due to legal disputes as well as from North America on account of wild fires. Furthermore, the decision from OPEC+ to reduce supply by 1.66 million barrels per day from May, and the subsequent intended cut of 1 million barrels per day from July, provided some support to the ailing prices during the quarter. The average price for the quarter was US$ 73.93 per barrel, down by 3.2% from the previous quarter.

Paraxylene (PX) market largely lost strength over the course of the quarter following the decline in Crude Oil prices. However PX prices were periodically supported as several facilities underwent planned shut downs during the quarter, and some PX producers diverted product to the Gasoline pool which offered lucrative margins, consequently causing the market to tighten. Demand for PX within China remained robust on the back of capacity additions in the downstream PTA sector, however poor economics kept the demand subdued in the rest of Asia despite the peak season. The average PX price for the quarter was US$ 1,031.29 per tonne while the PX-Naptha spread averaged at US$ 429 per tonne.

The PTA prices trended downwards following the upstream PX market, as major stakeholders adopted a cautious approach due to the volatility in the upstream energy markets and uncertainty in the macroeconomic environment. PTA production in the region reached unprecedented levels with the start-up of 5.5 million MTs of new capacities in China, however the market failed to gather sufficient support as it was inundated by negative sentiment amid inflationary pressure and lackluster consumerism. Despite the peak season, demand for PTA remained relatively depressed as many polyester producers were forced to rationalize operations due to poor margins, however capacity additions in the downstream PET and polyester sectors kept the PTA inventory build-up in check. The average PTA price for the quarter was US$ 797.13 per metric tonne, whereas the average PTA margin over PX for the quarter was US$ 120 per metric tonne.

The domestic polyester industry re-gained stability in Q2-2023 as compared to the previous quarter as producers made alternate arrangements in their supply chains to manage operations and replenish finished goods inventories. However, despite the peak season, downstream sales remained sub-par due to weak demand resulting from challenging economic conditions and inflationary pressure in the country.

04