Lotte Chemical Pakistan : Transmission of Quarterly Report for the Period Ended 31 March 2022.

QUARTERLY REPORT

JAN - MAR 2022

Contents

Company Information 03

Directors' Review 04

Condensed Interim Statement of Financial Position 06

Condensed Interim Statement of Profit or Loss 07

Condensed Interim Statement of Comprehensive Income 08

Condensed Interim Statement of Changes in Equity 09

Condensed Interim Statement of Cash Flows 10

Notes to the Condensed Interim Financial Statements 11

Company Information

As at 22 April 2022

Board of Directors

Sang Hyeon Lee	Chairman
Humair Ijaz	Chief Executive
Young Dae Kim	Executive
IL Kyu Kim	Non-Executive
Jae Sun Park	Non-Executive
Pervaiz Akhtar	Independent
Adnan Afridi	Independent
Mohammad Zubair	Independent
Audit Committee
Pervaiz Akhtar	Chairman
IL Kyu Kim	Member
Adnan Afridi	Member
Faisal Abid	Secretary
HR & Remuneration Committee
Pervaiz Akhtar	Chairman
Sang Hyeon Lee	Member
Young Dae Kim	Member
Waheed U Khan	Secretary
Shares Sub Committee
Young Dae Kim	Chairman
Sang Hyeon Lee	Member
Mohammad Zubair	Member
Executive Management Team
Humair Ijaz	Chief Executive
Tariq Nazir Virk	Director Manufacturing
Waheed U Khan	General Manager HR & IT
Chief Financial Officer
Ashiq Ali
Company Secretary
Faisal Abid
Bankers	External Auditors
Askari Bank Limited	KPMG Taseer Hadi & Co.,
Citibank NA	Chartered Accountants
Deutsche Bank AG
Faysal Bank Limited	Legal Advisor
Habib Bank Limited	Naz Toosy
Industrial and Commercial Bank of China	148, 18th East Street,
MCB Bank Limited	Phase 1, DHA, Karachi
Meezan Bank Limited
National Bank of Pakistan	Registered Office

Standard Chartered Bank (Pakistan) Limited	EZ/I/P-4, Eastern Industrial Zone,
United Bank Limited	Port Qasim, Karachi
Internal Auditors	Shares Registrar
EY Ford Rhodes	Famco Associates (Pvt) Limited
Chartered Accountants	8-F, Next to Hotel Faran, Nursery,
Block 6, P.E.C.H.S., Shahrah-e-Faisal,
Karachi
Quarterly Report Jan - Mar 2022

03

Directors' Review

For the first quarter ended 31 March 2022

The Directors are pleased to present their review report for the first quarter ended 31 March 2022 together with the un-audited condensed interim financial information of the Company as at and for the first quarter ended 31 March 2022.

Board Changes

Mr Humair Ijaz, will be stepping down as Chief Executive and Director of the Company with effect from close of business on 22 April 2022 and Mr Young Dae Kim, Executive Director will be taking over as Chief Executive with effect from 23 April 2022 for the remainder of Mr Humair's term which expires on 22 June 2023.

The Company and its Board places on record its appreciation for the valuable contributions made by the outgoing Chief Executive and Director, Mr Humair Ijaz in reshaping the business and steering the Company into profitability and welcomes Mr Young Dae Kim as the new Chief Executive of the Company.

Business Overview

The year 2022, commenced with a bullish trend for Crude Oil (WTI) prices on anticipated tightness in the market as OPEC+ failed to deliver the planned number of additional barrels. Additionally, severe weather in the US led to lower production resulting in consistent inventory draws, driving prices further upward. As the quarter progressed, geopolitical tensions between Russia and Ukraine further exacerbated the market sentiment. Initiation of military operations in Ukraine drove the US and the EU to impose severe sanctions on Russia creating further volatility in the market with a possible threat of disruption of Russian Crude supply. Under these circumstances, Crude Oil (WTI) prices crossed the US$ 120 per barrel mark, levels last observed in the year 2008. Nevertheless, towards the end of the quarter, news of cease fire talks, extreme lockdowns in China due to the unprecedented spread of the Covid-19 virus, as well as US-Iran negotiations ensued weakness in prices. By the end of the quarter, the prices regained some strength backed by attacks on oil facilities in Saudi Arabia, and disruption of oil exports from Kazakhstan's CPC terminal on Russia's Black Sea. The average price for the quarter was US$ 94.4 per barrel, up by 22.4% from the previous quarter.

Paraxylene (PX) prices followed the trend of the upstream Crude Oil market throughout the quarter. At the start of the year, the demand in the region remained relatively stable amid the start-up of a new megaton PTA plant in China. However, the demand soon slowed down amid several downstream shutdowns during the Lunar New Year holidays in China. The PX-Naphtha spread remained untenable during the first half of the quarter as the PX prices failed to cope with the pace of Naphtha prices. During the second half of the quarter, PX producers were forced to rationalize operations as well as shift to Gasoline production to ensure profitability. Towards the end of the quarter, PX demand slowed down amid the spike of Covid-19 cases in China; lockdowns in several parts of the country were imposed forcing the downstream producers to curtail operations. The average PX price for the quarter was US$ 1,084.22 per metric tonne while the PX-Naptha spread averaged at US$ 206 per tonne.

PTA prices gained strength at the start of the year mainly due to the bullish trend in the upstream markets. Additionally, higher demand was observed due capacity additions in the downstream polyester sector in China. However, as the Lunar New Year approached, several downstream customers planned maintenance shutdowns weakening the demand sentiment in the region. The upward movement of price was further restricted by excess supply concerns as a new 3.3 million metric tonne plant was commissioned in China. Despite the volatility in the upstream market, the upward trend in PTA prices was sluggish as demand struggled to recover post Lunar New Year holidays. Additionally, the Covid related lockdowns in China towards the end of the quarter led to demand destruction, and an overall increase in inventories of the downstream polyester sector that further weighed down on the PTA prices. The average PTA price for the quarter was US$ 828 per metric tonne, whereas the average PTA margin over PX for the quarter was US$ 112 per metric tonne.

The domestic polyester market operated at a healthy rate of 86% during the first quarter of 2022 amid strong demand due to the upcoming peak season as well as improved domestic PSF demand on implementation of Anti-Dumping Duty on PSF imports from Taiwan, Indonesia and Thailand.

Directors' Review

For the first quarter ended 31 March 2022

Operations

Production volume during the quarter at 109,781 tonnes was 15% lower than the corresponding period last year due to planned overhaul of the plant in Feb-March 2022.

Sales volume, comprising of domestic sales only, for Q1 2022 at 111,212 tonnes was 13% lower than the corresponding quarter last year due to lower product availability.

Financial Performance

Revenue for the quarter was 39% higher than the corresponding period last year due to higher PTA price. This coupled with higher margin resulted in a gross profit of Rs 4,010 million for the quarter as compared to gross profit of Rs 2,264 million during the same period last year.

The taxation charge for the quarter is based on statutory income tax rate and tax under Final Tax Regime (FTR) as adjusted by the movement in the deferred tax account.

Earnings per share (EPS) for the quarter stood at Rs 1.73 per share as compared to Rs 1.08 per share for Q1 2021.

Future Outlook

Moving forward, Crude Oil (WTI) prices are expected to trend lower on hopes of the easing conflict between Russia and Iran. Furthermore, the market eyes the ease of sanctions on Iranian and Venezuelan Oil exports that could add further barrels to the market. However, the continued post-pandemic demand growth and failure of OPEC+ to deliver promised barrels may restrict any significant dip in prices.

Paraxylene (PX) prices are expected to follow the Crude Oil market and trend downwards in the next quarter. Moreover, the expected capacity addition of a million metric tonne PX plant in China may further add pressure to PX prices. Nevertheless, continued low operating rates amid weak margins in the region may prevent an oversupply in the market.

PTA market is envisioned to trend lower as the peak season approaches its end and the downstream absorbs current high inventories. However, upstream markets may eventually determine the price direction in addition to hopes of improving lockdown situation in China which may enable the downstream polyester industry to recover.

The domestic Polyester market is expected to continue showing strength due to the existing high demand from the textile sector as well as improved consumption in the PET sector owing to the Holy month of Ramadan. However, the uncertain political situation of the country and the resulting dwindling exchange rate poses a threat to domestic industrial operations.

Sang Hyeon Lee Chairman

Humair Ijaz Chief Executive

Date: 22 April 2022 Karachi

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