Lotte Chemical Pakistan : Transmission of Quarterly Report for the Period ended 30 September 2023

People.

Progress.

Profit.

REPORT FOR THE

NINE MONTHS PERIOD ENDED

30 SEPTEMBER 2023

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
02

Company Information

As at 12 October 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 nine months period ended 30 September 2023

03

Directors' Review

For the third quarter ended 30 September 2023

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

Business Overview

Crude Oil (WTI) prices exhibited bullishness throughout the third quarter on the back of a tight supply outlook as OPEC+ announced to extend the production cuts by 1.3 million barrels per day till the end of this year. Despite the increase in interest rates by major economies at the start of the quarter, positive economic data from U.S. and a longer than expected driving season in the west resulted in continued improvement in demand for fuels globally, helping Crude Oil prices maintain the upward trajectory. However, despite China's efforts to provide stimulus to their domestic industry, persistent weak economic data kept the upward price movement in check. The average price for the quarter was US$ 81.84 per barrel, 10.6% higher than the previous quarter.

Paraxylene (PX) market largely trended higher over the course of the quarter following the escalation in the Crude Oil prices. Demand in the downstream PTA sector remained robust throughout the quarter due to healthy operations as well as the start-up of several new PTA facilities within China. Prompt supply remained tight with premiums being charged on spot parcels as several PX units underwent maintenance turnarounds and the continued diversion of Aromatics towards the Gasoline pool. The average PX price for the quarter was US$ 1,072.41 per metric tonne, 4% higher than the previous quarter, while the PX-Naptha spread averaged at US$ 426 per tonne.

The PTA prices trended in line with the upstream PX market, with operations at record high levels in mainland China on account of resilient operations in the downstream polyester sector. However, despite high PTA operating rates, PTA-PX spread in China remained below breakeven levels which were only sustainable for vertically integrated units. Higher than expected demand prior to Golden Week holidays in China as well as winter season holiday demand helped producers maintain strong operations. However, higher feedstock costs including the rise in prices of Acetic Acid put pressure on regional margins which declined as the quarter progressed. The average PTA price for the quarter was US$ 796.17 per metric tonne, whereas the average PTA margin over PX for the quarter was US$ 88 per tonne as compared to US $ 120 per tonne for the previous quarter.

The domestic polyester industry operations remained consistent in Q3-2023; however operating rates remained at the lower end of the spectrum despite the peak season for the Textile and PET sector. Demand once again, remained below par due to high energy costs, volatility in exchange rates as well as high inflation in the country.

Operations

Sales volume, comprising of domestic sales only, for Q3 2023 at 82,427 tonnes was 35% lower than the corresponding quarter last year due to lower demand as well as additional PTA imports planned by the downstream in the previous quarter.

Production volume during the quarter at 105,395 tonnes was 17% lower than the corresponding period last year due to curtailment of plant operating rate to match sales.

04

Directors' Review

For the third quarter ended 30 September 2023

Financial Performance

Revenue for the quarter was 20% lower than the corresponding period last year mainly due to lower volume sold. This resulted in a lower gross profit of Rs 3,417 million for the quarter as compared to gross profit of Rs 4,805 million during the same period last year.

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

Earnings per share (EPS) for the quarter stood at Rs 1.31 per share as compared to Rs 1.79 per share for Q3 2022.

Future Outlook

Going forward, Crude Oil (WTI) prices are expected to trend upwards during the last quarter of 2023 as prominent global agencies; including Energy Information Agency (EIA) suggest a continuing supply deficit on account of lower production from OPEC+ as well as the export restrictions being implemented by Russia. The change in consumer spending preferences may result in persistent higher demand for fuels in the winter season as well.

International Paraxylene (PX) prices are expected to trend upwards in the next quarter supported by the upstream Crude Oil prices, however, there is a possibility of limited upside as downstream PTA production approaches the seasonal lull.

PTA prices are forecasted to follow the trend of the upstream markets; however the continued record high output from China and lower demand expected in the upcoming winter season may continue to exert pressure on PTA-PX margins.

The domestic Polyester market is expected to continue facing challenges, as overall domestic manufacturing comes under pressure due to macro-economic issues in the country. Apart from the expected lower seasonal demand, high domestic inflation and unviability in the export market which is already plagued with poor demand, pose a serious risk to operations going forward.

Sang Hyeon Lee	Young Dae Kim
Chairman	Chief Executive

Date: 12 October 2023

Karachi

Report for the nine months period ended 30 September 2023

05