Lotte to halve basic chemicals in portfolio for profitability

South Korea’s No. 2 petrochemicals manufacturer Lotte Chemical Corp. is set to more than halve its basic chemicals business by 2030 in its portfolio while strengthening advanced materials and fine chemical businesses to improve profitability and boost its corporate value by more than 10 times.

Lotte aims to generate less than 30% of its revenue from the basic chemicals, which made up 60% of its total sales last year, CEO Lee Hun Ki told domestic institutional investors and analysts on Thursday. The business, which manufactures general-purpose products such as polyolefin and aromatics, logged an operating loss of 492 billion won ($356.3 million) last year on cut-throat competition with Chinese rivals, forcing the company to report a loss of 347.7 billion won.

“We plan to change the level of petrochemicals in our portfolio to ramp up the company’s corporate value to more than 50 trillion won (from the current 4.7 trillion won),” Lee pledged.

Lotte Chemical also plans to restructure the organization by selling ineffective assets and giving up loss-making businesses to improve its free cash flow by 5 trillion won by the end of 2025.

The South Korean petrochemical industry has been suffering from the rapid expansion of Chinese competitors amid oversupply and dwindling demand in the global market.

Lotte Chemical embarked on the process of selling its Malaysian unit Lotte Chemical Titan Holdings to scale back petrochemical operations. Lotte Chemical’s domestic rival LG Chem Ltd. was in talks with Kuwait Petroleum Corp. to sell a stake in a naphtha cracker in South Korea.

TO FOSTER HIGH-VALUE SECTORS

Lotte Chemical plans to increase its specialty chemicals business by raising functional products in the advanced material business.

The company aims to raise sales of the specialty chemicals business to 8 trillion won by 2030 from the 5 trillion won in 2023 and ramp up its earnings before interest, taxes, depreciation, and amortization (EBITDA) margin to 10% from the existing 8%, Lee said.

The fine chemical business will be expanded. The firm plans to nearly triple the business’ revenue to 5 trillion won from the 1.8 trillion won last year with the new product development while increasing its EBITDA margin to 23% from 14%.

Lotte Chemical is poised to widen its sharers in the secondary battery materials industry, especially the cathode and anode foil markets. It aims to increase sales of the business to 7 trillion won from 645 billion won and treble its EBITDA margin to 18%.

The company is also set to foster its new growth engine hydrogen energy business, which produces hydrogen with by-product gases from the existing petrochemical production facilities. It targets sales of 4 trillion won from the business.

Write to Hyeon-woo Oh at ohw@hankyung.com
 

Jongwoo Cheon edited this article.