Lotte Chemical Pakistan : Transmission of Quarterly Report for the Period Ended 31 March 2024.

25 Years of Excellence

QUARTERLY REPORT

JAN - MAR 2024

Company Information

As at 18 April 2024

Board of Directors
Sung Soo Bae	Chairman
Young Dae Kim	Chief Executive
IL Kyu Kim	Non-Executive
Jae Sun Park	Non-Executive
Kyung Hoi Yoo	Non-Executive
Shabbir Diwan	Non-Executive
Rashid Ibrahim	Independent
Khurram Rashid	Independent
Audit Committee
Rashid Ibrahim	Chairman
IL Kyu Kim	Member
Khurram Rashid	Member
Faisal Abid	Secretary
HR & Remuneration Committee
Rashid Ibrahim	Chairman
Sung Soo Bae	Member
Young Dae Kim	Member
Waheed U Khan	Secretary
Shares Sub Committee
Young Dae Kim	Chairman
Kyung Hoi Yoo	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		Internal Auditors
Ashiq Ali		KPMG Taseer Hadi & Co.,
		Chartered Accountants
Company Secretary
Faisal Abid		External Auditors
		A.F. Ferguson & Co.,
Bankers		Chartered Accountants
Allied Bank Limited
Askari Bank Limited		Legal Advisor
Bank Alfalah Limited		Naz Toosy
Citibank NA		148, 18th East Street, Phase 1, DHA, Karachi
Deutsche Bank AG
Faysal Bank Limited		Registered Office
Habib Bank Limited		EZ/I/P-4, Eastern Industrial Zone,
Habib Metropolitan Bank Ltd		Port Qasim, Karachi
Industrial and Commercial Bank of China
MCB Bank Limited		Shares Registrar
Meezan Bank Limited		FAMCO Share Registration Services (Pvt) Ltd.
National Bank of Pakistan		8-F, Near Hotel Faran, Nursery,
Standard Chartered Bank (Pakistan) Limited		Block 6, P.E.C.H.S.,
United Bank Limited		Shahrah-e-Faisal, Karachi

02

Directors' Review

For the first quarter ended 31 March 2024

The Directors are pleased to present their review report for the first quarter ended 31 March 2024 together with the un-audited condensed interim financial information of the Company as at and for the first quarter ended 31 March 2024.

BUSINESS OVERVIEW

The Crude Oil (WTI) prices showed strength throughout the quarter as major geo-political events projected towards higher prices eventually resulting in prices crossing the US$ 83 per barrel mark, levels previously seen in November last year The bullish sentiment was primarily being driven by potential supply disruptions arising from the conflict in the Middle East. Furthermore, market found support from China's economic recovery post Lunar New Year holidays that exhibited increased oil demand as consumption surpassed pre-Covid levels. Additionally, the decision from OPEC+ to extend the production cuts of 2.2 million barrels per day till the end of Q2 2024 helped prices maintain the upward trend. Towards the end of the quarter, market confidence took a hit on account of the attacks on Russian refineries by Ukraine which forced an export cut on Russian oil, indicating constriction in the Crude Oil market. The average price for the quarter was US$ 76.46 per barrel, an increase of 0.16% from the previous quarter.

Paraxylene (PX) prices exhibited bullishness over the course of the quarter, moving in-line with the upstream Crude oil markets. Strong demand prior to Lunar New Year holidays as well as ongoing planned outages at a few major assets in the region helped keep price propped. However, as the quarter progressed high inventories in the downstream PTA and Polyester sector kept the PX market subdued whereas the lack of diversion of PX into the Gasoline pool resulted in languid movement in prices; thereby resulting in pressure on PX-Naphtha margins which averaged at US$ 346 per metric tonne as compared to US$ 358 per metric tonne for the previous quarter. PX prices averaged at US$ 1,027.22 per tonne for the quarter.

The PTA prices trended higher in Q1 2024, largely following the direction of the upstream feedstock market. The price movement remained capped due to lower downstream operations around the Lunar New Year holidays in China. This resulted in higher PTA inventories which compelled major producers to rationalize operations. However, moving forward demand recovery was observed on account of revival in downstream operations as well as new capacities coming on-line in the PET sector resulting in improved PTA-PX spreads as compared to the previous quarter. The average PTA price for the quarter was US$ 768.41 per tonne, whereas the international average PTA margin over PX for the quarter was US$ 91 per tonne, 11% higher than the previous quarter.

The domestic polyester industry has operated at the rate of 72% during the first quarter of 2024. Overall, an improvement was observed as compared to the previous quarter as the market gained momentum on account of positivity around General Elections in the country, stability in exchange rates and the improved demand generally observed prior to the month of Ramadan which enabled producers to maintain consistent operations. However, actual demand was reported to be lower as compared to previous years on account of ongoing high inflation as well as the ingress of cheaper imports through the EFS scheme.

OPERATIONS

Sales volume, comprising of domestic sales only, for Q1 2024 at 127,624 tonnes was 40% higher than the corresponding quarter last year due to consistent downstream demand.

Production volume during the quarter at 107,581 tonnes was 30% higher than the corresponding period last year.

The Company suspended its Plant operations from 15 January 2024 to 24 January 2024 in order to efficiently manage its inventory.

Quarterly Report Jan - Mar 2024

03

Directors' Review

For the first quarter ended 31 March 2024

FINANCIAL PERFORMANCE

Revenue for the quarter was 46% higher than the corresponding period last year mainly due to higher volume sold. However, higher cost of sales including significant increase in gas prices resulted in a gross profit of Rs 1,684 million for the quarter as compared to gross profit of Rs 4,439 million during the same period last year.

Distribution and selling expenses were 32% higher while Administrative and general expenses were 20% higher than the corresponding period last year due to overall impact of high inflation. 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 0.59 per share as compared to Rs 1.68 per share for Q1 2023.

POST BALANCE SHEET EVENT

The Board of Directors in its meeting held on 18 April 2024 has approved an interim cash dividend of Rs 0.50 per share for the year ending 31 December 2024.

FUTURE OUTLOOK

Looking ahead, it is anticipated that Crude Oil (WTI) prices will experience a restrained upward movement from their current levels. The ongoing geopolitical tensions in the Middle East, attacks on Russian refineries and the un-waivered stance of OPEC+ on production will result in tighter supply. However, weak economic data coming from China and higher interest rates in the US and Europe may keep the upward price movement in check.

Moving forward, it is expected that Paraxylene (PX) prices will move in parallel to the upstream energy prices in the next quarter. The upward trend will be supported by higher demand for PX, driven by new PTA capacities expected to come online in Q2 as well as the diversion of PX into Gasoline pool ahead of the summer season. Additionally, the market supply is expected to tighten on account of planned outages at PX units in Q2 2024.

The PTA market is expected to move in line with the upstream markets; additionally improved demand is expected ahead of the peak season for the PET and the Textile sector. However, new capacities of 4.5 million tonnes expected to come online within the first half of the year may add pressure on the existing oversupplied market.

The Domestic Polyester industry has started to feel the pressure of the high interest rates as well as the continued hike in energy prices which has resulted in eroding profits. However, expectations of positive developments on long-term Policy matters by the newly elected Government may continue to give domestic producers confidence to maintain strong operations ahead of the higher demand expected ahead of the peak summer season.

Sung Soo Bae	Young Dae Kim
Chairman	Chief Executive

Date: 18 April 2024

Karachi

04

Condensed Interim Statement of Financial Position

As at 31 March 2024

		Amounts in Rs '000
	31 March		31 December
	2024	2023
Note	(Un-audited)		(Audited)

Assets

Non-current assets
Property, plant and equipment	4
Intangible assets
Right-of-use assets
Long-term loans
Long-term deposits and prepayments
Deferred taxation - net
Current assets
Stores and spare parts
Stock-in-trade
Trade debts	5
Loans and advances
Trade deposits and short-term prepayments
Accrued interest
Other receivables
Short-term investments - at amortised cost	6
Sales tax refunds due from government	7
Taxation - net
Cash and bank balances	8
Total assets
Equity and liabilities
Share capital and reserves
Issued, subscribed and paid-up capital
1,514,207,208 (31 December 2023: 1,514,207,208)
ordinary shares of Rs 10 each
Capital reserve
Revenue reserve - Unappropriated profit
Total equity
Liabilities
Non-current liabilities
Retirement benefit obligations
Lease liability
Current liabilities
Trade and other payables	9
Lease liability
Accrued interest	10
Unclaimed dividend
Unpaid dividend	11
Short-term financing	12
Total liabilities
Contingencies and commitments	13
Total equity and liabilities

5,539,277

24,015

347,848

171,179

33,462

2,226,936

8,342,717

2,450,803

11,408,335

12,117,402

72,897

126,355

25,173

8,009

7,284,895

2,890,662

2,492,971

112,188

38,989,690

47,332,407

15,142,072

2,345

7,764,668

22,909,085

252,092

729,367

981,459

17,935,790

467,491

423,278

71,864

4,543,440

-

23,441,863

24,423,322

47,332,407

5,744,442

27,637

365,275

160,635

33,805

2,170,718

8,502,512

2,101,184

13,362,175

8,486,031

51,081

176,387

32,823

10,335

4,503,595

2,413,440

2,673,353

1,262,827

35,073,231

43,575,743

15,142,072

2,345

6,867,542

22,011,959

247,835

855,927

1,103,762

13,975,321

436,403

431,471

73,387

4,543,440

1,000,000

20,460,022

21,563,784

43,575,743

The annexed notes 1 to 23 form an integral part of these condensed interim financial statements.

Sung Soo Bae	Young Dae Kim
Chairman	Chief Executive	Chief Financial Officer

Quarterly Report Jan - Mar 2024

05

Condensed Interim Statement of Profit or Loss (Un-audited)

For the first quarter ended 31 March 2024

				Amounts in Rs '000
			Quarter ended
			31 March (Un-audited)
	Note	2024	2023
Revenue - net	14		32,276,924	22,112,698
Cost of sales	15		(30,592,943)	(17,673,713)
Gross profit			1,683,981	4,438,985
Distribution and selling expenses			(48,693)	(36,867)
Administrative and general expenses			(182,349)	(151,633)
Other operating expenses	16		(111,947)	(297,524)
Operating profit			1,340,992	3,952,961
Other income	17		351,092	585,156
Finance costs	18		(222,775)	(755,507)
Profit before taxation			1,469,309	3,782,610
Taxation	19		(572,183)	(1,240,253)
Profit after taxation			897,126	2,542,357
			----- Amount in Rupees -----
Earnings per share - basic and diluted			0.59	1.68

The annexed notes 1 to 23 form an integral part of these condensed interim financial statements.

Sung Soo Bae	Young Dae Kim
Chairman	Chief Executive	Chief Financial Officer

06

Condensed Interim Statement of Comprehensive Income (Un-audited)

For the first quarter ended 31 March 2024

			Amounts in Rs '000
		Quarter ended
		31 March (Un-audited)
		2024	2023
Profit after taxation	897,126	2,542,357
Other comprehensive income	-	-
Total comprehensive income for the period	897,126	2,542,357

The annexed notes 1 to 23 form an integral part of these condensed interim financial statements.

Sung Soo Bae	Young Dae Kim
Chairman	Chief Executive	Chief Financial Officer

Quarterly Report Jan - Mar 2024

07

Condensed Interim Statement of Changes in Equity (Un-audited)

For the first quarter ended 31 March 2024

						Amounts in Rs '000
Share capital			Reserves
Issued,
subscribed	Capital	Unappropriated	Sub-		Total
and paid-up		equity
reserves	profit	total
capital

Balance as at 1 January 2023

Total comprehensive income for the quarter ended

31 March 2023

• Profit for the first quarter ended 31 March 2023
• Other comprehensive income for the first quarter ended
  31 March 2023

Balance as at 31 March 2023

Balance as at 1 January 2024

Total comprehensive income for the first quarter ended

31 March 2024

• Profit for the first quarter ended 31 March 2024
• Other comprehensive income for the first quarter ended
  31 March 2024

Balance as at 31 March 2024

15,142,072

-

-

-

15,142,072

15,142,072

-

-

-

15,142,072

2,345 7,869,409 7,871,754 23,013,826

-		2,542,357		2,542,357		2,542,357
-		-		-		-
-		2,542,357		2,542,357		2,542,357
2,345		10,411,766		10,414,111		25,556,183
2,345		6,867,542		6,869,887		22,011,959

-		897,126		897,126		897,126
-		-		-		-
-		897,126		897,126		897,126
2,345		7,764,668		7,767,013		22,909,085

The annexed notes 1 to 23 form an integral part of these condensed interim financial statements.

Sung Soo Bae	Young Dae Kim
Chairman	Chief Executive	Chief Financial Officer

08

Condensed Interim Statement of Cash Flows (Un-audited)

For the first quarter ended 31 March 2024

	Note
Cash flows from operating activities
Cash generated from / (used in) operations	20
Finance costs paid
Payments to retirement benefit obligations
Long-term loans and advances - net
Long-term deposits and prepayments - net
Taxes paid
Finance income received - conventional
Finance income received - islamic
Net cash generated from / (used in) operating activities
Cash flows from investing activities

Amounts in Rs '000

Quarter ended

31 March (Un-audited)

20242023

3,039,971	(5,911,127)
(35,060)	(11,923)

1. (906)

(10,544)

8,660

343(17,924)

(477,413) (676,747)

257,952168,753

79,485362,565

2,853,843 (6,078,649)

Payments for capital expenditure

Proceeds from disposal of property, plant and equipment Redemption of / (placement in) short-term investments -net

Net cash used in investing activities

Cash flows from financing activities

(54,904)

-

-

(54,904)

(122,490)

62,626

(89,184)

(149,048)

Dividend paid		(1,523)
Payment of short-term financing		(1,000,000)
Payment of lease liability		(166,755)
Net cash used in financing activities		(1,168,278)
Net increase / (decrease) in cash and cash equivalents		1,630,661
Cash and cash equivalents at 1 January		5,766,422
Cash and cash equivalents at 31 March	8.2	7,397,083

(1,020)

-

(155,435)

(156,455)

(6,384,152)

13,782,547

7,398,395

The annexed notes 1 to 23 form an integral part of these condensed interim financial statements.

Sung Soo Bae	Young Dae Kim
Chairman	Chief Executive	Chief Financial Officer

Quarterly Report Jan - Mar 2024

09

Notes to the Condensed Interim Financial Statements (Un-audited)

For the first quarter ended 31 March 2024

1. STATUS AND NATURE OF BUSINESS

1. Lotte Chemical Pakistan Limited ("the Company") was incorporated in Pakistan on 30 May 1998 under Companies Ordinance, 1984 (Repealed with enactment of the Companies Act, 2017) and is listed on Pakistan Stock Exchange Limited. The principal activity of the Company is to manufacture and sale of Purified Terephthalic Acid (PTA).
2. The geographical location and addresses of business units are as under:
   LocationAddress

Registered Office	EZ/I/P-4, Eastern Industrial Zone, Port Qasim, Karachi.
City Office	Al-Tijarah Centre, 14th Floor, 32/1-A, Main Shahrah-e-Faisal,
	Block 6, P.E.C.H.S., Karachi.

1.3 The Company is a subsidiary of Lotte Chemical Corporation, South Korea ("LCC Korea") and its ultimate parent company is South Korean Conglomerate Lotte.

2. BASIS OF PREPARATION

2.1 Statement of compliance

These condensed interim financial statements of the Company for the three months period ended 31 March 2024 have been prepared in accordance with the accounting and reporting standards as applicable in Pakistan for interim financial reporting. The accounting and reporting standards as applicable in Pakistan for interim financial reporting comprise of:

• International Accounting Standard (IAS) 34, Interim Financial Reporting, issued by the International Accounting Standards Board (IASB) as notified under the Companies Act, 2017;
• Provisions of and directives issued under the Companies Act, 2017.

Where the provisions of and directives issued under the Companies Act, 2017 differ with the requirements of IAS 34, the provisions of and directives issued under the Companies Act, 2017 have been followed.

2.1.1 These condensed interim financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the financial statements of the Company for the year ended 31 December 2023. However, selected explanatory notes are included to explain events and transactions that are significant to understanding of changes in Company's financial position and performance since the last annual financial statements.

2.2 Basis of measurement

These condensed interim financial statements have been prepared under the historical cost convention (except for retirement benefit obligations and lease liability, which have been measured at present value).

3. ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS AND FINANCIAL RISK MANAGEMENT

The accounting policies and the methods of computation adopted in the preparation of these condensed interim financial statements are the same as those applied in the preparation of the annual audited financial statements for the year ended 31 December 2023.

The preparation of these condensed interim financial statements, in conformity with accounting and reporting standards as applicable in Pakistan requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. Actual results may differ from the estimates. During the preparation of these condensed interim financial statements, the significant judgements made by management in applying the Company's accounting policies and the key sources of estimation and assumptions are consistent with those that were applied to the annual audited financial statements of the Company for the year ended 31 December 2023.

The Company's financial risk management objectives and policies are consistent with those disclosed in the annual audited financial statements for the year ended 31 December 2023.

10