Lotte Chemical Pakistan Limited posted a significant decline of 22.9% in revenue, 35.65% in gross and 47.2% in net profits in the first half (January-June) of the ongoing calendar year 2023 as compared to the corresponding period of 2022, WealthPK reports. The company’s net sales went down to Rs38.5 billion in 1HCY23 from Rs49.9 billion in 1HCY22 due to lower volumes sold. This was because the company had to stop its operations partially due to a shortage of raw materials that caused domestic sales to fall substantially. As a result, the gross profit fell to Rs6.4 billion in 1HCY23 from Rs10 billion last year. This decline in revenue caused gross profit margin to dip to 16.71% in 1HCY23 from 20.03% in 1HCY22. Lotte Chemical, which was incorporated in Pakistan on May 30, 1998, manufactures and sells Pure Terephthalic Acid (PTA).
Lotte Chemical’s operating profit plunged 38% to Rs5.58 billion from Rs9.013 billion over the same period last year due to inflationary pressures. The company’s net profit plunged 47.2% to Rs2.8 billion in 1HCY23 from Rs5.4 billion in 1HCY22, because of an increase in tax rates, stringent monetary restrictions, and the ongoing macroeconomic difficulties, including high inflation and currency devaluation. As a result, the net profit ratio declined to 7.40% in 1HCY23 from 10.81% in 1HCY22. Similarly, the earnings per share dropped to Rs1.88 in 1HCY23 from Rs3.57 in 1HCY22.

Historical analysis (current ratio) The current ratio measures a company’s liquidity position to meet its current obligations. Lotte Chemical remained stable over the period from 2018 to 2022, as its current ratio remained above 1.2. The company observed the highest current ratio of 2.34 in 2020 and the lowest of 1.80 in 2018. In 2022, it stood at 1.85. Gross profit ratio The company’s gross profit remained stable from 2018 to 2019, exhibiting ratios of 12.86% and 13.26%, respectively.
In 2020, the gross profit ratio jumped to the highest level of 67.80%, indicating improvement in profitability and decreased costs. However, it fell sharply to 11.29% in the following year 2021, but rose to 17.78% in 2022.
Net profit ratio

Lotte Chemical’s net profit ratio exhibited a fluctuating trend from 2018 to 2022. In 2018 and 2019, this ratio stood at 7.72% and 8.85%, respectively. However, in 2020, it reduced to 5.45% as a result of Covid-19-induced lockdowns. In 2021, the net profit ratio went up to 6.91%, and jumped to the highest level of 10.09% in 2022. This rise indicates improved sales and decreased costs.

Credit: Independent News Pakistan (INP)