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Lotte Chemical Titan focuses on efficiency this year
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A facility belonging to Lotte Chemical Titan in Malaysia is seen from above at night. (Courtesy of http://www.lottechem.my//-)
K
orea-based chemical manufacturer Lotte Chemical Titan Nusantara Tbk has managed to avoid losses in the first quarter of the year by pushing efficiency, resulting in a US$424,000 net profit.
The company has been struggling with the rising price of its raw material, ethylene, amid limited stocks due to supply chain problems. As a consequence, the company suffered a US$1.96 million loss in the fourth quarter last year.
"We only seek positive results and will achieve that through efficiency. We’ve installed inverter in our machines to reduce electricity consumption and shift from gas-based power supply to coal-based, which is cheaper," said Lotte Chemical director Jojok Hadrijanto in Jakarta on Thursday.
Despite the fact that ethylene is derived from oil, the price of which recently dropped, Jojok said the price of ethylene had moved inversely because of maintenance at the Chandra Asri factory. The facility supplies 100,000 metric tons of Lotte Chemical’s total needs of 450,000 metric tons.
"We must import the raw material from Malaysia and India, which have more stable supplies. The maintenance is expected to finish this year. The supply may still be sluggish but we are more positive," he said.
The company has been conservative with its financial targets this year, setting a 5 percent sales growth target. The low figure could be challenging as first quarter sales were down 10.9 percent to US$110.04 million.
Lotte Chemical will also focus on the domestic market rather than exports. According to Jojok, the yield in the foreign market was not high and expansion would only mean increased cost with low returns.
"Last year, our domestic sales contributed 87 percent to total sales. This year, it will be 90 percent. Half of our exports go to Malaysia, one-third goes to China, and the remainder is dispersed to other countries," he said.
As for capital expenditure, the company allocated between $4 million to $5 million. It is also in the process of building a new factory in Cilegon, West Java, with the capacity to produce one million metric tons of chemicals. It will be equipped with a cracker facility to produce butadiene along with polyethylene.
"But we must clear the land first. We hope to solve it this year. After that, we need to do a feasibility study, which will take two years. Thus, the construction will begin in 2018," Jojok said.
Of a total 100 hectares (ha), the company has just 40 ha at present and needs to add another 60 ha. "We are currently talking with the principal in Korea. The financing will use cash or bank loans. There are no plans for issuing bonds or a rights issue," he said. (ags)
