KUALA LUMPUR: Lotte Chemical Titan Holding Bhd can now go ahead with its planned disposal of a 49 per cent stake in PT Lotte Chemical Indonesia (PT Lotte) to parent Lotte Chemical Corp (LCC).
Lotte Chemicals shareholders yesterday approved the US$65.39 million (RM274.29 million) sale, which will also see LCC injecting RM3.6 billion to help finance PT Lotte’s RM18.3 billion plant expansion in Indonesia.
Lotte Chemical president and chief executive officer Dr. Lee Dong Woo said the outcome of its extraordinary general meeting (EGM) demonstrated shareholders’ confidence with the growth prospects of PT Lotte’s new RM18.3 billion Integrated Petrochemical Facility (IPF) project in Cilegon.
“The project is expected to significantly boost the group’s overall production capacity by 80 per cent or 2.8 million metric tonne from the current capacity of 3.5 million metric tonne,” Lee said at a press conference after the EGM here yesterday.
He said about 60 per cent or RM11 billion of the total IPF cost would be raised through borrowings, while the remaining 40 per cent or RM7.3 billion through equity portion.
“LCC will inject RM3.6 billion and another RM3.7 billion will be from Lotte Chemical to develop the IPF project,” he added.
He said construction of the IPF project would likely start in the second half of 2020, with completion expected by 2023.
“The new integrated complex with a capacity of a million tonne per annum naphtha cracker and other related downstream petrochemical facilities will provide better product mix and improve overall operational efficiency,” he said.
Lee said the current business environment was challenging and volatile due to the ongoing US-China trade war and fluctuations in oil prices, which is linked closely to its feedstock Naphtha.
“Financially, we need to be strong and resilient to face the challenging time. We believe the company will do well, as long as there is a continued growth and development in Southeast Asia for plastic fabrication business.”
He added that the US-China trade war had fuelled the influx of petrochemicals from the US in Southeast Asia with the imposition of import tariff from China.
“Hence, our performance were affected and margins were slightly depressed. The petrochemical business is on a long-term basis and notwithstanding the downturn in the market.
“Our industry is linked to development and urbanisation as the plastic sector is important for the transportation, medical and etc,” he said.
While petrochemical companies were expanding, he said margins would be depressed, although the growing population will help boost demand.
Lotte Chemical’s production facilities are domiciled in Malaysia and Indonesia.
As of December 31 last year, its total capacity from Malaysia was reportedly 3.12 million tonnes per annum.
This came from 12 plants, two co-generation plants and three tank farms in Pasir Gudang and Tanjung Langsat, both in Johor.