LOTCHEM conducted its analyst briefing today to discuss its 9MCY23 financial performance and future outlook. Here are the key highlights:

· To recall, the company reported earnings of PkR3.2/sh in 9MCY23 compared to PkR5.35/sh in the same period last year, marking a 40%YoY decline. This decline can be attributed to reduced revenues, falling gross margins, and increased taxation.

· Management highlighted that production in 1HCY23 was significantly impacted by import restrictions, preventing the company from importing necessary raw materials.

· To address this, the company prudently increased its inventory over the nine months. However, the company is currently not facing any LC restrictions for imports.

· Management clarified that acetic acid accounts for 0.04% of the production quantity. Additionally, the duty on PTA import is 5%, and PX is 0%.

· Regarding exports, management mentioned that they are unviable for the company due to additional freight charges. The local market remains the sole revenue source for the company’s products. Further, the current PTA margin stands at US$80/ton.

· According to management, the PTA demand in the country is approximately 697k tons, with peak demand reaching 730k tons.

· The company is not facing any gas supply or pressure issues. However, the recent upward revision in gas prices is expected to impact the company’s margins.

· Looking ahead, management expresses hope for improving the country’s overall economy, anticipating a better demand cycle for PTA.

· Management informed that a maintenance plant shutdown would be reviewed in the year-end board meeting and can be deferred due to frequent plant shutdowns previously.

Courtesy – AKD Research