Lotte Chemical Pakistan : Transmission of Quarterly Report for the Period Ended 31 March 2023.

People.

Progress.

Profit.

QUARTERLY REPORT

JAN - MAR 2023

Contents
Company Information	03
Directors' Review	04
Condensed Interim Statement of Financial Position	06
Condensed Interim Statement of Profit or Loss	07
Condensed Interim Statement of Comprehensive Income	08
Condensed Interim Statement of Changes in Equity	09
Condensed Interim Statement of Cash Flows	10
Notes to the Condensed Interim Financial Statements	11
02

Company Information

As at 13 April 2023

Board of Directors
Sang Hyeon Lee	Chairman
Young Dae Kim	Chief Executive
IL Kyu Kim	Non-Executive
Jae Sun Park	Non-Executive
Pervaiz Akhtar	Independent
Adnan Afridi	Independent
Mohammad Zubair	Independent
Tariq Nazir Virk	Executive
Audit Committee
Pervaiz Akhtar	Chairman
IL Kyu Kim	Member
Adnan Afridi	Member
Faisal Abid	Secretary
HR & Remuneration Committee
Pervaiz Akhtar	Chairman
Sang Hyeon Lee	Member
Young Dae Kim	Member
Waheed U Khan	Secretary
Shares Sub Committee
Young Dae Kim	Chairman
Sang Hyeon Lee	Member
Mohammad Zubair	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
Ashiq Ali
Company Secretary
Faisal Abid
Bankers
Askari Bank Limited
Citibank NA			Legal Advisor
Deutsche Bank AG
Faysal Bank Limited			Naz Toosy
Habib Bank Limited			148, 18th East Street,
Industrial and Commercial Bank of China			Phase 1, DHA, Karachi
MCB Bank Limited
Meezan Bank Limited			Registered Office
National Bank of Pakistan			EZ/I/P-4, Eastern Industrial Zone,
Standard Chartered Bank (Pakistan) Limited		Port Qasim, Karachi
United Bank Limited
Habib Metropolitan Bank Ltd			Shares Registrar
			Famco Associates (Pvt) Limited
External Auditors			8-F, Near Hotel Faran, Nursery,
A. F. Ferguson & Co.,			Block 6, P.E.C.H.S.,
Chartered Accountants			Shahrah-e-Faisal, Karachi

Quarterly Report Jan - Mar 2023

03

Directors' Review

For the first quarter ended 31 March 2023

The Directors are pleased to present their review report for the first quarter ended 31 March 2023 together with the un-audited condensed interim financial information of the Company as at and for the first quarter ended 31 March 2023.

BUSINESS OVERVIEW

The current state of the economy is worrisome as it is facing multiple challenges such as low foreign reserves, a weakening currency, and soaring inflation. Moreover, the CAD (Current Account Deficit) has narrowed more than previously expected, primarily due to significant import curtailment measures. Although progress has been made towards completing the 9th review under the IMF's EFF program, recent strains in the global banking system have further tightened global liquidity and financial conditions. Dwindling foreign reserves, import restrictions, flood impacts, high fuel costs, policy uncertainty, and the slowdown in domestic and global demand have affected industry and service sector activity in the Country.

The year commenced with Crude Oil (WTI) prices rebounding due to an optimistic demand outlook from OPEC and the International Energy Agency (IEA) amidst Chinese economic recovery. Prices were also supported by elevated consumption on account of holiday mobility in the U.S. and Europe. However, the remainder of the quarter saw bearishness in prices as intractable inflation led to further increments in interest rates which raised concerns of global economic deceleration. Furthermore, supply remained ample as indicated by consecutive inventory builds in the U.S, while Russian production also remained more resilient than expected despite various sanctions. The Crude Oil prices plummeted towards the quarter-end following the default of two western banks exacerbating recession concerns which may reduce fuel demand. Nevertheless, the prices eventually stabilized due to prompt and effective interventions by the governments to avoid a contagion. The average price for the quarter was US$ 76.34 per barrel, down by 8.3% from the previous quarter.

Paraxylene (PX) prices exhibited bullishness at the start of the quarter in-line with the Crude Oil market, however, as the quarter progressed, the PX market maintained the uptrend in contrast to the upstream Oil prices. Uptick in demand ahead of the Lunar New Year Holiday coinciding with removal of COVID-19 restrictions in mainland China ignited the market sentiment, boosting prices for prompt supply. However, as the quarter progressed, demand from downstream PTA market declined as lack of recovery in the downstream polyester sector resulted in weak market fundamentals. Plant shutdowns in the region as well as diversion of feedstock to produce gasoline blends kept spot PX availability tight, elevating the PX-Naphtha spread to above US$ 400 per tonne mark. The average PX price for the quarter was US$ 1,033.64 per metric tonne while the PX-Naptha spread averaged at US$ 344 per tonne.

The PTA prices tracked the movement of the upstream PX prices but were unable to match the gains as polyester demand failed to recover to seasonal high levels due to depressed consumerism and poor export-related demand. Additionally, inventory pressure, and inability to pass down costs to downstream buyers resulted in PTA-PX spread to remain below US$ 100 per tonne for most of quarter, thereby forcing producers to rationalize operations. However, the PTA prices rallied towards the end of the quarter following the price hike in the feedstock PX market, spurt in polyester demand due to peak summer season, and unexpected shutdowns, thereby supporting the PTA-PX spread. The average PTA price for the quarter was US$ 775.14 per metric tonne, whereas the average PTA margin over PX for the quarter was US$ 93 per metric tonne.

The domestic polyester market operated at the rate of 63% during the first quarter of 2023. Producers were forced to curtail operations due to reduced availability of major Raw Material PTA through domestic as well as imported supply due to operational constraints caused by limited availability of Foreign Exchange for establishing Letter of Credits. However, demand remained relatively resilient as the market geared up for the peak season demand ahead of the holy month of Ramadan.

OPERATIONS

Due to the current economic situation prevalent in the country in relation to the foreign exchange reserves and its impact on the ability of banks to open letter of credit for import of raw materials, the Company had to temporarily suspend its Plant operations for 17 days in March 2023.

As a result, Production volume during the quarter at 82,874 tonnes was 25% lower than the corresponding period last year while Sales volume, comprising of domestic sales only, at 91,372 tonnes was 18% lower than the corresponding quarter last year.

04