KUALA LUMPUR: Lotte Chemical Titan Bhd's profits fell by 77.1% in the first quarter ended March 31, 2019 due to higher effective tax rate as there was no further reinvestment allowance claimable and lower profit and a fall in the selling prices of its products.

It said on Monday its net profit fell to RM55.83mil from RM244.19mil a year ago. Its pre-tax profit fell from RM299.83mil to RM89.13mil. Earnings per share were 2.46 sen compared with 10.74 sen.

Its revenue declined by 2% to RM2.17bil from RM2.214bil a year ago due to a decrease in average selling prices. But this was partially offset by higher sales volume due to an improvement in production from a year ago.

Lotte explained the main reason for the lower pre-tax profit was due to margin squeeze resulting from the fall in product selling prices.

“Product market prices were lower as a result of diversion of polyfin supply from the US into Southeast Asia as a consequence of the the US-China trade war,” it said.

Lotte said other factors contributing to the lower profit before tax includes royalty expenses to holding company of RM9.3mil,foreign exchange loss of RM18.7mil,share of loss from associates of RM13.4mil which is mainly due to loss on fair value changes in interest rate swap entered by Lotte Chemical USA Corporation.

Lotte said its olefins and derivative products revenue fell by RM142.2mil from RM577.7mil a year ago to RM435.5mil. This was mainly due to the decrease in selling price in Q1 2019 as compared to a year ago and partially offset by higher sales volume.

Profit before tax for this division decreased by RM82.8mil from RM98.9mil in Q12018 to RM16.1mil in Q1 2019 mainly due to margin squeeze resulting from lower average selling price.

The polyolefin products segment recorded an increase in revenue of RM97.9mil from RM1.636bil in Q12018 to RM1.734bil in Q1 2019.

This was primarily due to an increase in sales volume in Q12019 as compared to a year ago due to new plant capacity and partially offset by decrease in average product selling price. 

Profit before tax for this division decreased by RM108.4mi from RM205.6mil a year ago to RM97.2mil in Q12019 mainly due to margin squeeze resulting from lower product selling price.