- Inventory write-downs widen losses despite stronger margins
- FY2026 utilisation guidance stands at 60-65%
Lotte Chemical Titan’s (LCT) financial performance remained under pressure in Q2 2026 despite a sharp increase in revenue, as the ramp-up of its Indonesia New Ethylene (LINE) project was offset by inventory write-downs and higher project-related costs. The chemical manufacturing company reported a net loss of MYR 401.7 million, while the loss attributable to owners stood at MYR 174.2 million, broadly unchanged from MYR 173.1 million a year earlier.
LINE drives revenue growth
The major change in LCT’s operating profile came from the LINE project in Indonesia, which started commercial operations in October 2025. The integrated complex has annual production capacity of 1 mnt of ethylene, 520,000 t of propylene, 400,000 t of benzene-toluene-xylene, 250,000 t of polypropylene and 140,000 t of butadiene.
LCT holds a 51% stake in the project, while its South Korean parent holds 24%.
The additional production base helped lift Q2 revenue 116% y-o-y to MYR 3.11 billion. Higher average selling prices also supported revenue, although the weakening US dollar against the ringgit partly reduced the benefit.
Utilisation remains key
Average plant utilisation increased to 50% in Q2 from 46% a year earlier, reflecting the LINE contribution. However, the relatively modest utilisation level indicates that the expanded asset base is still moving through its ramp-up phase.
LCT has guided for a 60-65% operating rate for FY2026, subject to unforeseen circumstances. Achieving this level is likely to be important for improving fixed-cost absorption and extracting greater value from the new capacity.
Regional oversupply limits earnings recovery
The revenue increase has not translated into improved profitability. LCT attributed the weaker earnings performance to inventory write-downs and higher costs associated with the LINE project, while management also highlighted pressure from global geopolitical tensions and macroeconomic uncertainty.
According to LCT chairman and CEO Jang Seon Pyo, supply-demand imbalances remain a challenge across regional markets as capacity additions continue to outpace demand growth. Volatility in crude oil, naphtha and average selling prices has further complicated operating conditions.
The company’s EBITDA loss widened to MYR 72.7 million in Q2 from MYR 55.9 million a year earlier, while gross loss increased to MYR 137.0 million from MYR 104.3 million.
Market implications
LCT’s Q2 performance highlights the challenge facing new petrochemical capacity in a weak regional cycle. The LINE project has materially increased LCT’s revenue base, but higher utilisation alone may not be sufficient to restore profitability while regional capacity growth continues to exceed demand.
For the remainder of FY2026, the key indicators are likely to be LINE’s utilisation trajectory, product margins, inventory costs and regional supply-demand conditions. The company’s 60-65% operating-rate guidance provides an important benchmark for assessing whether the expanded production base can begin translating into stronger earnings.
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