Lotte Fine Chemical transforms from ugly duckling to golden swan

Just six years after it became a Lotte Group affiliate, the fine chemicals firm has emerged as the conglomerate’s cash cow

Lotte Fine Chemical's Ulsan plant
Lotte Fine Chemical's Ulsan plant
Ik-Hwan Kim 2
2023-02-13 17:48:41 lovepen@hankyung.com
Petrochemicals

For Samsung Group, the fine chemicals business was an ugly duckling losing money while other affiliates, including Samsung Electronics Co., were flush with cash, riding the tech boom in the early 2000s.

Started as a fertilizer maker by Samsung founder Lee Byung-chull in 1964, Samsung Fine Chemicals Co., sidelined by other Samsung companies, stopped producing fertilizer years later.

In 2016, Samsung decided to hand over the company together with other chemical businesses, including Samsung BP Chemicals and Samsung SDI Co.'s chemical unit, to its rival Lotte Group.

Six years later, however, the company, renamed Lotte Fine Chemical Co., has turned into a swan laying golden eggs.

Lotte Fine Chemical, now a subsidiary of Lotte Chemical Corp., is South Korea’s largest producer of ammonia, a raw material for fertilizer.

Lotte Fine’s regulatory filing showed its 2022 sales grew 38.4% over the previous year to 2.46 trillion won ($1.93 billion). Its operating profit climbed 67.1% to a record 408.5 billion won, an all-time high figure, for the second consecutive year.

Last year’s operating profit also represents the largest profit among 89 Lotte Group affiliates, even higher than the conglomerate’s flagship Lotte Shopping Co., which reported profit of 394.2 billion won in 2022.

Lotte Fine’s parent, Lotte Chemical, posted a loss of 758.4 billion won last year.

The fine chemical company then expanded its ammonia and chlorine lines, raw materials for paints and bleaches.

Lotte Fine Chemical, alongside its parent Lotte Chemical, is leading the group's new growth businesses
Lotte Fine Chemical, alongside its parent Lotte Chemical, is leading the group's new growth businesses

The company said last year’s record earnings were buoyed by a hike in ammonia prices and a dire shortage of urea, a chemical compound used to reduce diesel engine pollution. The urea shortage created a nationwide crisis, forcing the government as well as other Korean firms to urgently seek out alternatives when China banned its urea exports.

CASH COW FOR GROUP AFFILIATES

Alongside its decent performance, Lotte Fine Chemical’s financial structure has also improved, with its debt-equity ratio standing at a mere 17.9%.

Sitting on 589 billion won in cash and cash equivalents, the company last month lent 300 billion won to Lotte Engineering & Construction Co., which was on the brink of a liquidity crisis after failed project finance.

Lotte Fine Chemical’s enterprise value is also rising with a tailwind from its affiliate Lotte Ineos Chemical Co., in which it holds a 49.06% stake. The fine chemical company is expected to receive decent dividends from Lotte Ineos, which posted a record operating profit of between 300 billion won and 400 billion won last year.

In tandem with its parent, Lotte Fine is leading the group’s new-growth businesses.

Lotte Chemical is pushing for a 6 trillion won project to import 1.2 million tons of ammonia, converted from green hydrogen and produced through green energy sources such as wind and solar power at overseas facilities.

For its part, Lotte Fine Chemical is developing the technology to extract hydrogen from ammonia for industrial use.

Write to Ik-Hwan Kim at lovepen@hankyung.com
In-Soo Nam edited this article.

Lotte Chemical, RWE, Mitsubishi form alliance for clean ammonia

Lotte Chemical, RWE, Mitsubishi form alliance for clean ammonia

South Korea's Lotte Chemical Corp. has joined forces with German energy company RWE and Japan's Mitsubishi Corporation to create a global consortium for the development of clean ammonia production and supply. The three companies signed on Tuesday a joint study agreement at Lotte World Tower in

Lotte Chemical raises stake in Fine Chemical amid merger talk

Lotte Chemical raises stake in Fine Chemical amid merger talk

Lotte Chemical is diversifying its business portfolio South Korea’s Lotte Chemical Corp. has raised its stake in affiliate Lotte Fine Chemical Co. amid speculation that the two companies may merge to compete with bigger rival LG Chem Ltd.According to the Financial Supervisory Service on S

Lotte Chemical, Soelect in $200 million JV for advanced batteries

Lotte Chemical, Soelect in $200 million JV for advanced batteries

A growing number of global automakers and battery companies are entering the solid-state battery market South Korea’s Lotte Chemical Corp. is advancing into the electric vehicle battery market by forming a $200 million joint venture with US battery startup Soelect Inc.The petrochemical un

Lotte Chemical to invest $502 mn in eco-friendly materials plants in Korea

Lotte Chemical to invest $502 mn in eco-friendly materials plants in Korea

Lotte Chemical's domestic petrochemical complex in Daesan, South Chungcheong province (Courtesy of Lotte Chemical) South Korea’s Lotte Chemical Corp. is set to spend 602 billion won ($501.5 million) in building eco-friendly materials plants at one of its petrochemical complexes in the cou

Lotte Chemical goes green with $3.8 bn investment in hydrogen business

Lotte Chemical goes green with $3.8 bn investment in hydrogen business

Lotte Chemical aims to transition into an eco-friendly company (Getty Images Bank) South Korea’s Lotte Chemical Corp. is investing 4.4 trillion won ($3.8 billion) in hydrogen projects by 2030 to foster the business as a new growth driver, moving away from its mainstay petrochemicals.Under

(* comment hide *}