KUALA LUMPUR: Escalating crude oil prices stemming from the geopolitical turmoil in Ukraine put pressure on Lotte Chemical Titan Holding Bhd's operating costs in the first quarter of 2022, said president and CEO Park Hyun Chul.

       In a statement, he announced that the petrochemicals producer's net profit in the quarter slumped 76.36% year-on-year (y-o-y) to RM104mil as higher naphtha feedstock costs narrowed its profit margins.

       "During the period, the feedstock costs of the company increased 64% y-o-y," he said, while noting the increase in Brent crude prices to a high of US$127 a barrel in early March 2022 from US$78 a barrel as at end-December 2021.

       The company's weaker earnings performance comes despite a 17% y-o-y jump in revenue to RM2.8bil.on the back of the rising average selling prices of the company's olefins and derivatives products and polyolefin products.

       According to Park, revenue from olefins and derivatives products grew 34% y-o-y while revenue from polyolefins products improved 13% y-o-y.

       In his review of the crude oil market, Park noted that tensions over the Ukraine-Russian conflict is not abating and crude oil prices remained elevated on the prospect of Russian crude oil sanctions.

       To mitigate the impact on operations, he said the management has put in place a robust framework to manage feedstock pricing volatility, and is looking towards long-term growth plans.

       “Premised on that, we commenced the construction of Lotte Chemical Indonesia New Ethylene (LINE) project in Indonesia in January and completion of the project is expected in 2025.

       "We believe that the LINE project will equip our group with the ability to capitalise on the growth of the petrochemical industry in Indonesia as well as the Southeast Asia region.

       "It will enable us to capture a larger market share and to position the group to be the Top-Tier Petrochemical Company in SEA,” he said.