Kumho Petrochemical recorded an operating loss for the quarter for the first time in 42 quarters. The results were affected by sluggish performance in key business segments and deteriorating profitability due to fluctuations in raw material prices.
On Friday, Kumho Petrochemical disclosed that it posted consolidated revenue of 1.9215 trillion won and an operating loss of 20.8 billion won for the third quarter of this year. This marks a shift into the red after 42 quarters since the fourth quarter of 2015.
Revenue increased by 16.9% year-on-year but decreased by 15.3% compared to the previous quarter. Operating profit turned negative, down from 84.5 billion won in the third quarter of last year and 339 billion won in the second quarter of this year. Net loss for the period was recorded at 22 billion won.
By business segment, the synthetic rubber division posted revenue of 782.4 billion won and an operating profit of 2.3 billion won. This represents a 92.6% decrease compared to the operating profit of 31.2 billion won in the same period last year.
High-cost inventory of key raw materials and products pressured profitability, while demand remained on hold due to volatility in raw material prices. In particular, nitrile butadiene latex (NB latex) turned into a deficit as price competition intensified and the spread—the price difference between products and raw materials—narrowed.
The synthetic resin division recorded revenue of 311.5 billion won and an operating loss of 13.9 billion won, turning from an operating profit of 4.4 billion won in the same period last year. This was due to continued weakness in product prices amid sluggish real demand centered on its main product, acrylonitrile butadiene styrene (ABS).
The phenol derivatives division posted revenue of 432.1 billion won and an operating loss of 62.5 billion won, recording the largest deficit among major business segments. Compared to an operating loss of 14.4 billion won in the third quarter last year, the size of the deficit expanded by 48.1 billion won. The main causes of the deteriorated performance are cited as delayed inventory depletion of key products due to sluggish demand in downstream industries and a narrowed spread resulting from the negative lagging effect of high-cost inventory.
In contrast, the ethylene propylene rubber and thermoplastic vulcanizate (EPDM/TPV) division posted relatively solid results with revenue of 210.4 billion won and an operating profit of 24.3 billion won. Operating profit increased by 20.3% compared to 20.2 billion won in the third quarter last year.
The other segment, including energy and fine chemicals, recorded revenue of 185.1 billion won and an operating profit of 29 billion won, a 32.7% decrease from the operating profit of 43.1 billion won in the same period last year. However, profitability in the energy business improved compared to the previous quarter, driven by rising spot market prices (SMP).
Kumho Petrochemical forecasted that profitability in the synthetic rubber segment would improve in the fourth quarter. This is because volatility in key raw material prices is expected to ease and sales volumes of NB latex are projected to increase. The company also predicted that profitability in the phenol derivatives segment would recover as the negative lagging effect from high-cost inventory is resolved.
in INDUSTRY
