1. LOTTE Fine Chemical Q2 Earnings Breakdown

LOTTE Fine Chemical’s Q2 2025 revenue slightly beat expectations at ₩424.7 billion, but operating profit and net income significantly missed the mark, coming in at ₩8.7 billion (-6%) and ₩15.5 billion (-25%), respectively. The substantial drop in net income warrants further investigation and suggests a combination of factors, such as increased interest expenses, one-off costs, and reduced net profit after tax.

2. Why the Underperformance?

Several factors contributed to this underperformance, including rising raw material prices, difficulties in cost management, fluctuations in exchange rates and interest rates, and internal factors like the management changes following the March general shareholders’ meeting. The company appears to have struggled to pass on increased raw material costs to consumers, impacting profitability.

3. LOTTE Fine Chemical: Fundamental Analysis

  • Profitability: Deteriorating due to the insufficient offsetting of rising raw material prices by product price increases. Declining operating profit margin trend is a concern.
  • Financial Stability: Debt-to-equity ratio is low, but continued decline in profitability could increase liquidity risks.
  • Growth: Ammonia business expansion plans are positive, but require close monitoring due to external factors like crude oil prices and shipping market conditions.

4. Action Plan for Investors

Investors considering LOTTE Fine Chemical should carefully assess the following: the reasons behind the decline in net income (awaiting further disclosure), monitor raw material price and exchange rate fluctuations, track the progress of new business ventures, and keep an eye on any shifts in management strategy. For long-term investors, the growth potential of the ammonia business and the impact of management changes on the company’s overall strategy are crucial factors to watch.