KUALA LUMPUR (July 7): Lotte Chemical Titan Holding Bhd (KL:LCTITAN) is undertaking a related-party transaction worth an estimated US$2.99 billion (RM12.69 billion) through a 10-year ethylene supply agreement between two of its Indonesian subsidiaries.

In a bourse filing on Monday, the loss-making olefin and polyolefin producer said its 92.5%-owned unit PT Lotte Chemical Titan Nusantara (LCTN) entered into the agreement with the group's 51%-owned PT Lotte Chemical Indonesia (LCI) for the procurement of ethylene starting from Sept 1.

LCTN will purchase 350,000 tonnes of ethylene annually from LCI to be used as feedstock in its polyethylene manufacturing operations in Indonesia. LCTN manufactures polyethylene whereas LCI manufactures upstream petrochemical products, including ethylene.

The purchase price will be determined monthly based on the ICIS CFR SEA Ethylene Index, a regional benchmark published by the Independent Commodity Intelligence Services, plus a pre-agreed premium, said Lotte Chemical Titan.

The transaction value is subject to monthly fluctuations due to the commoditised nature of ethylene but is currently estimated at US$2.99 billion over the 10-year term.

Lotte Chemical Titan said the arrangement will be funded through internally generated funds and external financing facilities.

The group said the deal ensures a sustainable supply of feedstock and offers potential cost advantages due to LCI’s geographical proximity to LCTN’s production facilities.

It added that logistics efficiency and supply certainty are crucial for LCTN’s long-term competitiveness in polyethylene production, versus sourcing from other import vendors.

The transaction is subject to approval by Lotte Chemical Titan’s non-interested shareholders at an upcoming extraordinary general meeting.

Lotte Chemical Corporation, which owns a 75.86% stake in Lotte Chemical Titan and a 24% stake in LCI, is deemed an interested party and will abstain from voting.

Three Lotte Chemical Titan directors — Jang Seon Pyo, Yu Seung Yong and Park Jae Sun — have also abstained from deliberation and voting, given their appointments as LCC nominees.

Kenanga Investment Bank Bhd has been appointed as an independent adviser to assess the fairness and reasonableness of the transaction.

Lotte Chemical Titan reported its eighth consecutive quarterly loss for the first quarter ended March 31, 2025, although losses narrowed year-on-year on better margins and contributions from a US associate. The group incurred a net loss of RM125.67 million during the quarter versus a net loss of RM178.03 million a year earlier, as revenue dropped 22.3% to RM1.49 billion from RM1.92 billion on lower sales volume and average selling prices.

Lotte Chemical Titan shares closed 1.5 sen or 3.16% lower at 46 sen on Monday, valuing the group at RM1.06 billion. Year to date, the counter has declined by over 28%.

 Uploaded by Magessan Varatharaja