Q2 2026 Lotte Chemical Corp Earnings Call

August 7, 2026

Speaker #1: Good afternoon. I am Eun-Kyung Hwang, Head of IR at Lotte Chemical. Thank you for taking the time out of your busy schedules to join us for Lotte Chemical's earnings conference call.

Young Kyung Hwang: Good afternoon. I am Young Kyung Hwang, Head of IR at Lotte Chemical. Thank you for taking the time out of your busy schedules to join us for Lotte Chemical's Earnings Conference Call. On today's conference call, we will first provide a brief overview of our financial results for Q2 2026. This will be followed by remarks from our CFO on key management issues, after which we will proceed to a Q&A session. Please note that a simultaneous interpretation will be provided during the presentation, while consecutive interpretation will be provided for the Q&A. Today's presentation materials are available for download from our website. Let me now introduce the executives joining us on today's earnings call.

Speaker #1: On today's conference call, we will first provide a brief overview of our financial results for the second quarter of 2026. This will be followed by remarks from our CFO on key management issues.

Speaker #1: After which, we will proceed to a Q&A session. Please note that simultaneous interpretation will be provided during the presentation, while consecutive interpretation will be provided for the Q&A.

Speaker #1: Today's presentation materials are available for download from our website. Let me now introduce the executives joining us on today's earnings call. Joining us today are Nak-sun Sung, CFO; Minho Kim, CSO; Ki-seok Kwak, Head of the Corporate Planning Division for Basic Chemicals; Hyunseok Shim, Head of Sales; and Jinseok Park, Head of Corporate Planning Division for Advanced Materials.

Young Kyung Hwang: Joining us today are Sung Nak-sun, CFO, Minwoo Kim, CSO, Kye-Seok Hwa, Head of the Corporate Planning Division for the Basic Chemicals, Hyun-Sub Shim, Head of Sales, and Jin-Seok Park, Head of Corporate Planning Division for Advanced Materials. Next, let me walk you through our business performance for the second quarter. Please turn to page two for our consolidated Q2 financial results. Revenue for Q2 2026 was KRW 5 trillion and 689.4 billion, while operating profit came in at KRW 110.1 billion, posting an improvement QoQ. In Q2, the product spread of key business areas widened, leading to improved profitability over the previous quarter. EBITDA came in at KRW 458.1 billion. Profit before tax and net income were KRW 242.4 billion and KRW 194.4 billion respectively.

Young Kyung Hwang: Joining us today are Sung Nak-sun, CFO, Min-woo Kim, CSO, Kye-Seok Hwa, Head of the Corporate Planning Division for the Basic Chemicals, Hyun-seob Shim, Head of Sales, and Jin-Seok Park, Head of Corporate Planning Division for Advanced Materials. Next, let me walk you through our business performance for the second quarter. Please turn to page two for our consolidated Q2 financial results. Revenue for Q2 2026 was KRW 5 trillion and 689.4 billion, while operating profit came in at KRW 110.1 billion, posting an improvement QoQ. In Q2, the product spread of key business areas widened, leading to improved profitability over the previous quarter. EBITDA came in at KRW 458.1 billion. Profit before tax and net income were KRW 242.4 billion and KRW 194.4 billion respectively.

Speaker #1: Next, let me walk you through our business performance for the second quarter. Please turn to page 2 for our consolidated second quarter financial results.

Speaker #1: Revenue for the second quarter of 2026 was ₩5,689.4 billion, while operating profit came in at ₩110.1 billion, posting an improvement QoQ. In Q2, the product spread of key business areas widened, leading to improved profitability over the previous quarter.

Speaker #1: EBITDA came in at 458.1 billion won. Profit before tax and net income were 242.4 billion won and 194.4 billion won, respectively. Pre-tax profit improved significantly over the first quarter due to the increase in gains on equity method valuation, on the back of earnings recovery of the major subsidiaries, as well as the impact from the valuation gains on derivatives owing to the changes in the FX rate.

Young Kyung Hwang: Pre-tax profit improved significantly over Q1 due to the increase in gains on equity method valuation on the back of earnings recovery of the major subsidiaries, as well as the impact from the valuation gains on derivatives owing to the changes in the FX rate. Next is the consolidated financial position. As of the end of Q2 2026, total assets stood at KRW 32.8 trillion, total liabilities at KRW 14.2 trillion, and total equity at KRW 18.5 trillion. The debt-to-equity ratio posted 76.8%, similar to last quarter. Next is performance outlook by business. First, Basic Chemicals. In Q2 2026, Basic Chemicals business recorded revenue of KRW 3.9403 trillion, operating profit of KRW 2.3 billion, and operating margin of 0.1%. Profitability in Q2 declined QoQ despite improved spreads for key products due to scheduled maintenance and the lagging effect from feedstock price volatility.

Speaker #1: Next is the consolidated financial position. As of the end of the second quarter of 2026, total assets stood at ₩32.8 trillion, total liabilities at ₩14.2 trillion, and total equity at ₩18.5 trillion.

Speaker #1: The debt-to-equity ratio posted at 76.8%, similar to last quarter. Next is performance and outlook by business. First, Basic Chemicals. In Q2 2026, Basic Chemicals recorded revenue of 3.9403 trillion won, operating profit of 2.3 billion won, and operating margin of 0.1%.

Speaker #1: Profitability in Q2 declined quarter-on-quarter despite improved spreads for key products, due to scheduled maintenance and the lagging effect from feedstock price volatility. In Q3, as global demand recovery continues to lag, increased volatility in raw material prices is likely to prolong market uncertainty as well.

Young Kyung Hwang: In Q3, as global demand recovery continues to lag, increased volatility in raw material prices is likely to prolong market uncertainty as well. Next, Advanced Materials. In Q2 2026, revenue was KRW 1.1551 trillion, operating profit KRW 132.5 billion, and operating margin 11.5%.

Speaker #1: Next, Advanced Materials. In Q2 2026, revenue was 1.1551 trillion won, operating profit was 132.5 billion won, and operating margin was 11.5%. Profitability improved significantly quarter-on-quarter due to wider spreads for key products and the FX effect.

Nak-sun Sung: Profitability improved significantly QoQ due to wider spreads for key products and the FX effect. In Q3, product spreads are expected to slightly narrow QoQ due to the softening of the spread improvement stemming from rising raw material prices that were captured in Q2. Despite that, based on the high value-add product portfolio, we believe that we will be able to maintain our solid profitability. Next, Lotte Fine Chemical. The details were shared in the earnings release on 30 July 2026, so I will only go through the highlights. Revenue in Q2 was KRW 586.3 billion, and operating profit was KRW 61.9 billion with operating profit margin of 10.6%. Results improved QoQ thanks to higher international prices for major products, increased sales volume, and exchange rate effect.

Young Kyung Hwang: Profitability improved significantly QoQ due to wider spreads for key products and the FX effect. In Q3, product spreads are expected to slightly narrow QoQ due to the softening of the spread improvement stemming from rising raw material prices that were captured in Q2. Despite that, based on the high value-add product portfolio, we believe that we will be able to maintain our solid profitability. Next, Lotte Fine Chemical. The details were shared in the earnings release on 30 July 2026, so I will only go through the highlights. Revenue in Q2 was KRW 586.3 billion, and operating profit was KRW 61.9 billion with operating profit margin of 10.6%. Results improved QoQ thanks to higher international prices for major products, increased sales volume, and exchange rate effect.

Speaker #1: In Q3, product spreads are expected to slightly narrow quarter-on-quarter due to the softening of the spread improvement stemming from rising raw material prices that were captured in Q2.

Speaker #1: Despite that, based on the high value-add product portfolio, we believe that we will be able to maintain our solid profitability. Next, Lotte Fine Chemicals.

Speaker #1: The details were shared in the earnings release on July 30th, so I will only go through the highlights. Revenue in Q2 was ₩586.3 billion, and operating profit was ₩61.9 billion, with an operating profit margin of 10.6%.

Speaker #1: Results improved quarter-over-quarter thanks to higher international prices for major products, increased sales volume, and the exchange rate effect. In Q3, with upstream industries remaining flat, downward pressure on major product prices is expected to continue.

Nak-sun Sung: In Q3, with upstream industries remaining flat, downward pressure on major product prices is expected to continue, but solid profitability is expected to continue as well. Last, Lotte Energy Materials. Again, details were already covered yesterday at the earnings conference call, so I will only run through the highlights. Revenue in Q3 was KRW 194.2 billion, and operating loss was KRW 16.9 billion. Although Q2 sales volume increased, profitability declined as the positive lagging effects reflected in the previous quarter were eliminated. In Q3, sales volume is expected to rise with expanding demand for AI and ESS, and we plan to meet growing customer demand and strengthen our growth foundation through the ramp-up of a new overseas plant. That concludes the Q2 2026 results presentation. I will now hand over to our CFO, Nak-sun Sung, who will discuss our results and key management issues. Good afternoon.

Young Kyung Hwang: In Q3, with upstream industries remaining flat, downward pressure on major product prices is expected to continue, but solid profitability is expected to continue as well. Last, Lotte Energy Materials. Again, details were already covered yesterday at the earnings conference call, so I will only run through the highlights. Revenue in Q3 was KRW 194.2 billion, and operating loss was KRW 16.9 billion. Although Q2 sales volume increased, profitability declined as the positive lagging effects reflected in the previous quarter were eliminated. In Q3, sales volume is expected to rise with expanding demand for AI and ESS, and we plan to meet growing customer demand and strengthen our growth foundation through the ramp-up of a new overseas plant. That concludes the Q2 2026 results presentation. I will now hand over to our CFO, Nak-sun Sung, who will discuss our results and key management issues. Good afternoon.

Speaker #1: But solid profitability is expected to continue as well. Last, Lotte Energy Materials. Again, details were already covered yesterday at the earnings conference call, so I will only run through the highlights.

Speaker #1: Revenue in Q3 was 194.2 billion won, and operating loss was 16.9 billion won. Although Q2 sales volume increased, profitability declined as the positive lagging effect reflected in the previous quarter was eliminated.

Speaker #1: In Q3, sales volume is expected to rise with expanding demand for AI and ESS, and we plan to meet growing customer demand and strengthen our growth foundation through the ramp-up of a new overseas plant.

Speaker #1: That concludes the Q2 2026 results presentation. I will now hand over to our CFO, Nak-sun Sung, who will discuss our results and key management issues.

Speaker #1: Good afternoon. This is Nak-sun Sung, Head of Finance at Lotte Chemical. I thank the investors and shareholders who joined our Q2 2026 earnings conference call despite your busy schedules.

Nak-sun Sung: This is Nak-sun Sung, head of finance at Lotte Chemical. I thank the investors and shareholders who joined our Q2 2026 earnings conference call despite your busy schedule. I will briefly review our financial performance. Geopolitical issues in the Middle East continued to create global supply chain uncertainty this quarter, leading to increased volatility in raw material and product prices and a challenging business environment. In this environment, we optimized operations with a focus on profitability. There was some favorable feedstock lagging effect. And based on the feedstock competitiveness of our US ethane cracker business and improved results in Advanced Materials and fine chemicals, we maintained profitability on a consolidated basis for a second consecutive quarter. Given that domestic and external volatility is likely to continue, we will further strengthen our ability to respond to market changes and maintain profitability-focused operations.

Speaker #1: I will briefly review our financial performance. Geopolitical issues in the Middle East continued to create global supply chain uncertainty this quarter, leading to increased volatility in raw material and product prices, and a challenging business environment.

Speaker #1: In this environment, we optimized operations with a focus on profitability. There was a favorable feedstock lagging effect, and, based on the feedstock competitiveness of our USSA cracker business and improved results in Advanced Materials and Fine Chemicals, we maintained profitability on a consolidated basis for a second consecutive quarter.

Speaker #1: Given that domestic and external volatility is likely to continue, we will further strengthen our ability to respond to market changes and maintain profitability-focused operations.

Speaker #1: Despite the difficult environment, we are steadily moving ahead with strategies to reinforce our fundamental competitiveness and build a medium- to long-term growth foundation. First, we are actively participating in the government-led petrochemical industry restructuring to solidify the fundamental competitiveness of our Basic Chemicals business.

Nak-sun Sung: Despite the difficult environment, we are steadily moving ahead with strategies to reinforce our fundamental competitiveness and build a medium to long-term growth foundation. First, we are actively participating in the government-led petrochemical industry restructuring to solidify fundamental competitiveness of our basic chemicals business. In Daesan, the spinoff procedure was completed in June, and the integrated company with Hyundai Chemical will be launched in September to begin full-scale integrated operations. Yeosu received government approval for its restructuring plan, and we will proceed with splitting off of the Yeosu plant and establishing an integrated operating system with Yeochun NCC. These integrated operations are expected to improve operational efficiency and product portfolio synergy and to gradually strengthen financial soundness through asset and capital structure optimization.

Speaker #1: In Daesan, the spin-off procedure was completed in June, and the integrated company with Hyundai Chemical will be launched in September to begin full-scale integrated operations.

Speaker #1: Yeosu received government approval for its restructuring plan, and we will proceed with the splitting off of the Yeosu plant and establishing an integrated operating system with Yeosu NCC.

Speaker #1: These integrated operations are expected to improve operational efficiency and product portfolio synergy, and to gradually strengthen financial soundness through asset and capital structure optimization.

Speaker #1: Through the restructuring, we will heighten the competitiveness of our Basic Chemicals business while reducing its relative share, and build a more balanced portfolio by fostering high-value businesses in Advanced Materials and Fine Chemicals.

Nak-sun Sung: Through the restructuring, we will heighten competitiveness of our basic chemicals business while reducing its relative share and build a more balanced portfolio by fostering high-value businesses in advanced materials and fine chemicals. For longer term growth in advanced materials, we are moving ahead with the Yeochun compounding project on schedule to expand functional and high-value businesses, targeting completion and commercial operation within the year. This will help enhance our compounding production capabilities and to continue increasing the share of high-value specialty products, such as super engineering plastics. In fine chemicals, we continue to invest in and develop technologies for high-growth, high-value materials like semiconductor and medical-grade materials. We are also expanding capacity for TMAC, a precursor for semiconductor developers, to actively respond to growth in the semiconductor materials market.

Speaker #1: For longer-term growth in Advanced Materials, we are moving ahead with the Yulchun compounding project on schedule to expand functional and high-value businesses, targeting completion and commercial operation within the year.

Speaker #1: This will help enhance our compounding production capabilities, and allow us to continue increasing the share of high-value specialty products, such as super-engineered plastics. In Fine Chemicals, we continue to invest in and develop technologies for high-growth, high-value materials like semiconductor and medical-grade materials.

Speaker #1: We are also expanding capacity for TMAC, a precursor for semiconductor developers, to actively respond to growth in the semiconductor materials market. Along with such portfolio upgrades, we are continuing our efforts to improve our balance sheet through investment optimization and cash flow-focused management.

Nak-sun Sung: Along with such portfolio upgrade, we are keeping up our work to improve our balance sheet through investment optimization and cash flow-focused management. With the completion of our longstanding large investment projects, future investment levels will be managed at a more stable pace, and we expect to run our finances based on the principle of keeping investment within EBITDA. We will consistently maintain selective investment that considers growth and profitability and to keep conservative financial management. To our investors and shareholders, while uncertainties persist around the petrochemical industry, we remain unwavering in our push to strengthen competitiveness through restructuring, upgrade our portfolio towards higher value businesses

Speaker #1: With the completion of our long-standing, large investment projects, future investment levels will be managed at a more stable pace, and we expect to run our finances based on the principle of keeping investment within EBITDA.

Speaker #1: We will consistently maintain selective investment that considers growth and profitability, and keep conservative financial management. To our investors and shareholders, while uncertainties persist around the petrochemical industry, we remain unwavering in our push to strengthen competitiveness through restructuring, upgrade our portfolio toward higher-value businesses, nurture future growth areas, and improve our financial structure.

Young Kyung Hwang: nurture future growth areas and improve our financial structure. We will continue to respond flexibly to market changes, build a sustainable growth foundation and enhance corporate value. As always, we will do our utmost to meet your expectations and trust. Thank you.

Speaker #1: We will continue to respond flexibly to market changes, build a sustainable growth foundation, and enhance corporate value. As always, we will do our utmost to meet your expectations and trust.

Speaker #1: Thank you.

Speaker #2: 지금부터 질의응답을 시작하겠습니다. 질문을 하실 분은 전화기 버튼에 별표(*)와 1번을 누르시기 바랍니다. 질문을 취소하시려면 별표(*)와 2번을 누르시면 됩니다. 원활한 회의 진행을 위하여 질문은 1분당 두 가지 이내로 부탁드립니다.

Operator: 지금부터 질의응답을 시작하겠습니다. 질문을 하실 분은 전화기 버튼에 별표와 1번을 누르시기 바랍니다. 질문을 취소하시려면 별표와 2번을 누르시면 됩니다. 원활한 회의 진행을 위하여 질문은 한 분당 두 가지 이내로 부탁드립니다. Now Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two on your phone. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only 2 questions per each participant. 처음으로 질문해 주실 분은 신영증권의 신홍주 님입니다. The first question will be provided by Hong Ju Shin from Shinyoung Securities. Please go ahead with your question.

Operator: [Foreign Language] Now Q&A session will begin. Please press star one, that is star and one, if you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two on your phone. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only 2 questions per each participant. [Foreign Language]. The first question will be provided by Hong Ju Shin from Shinyoung Securities. Please go ahead with your question.

Speaker #3: Now Q&A session will begin. Please press star 1. That is star and 1, if you have any questions. Questions will be taken according to the order you have pressed the number star 1.

Speaker #3: For cancellation, please press star 2—that is, star and 2 on your phone. In order to allow as many Q&A chances as possible within the restricted time, we would appreciate only two questions per participant.

Speaker #2: 다음으로 질문해 주실 분은 신영증권의 신홍준 님입니다.

Speaker #3: The first question will be provided by Hongju Shin from Shinyang Securities. Please go ahead with your question.

Speaker #4: 안녕하세요. 저는 신영증권 신홍준 임입니다. 두 가지 질문이 있는데요. 우선 첫 번째는 저희 하반기 기초화학이랑 상반기 소재 쪽 사업부별 전망 좀 말씀해 주시면 감사하겠고요. 두 번째 질문은 저희 이번 분기에 반영된 재고 관련 손실, 그리고 전기보수 기회손실 등 일회성 손실 금액 좀 공유 부탁드리겠습니다.

Hong Ju Shin: 안녕하세요. 신영증권 신홍주입니다. 두 가지 질문이 있는데요. 우선 첫 번째는 저희 하반기 기초화학이랑 첨단소재 쪽 사업부별 전망 좀 듣는다면 감사하겠고요. 두 번째 질문은 이번 통계에 반영된 재고 관련 손실, 그리고 정기 보수 시에 손실된 일회성 손실 금액 공유 부탁드리겠습니다. 감사합니다.

Hong Ju Shin: [Foreign Language]

Speaker #4: 감사합니다.

Speaker #1: Thank you for giving me this opportunity to ask my question. I have two questions. First is the outlook for the second half. So, for the basics, can you give us an outlook for the second half going forward?

Young Kyung Hwang: Thank you for giving me this opportunity to ask my question. I have two questions. First is the outlook for H2. For the Basic Chemicals and the Advanced Materials, can you give us an outlook for H2 going forward? My second question has to do with what has been reflected in this quarter. In terms of the inventory valuation gains and losses, what has been reflected, and also other one-off items that has been reflected, if you can share those information. Thank you.

Speaker #1: And my second question has to do with what has been reflected in this quarter. So, in terms of the inventory valuation gains and losses, what has been reflected?

Speaker #1: And also, other one-off items that have been reflected—if you can share that information, thank you.

Speaker #5: 대체물품본부 송락수입니다. 첫 번째, 하반기 사업부별 실적 전망에 대해서 말씀드리겠습니다.

Nak-sun Sung: 네, 재무혁신본부 성낙선입니다. 첫 번째, 하반기 사업부별 실적 전망에 대해서 말씀드리겠습니다.

Nak-sun Sung: [Foreign Language]

Speaker #1: Okay, so this is Nak-sun Sung, the CFO. Let me take your question about the outlook for the second half.

Young Kyung Hwang: This is Sung Nak-sun, the CFO. Let me take your question about the outlook for H2.

Speaker #5: 기초학 부분은 상반기 중 나타났던 공급 타이트화, 가격 강세 효과가 점차 완화되고 있으며, 원료 가격 변동과 신규 공급 증가가 수익성에 영향을 미칠 것으로 예상됩니다.

Nak-sun Sung: 기초화학 부문은 상반기 중 나타났던 공급 타이트와 가격 강세 효과가 점차 완화되고 있으며, 원료 가격 변동과 신규 공급 증가가 수익성에 영향을 미칠 것으로 예상됩니다.

Nak-sun Sung: [Foreign Language]

Speaker #1: So in the case of the Basic Chemicals, we believe that the tight supply situation and also the strong prices that we have seen in the first half will be somewhat eased.

Young Kyung Hwang: In the case of the Basic Chemicals, we believe that the tighter supply situation and also the strong prices that we have seen in H1 will be somewhat eased. Going into H2, the feedstock prices changes and also the supply of new volumes will have an impact.

Speaker #1: And also, going into the second half, the changes in feedstock prices and the supply of new volumes will have an impact.

Nak-sun Sung: 또한 국내 사업 재편 진행에 따른 연결 손익 구조 변화도 순차적으로 반영될 예정입니다.

Nak-sun Sung: [Foreign Language]

Speaker #5: 또한, 국내 사업 재편 진행에 따른 연결 손익 구조 변화도 순차적으로 반영될 예정입니다.

Speaker #1: Also, we will sequentially reflect the changes in the consolidated earnings structure in line with the business restructuring of the domestic industry.

Young Kyung Hwang: Also, we will sequentially reflect the changes in the consolidated earnings structure in line with the business restructuring of the domestic industry.

Speaker #5: 첨단 소재는 2분기 중 스프레드 개선과 가격 운영 효과가 반영되며, 양호한 실적을 기록하였습니다.

Nak-sun Sung: 첨단소재는 2분기 중 스프레드 개선과 가격 운영 효과가 반영되며 양호한 실적을 기록하였습니다.

Nak-sun Sung: [Foreign Language]

Speaker #1: In the case of Advanced Materials, we have been managing our pricing very flexibly, and also the spreads have improved. This was reflected in the performance.

Young Kyung Hwang: In the case of advanced materials, we have been managing our pricing very flexibly and also the spreads have improved. This was reflected in the performance.

Speaker #5: 하반기에는 전방 산업 수요 회복 속도와 글로벌 경기 흐름이 중요한 변수로 작용될 것으로 예상되며, 당사는 전략 개선과 고부가 제품 중심의 사업 운영을 지속해 나갈 계획입니다.

Nak-sun Sung: 하반기에는 전방 산업 수요 회복 속도와 글로벌 경기 흐름이 중요한 변수로 작용될 것으로 예상되며, 당사는 전략 고객 층과 고부가가치 제품 중심의 사업 운영을 지속해 나갈 계획입니다. 이상입니다.

Nak-sun Sung: [Foreign Language]

Speaker #5: 이상입니다.

Speaker #1: And going into the second half, we believe that the major factors that will be affecting the performance of these businesses will be the recovery of demand in the downstream business, as well as the overall economic recovery trends.

Young Kyung Hwang: Going into the H2, we believe that the major factors that will be affecting the performance of these businesses will be the recovery of demand of the downstream business as well as the economic recovery trends. Also, we will be focusing on our strategic customers and also pursue further expansion of our high-value-added products.

Speaker #1: We will also be focusing on our strategic customers and pursuing further expansion of our high value-added products.

Speaker #5: 네, 기초 소재 경영 지원 본부장 곽기섭 상무입니다. 두 번째 질문인 기초학의 이분기 재고 자산 평가 손실 규모와 전기 보수 등 일회성 손실 금액에 대해서 말씀드리겠습니다.

Ki-seok Kwak: 네, 기초소재경영지원본부장 곽기섭 상무입니다. 두 번째 질문인 기초화학의 2분기 재고 자산 평가 손실 규모와 정기 보수 등 일회성 손실 금액에 대해서 말씀드리겠습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: This is Gi-Seop Kwak, the head of our corporate planning for Basic Chemicals. So let me take your question about the second quarter: inventory asset valuation losses, and also the one-off losses, pertaining to the Q&A.

Young Kyung Hwang: This is Ki-seok Kwak, the Head of our Corporate Planning for the basic chemicals. Let me take your question about the Q2 inventory asset valuation losses and also the one-off losses pertaining to the T&A.

Giseop Kwak: This is Giseop Kwak, the Head of our Corporate Planning for the basic chemicals. Let me take your question about the Q2 inventory asset valuation losses and also the one-off losses pertaining to the T&A.

Speaker #5: 먼저, 기초 소재의 경우 2분기 재고 평가 손실이 발생하였으며, 손실 규모는 약 1,000억 수준입니다.

Ki-seok Kwak: 먼저 기초소재의 경우, 2분기 재고 평가 손실이 발생하였으며 손실 규모는 약 1,000억 수준입니다.

Giseop Kwak: [Foreign Language]

Speaker #1: In the case of the Basic Chemicals, there were losses related to the valuation of inventory. These were recognized in the second quarter, and the losses came to 100 billion won.

Young Kyung Hwang: In the case of the basic chemicals, there were losses related to the valuation of inventory was recognized in the Q2, and the losses came to KRW 100 billion.

[Translator]: In the case of the basic chemicals, there were losses related to the valuation of inventory was recognized in the Q2, and the losses came to KRW 100 billion.

Speaker #5: 최대의 원인은 2분기 중동 전쟁 영향으로 납사 가격이 4월, 5월 상승 후 6월 급락하였고, 이에 따라 평가 역시 동반 하락하면서 6월에는 재고 평가 손실이 확대되었습니다.

Ki-seok Kwak: 특정 원인은 2분기 중동 전쟁 영향으로 나프타 가격이 4월, 5월 상승 후 6월 급락하였고, 이에 따라 평가 역시 동반 하락하면서 6월에는 재고 평가 손실이 확대되었습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: So the main reasons were owing to the impact of the Middle East war in the second quarter. The NASA prices rose in the months of April to May, and then sharply decreased in the month of June.

Young Kyung Hwang: The main reasons was owing to the impact of the Middle East war in Q2. The naphtha prices rose in the month of April to May, then it sharply decreased in the month of June. Accordingly, the sales prices also fell, and this led to increased losses for the valuation of inventory in the month of June.

[Translator]: The main reasons was owing to the impact of the Middle East war in Q2. The naphtha prices rose in the month of April to May, then it sharply decreased in the month of June. Accordingly, the sales prices also fell, and this led to increased losses for the valuation of inventory in the month of June.

Speaker #1: And accordingly, the sales prices also fell. This led to increased losses for the valuation of inventory in the month of June.

Speaker #5: 말레이시아와 인도네시아 사업 또한 납사 기반의 사업 구조로 원료 가격의 변동 영향이 존재하며, 기초소재와 유사한 원인에 따라 2분기 재고 평가 관련 손익이 기초소재와 유사한 규모로 발생하였습니다.

Ki-seok Kwak: 말레이시아와 인도네시아 사업 또한 나프타 기반의 사업 구조로 원료 가격의 변동 영향이 존재하며, 기초 소재와 유사한 원인에 따라 2분기 재고 평가 관련 손익이 기초 소재와 유사한 규모로 발생하였습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: In the case of our Malaysian business and our Indonesian business as well, they have business structures that are based on naphtha. And so, they are impacted by fluctuations in feedstock prices.

Young Kyung Hwang: In the case of the Malaysian business and our Indonesian business as well, they have business structures that are based on naphtha, they are impacted by fluctuations in the feedstock prices. Due to reasons similar to basic chemicals in Q2, similar level of losses related to valuations inventory occurred.

[Translator]: In the case of the Malaysian business and our Indonesian business as well, they have business structures that are based on naphtha, they are impacted by fluctuations in the feedstock prices. Due to reasons similar to basic chemicals in Q2, similar level of losses related to valuations inventory occurred.

Speaker #1: So due to reasons similar to Basic Chemicals, in the second quarter, losses—similarly, a level of losses related to valuation of inventory—occurred.

Speaker #5: 다음은 여수 NCC 전기 보수 손익 영향에 대해서 말씀드리겠습니다.

Ki-seok Kwak: 다음은 여수 NCC 정기 보수 손익 영향에 대해서 말씀드리겠습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: Next, I'm going to talk about the impact on their earnings by the T&A in the Yeosu NCC.

Young Kyung Hwang: Next, I'm going to talk about the impact on the earnings by the T&A in the Yeosu NCC.

[Translator]: Next, I'm going to talk about the impact on the earnings by the T&A in the Yeosu NCC.

Speaker #5: 당사는 법적, 장기적 안정 운영 및 설비 신뢰성 확보를 목적으로 여수 공장 전기 보수를 계획에 따라서 상반기에 실시하였습니다.

Ki-seok Kwak: Lotte Chemical undertook in the first half our scheduled T&A for the Yeosu plant with the aim of ensuring the reliability of our facilities and long-term safe and stable operation. 중동 지역 공급망 리스크 대응의 효율성을 높이고자 기존 계획된 일정을 대비하여 조기 시행하였고, 정기 보수 기간 확보된 원료를 타 설비 운영에 활용하면서 생산 안정성을 유지하였습니다.

Giseop Kwak: [Foreign Language]

[Translator]: Lotte Chemical undertook in the first half our scheduled T&A for the Yeosu plant with the aim of ensuring the reliability of our facilities and long-term safe and stable operation.

Speaker #1: Lotte Chemical undertook, in the first half, our scheduled T&A for the 여수 plant with the aim of ensuring the reliability of our facilities and long-term safe and stable operation.

Speaker #5: 중동 지역 공급망 리스크 대응의 효율성을 높이고자 기존 계획된 일정보다 조기 시행하였고, 정기 보수 기간 확보된 원료를 타 설비 운영에 활용하면서 생산 안정성을 유지하였습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: In order to enhance the efficiency of our measures to respond to the risk arising from the Middle East conflict on our supply chain, compared to our original schedule, we undertook the T&A earlier than the original plan.

Young Kyung Hwang: In order to enhance the efficiency of our measures to respond to the risk arising from the Middle East conflict on our supply chain, compared to our original schedule, we undertook the T&A earlier than the original plan. The feedstock that was occurred during the T&A period was utilized in the operation of other facilities, thus maintaining production stability.

[Translator]: In order to enhance the efficiency of our measures to respond to the risk arising from the Middle East conflict on our supply chain, compared to our original schedule, we undertook the T&A earlier than the original plan. The feedstock that was occurred during the T&A period was utilized in the operation of other facilities, thus maintaining production stability.

Speaker #1: The feedstock that was secured during the T&A period was utilized in the operation of other facilities, thus maintaining production stability.

Speaker #5: 또한 전기 보수 기간 판매 물량 감소에 대한 고객사 사전 통보 및 협의를 통해 고객사 제품 공급에 차질 없이 대응하였습니다.

Ki-seok Kwak: 또한 정기 보수 기간 판매 물량 감소에 대한 고객사 사전 통보 및 협의를 통해 고객사 제품 공급에 차질 없이 대응하였습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: Also, during the T&A period, we have given prior notice to our customers, and we have engaged in consultations with our customers regarding the volume during this period.

Young Kyung Hwang: During the T&A period, we have given prior notice to our customers, and we have engaged in consultations with our customers regarding the reduction in the production volume during this period. We have responded in a way that ensured that there was no disruption in the supply of our products to the customers.

[Translator]: During the T&A period, we have given prior notice to our customers, and we have engaged in consultations with our customers regarding the reduction in the production volume during this period. We have responded in a way that ensured that there was no disruption in the supply of our products to the customers.

Speaker #1: And so we have responded in a way that ensured there was no disruption in the supply of our products to the customers.

Speaker #5: 전기 보수 기간 생산 및 판매 물량 감소 등의 영향으로 약 450억 원 수준의 일회성 손익 악화 요인이 발생하였으나, 현재는 전기 보수 종료 후 안정적으로 운영 중에 있습니다.

Ki-seok Kwak: 정기 보수 기간 생산 및 판매 물량 감소 등의 영향으로 약 450억 원 수준의 일회성 손익 악화 요인이 발생하였으나 현재는 정기 보수 종료 후 안정적으로 운영 중에 있습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: During the T&A period, there was a reduction of the production and sales volume, and also, due to the delay in the schedule for restarting, around 50 billion won of one-off losses had occurred.

Young Kyung Hwang: During the T&A period, there was a reduction of the production and sales volume. Due to the delay in the schedule for restarting, around KRW 50 billion of one-off losses had occurred.

[Translator]: During the T&A period, there was a reduction of the production and sales volume. Due to the delay in the schedule for restarting, around KRW 50 billion of one-off losses had occurred.

Speaker #5: 하반기에는 전기 보수 완료에 따른 생산 효율성 증가 등의 긍정적인 효과가 기대되고 있습니다. 이상입니다.

Ki-seok Kwak: 하반기에는 정기 보수 완료에 따른 생산 효율성 증가 등의 긍정적인 효과가 기대되고 있습니다. 이상입니다.

Giseop Kwak: [Foreign Language]

Speaker #1: Going into the second half, with the completion of the turnaround, we are looking forward to a positive impact, including an increase in production efficiency. This is all.

Young Kyung Hwang: Going into H2 with the completion of the turnaround, we are looking forward to positive impact, including increase in the production efficiency. This is all. Thank you.

[Translator]: Going into H2 with the completion of the turnaround, we are looking forward to positive impact, including increase in the production efficiency. This is all. Thank you.

Speaker #1: Thank you.

Speaker #3: 다음으로 질문해 주실 분은 JP모건의 파슬리 웅 님입니다.

Operator: 다음으로 질문해 주실 분은 J.P. Morgan의 Parsley Ong 님입니다. The following question will be presented by Parsley Ong from J.P. Morgan. Please go ahead with your question.

Operator: [Foreign Language].

Speaker #1: The following question will be presented by Parsley Ong from J.P. Morgan. Please go ahead with your question.

[Translator]: The following question will be presented by Parsley Ong from J.P. Morgan. Please go ahead with your question.

Parsley Ong: Thank you for the chance to ask questions. Can I clarify, earlier you mentioned, I think KRW 100 billion inventory loss in basic chemicals and KRW 200 billion inventory loss in Titan in Q2. Total KRW 300 billion inventory loss. Despite that, you got KRW 110 billion OP in Q2. Can you help me quantify how much was the positive impact from feedstock lag that we can get a sense of how much of your Q2 earnings was core recurring earnings versus one-off caused by the oil price volatility? The second question is, now that your Daesan restructuring is completed, could you just tell us or share with us the expected impact on your OP versus equity method income?

Speaker #3: Hi. Thank you for the chance to ask questions. So, can I clarify? Earlier, you mentioned, I think, a 100 billion inventory loss in Basic Chemicals and a 200 billion inventory loss in Titan.

Speaker #3: In second quarter, so total 300 billion inventory loss. Then despite that, you got 110 billion OP in Q2. So can you help me quantify how much was the positive impact from feedstock lag so that we can get a sense of how much of your second quarter earnings was core recurring earnings versus one-off cost by the oil price volatility?

Speaker #3: And the second question is: now that your Daesan restructuring is completed, could you just tell us or share with us the expected impact on your OP versus equity-method income?

Speaker #3: For example, if we use the second quarter earnings as an example, then theoretically, going into the third quarter, how much would your OP and equity-method income change by?

Parsley Ong: For example, if we use the Q2 earnings as an example, theoretically going into Q3, how much would your OP and equity method income change by? Thank you.

Speaker #3: Thank you.

Speaker #1: 네, 질문 기회 주셔서 엄청 감사드립니다. 이제 몇 가지 좀 명확하게 해 주십사 제가 질문을 드리겠는데요. 지금 기초 소재 같은 경우에는 재고 자산 평가 손실이 1,000억이 있었다라고 말씀을 해 주셨고, 타이탄 같은 경우에는 2,000억이 있었다라고 말씀을 해 주셨는데, 그러면 총 3,000억의 손실이 발생을 한 것인데, 그럼에도 불구하고 이 2분기에는 지금 영업 손익이 1,100억이 발생했다라고 말씀을 해 주셨기 때문에, 이 원료 레깅 효과로 인해서 긍정적인 효과가 여기서 어느 정도 비중을 차지하는 것인지를 설명을 해 주시면 감사하겠습니다.

Young Kyung Hwang: 질문 기회 주셔서 먼저 감사드립니다. 몇 가지 좀 명확하게 해주십사 제가 질문을 드리겠는데요. 지금 기초소재 같은 경우에는 재고자산 평가손실이 1,000억이 있었다고 말씀해 주셨고, Titan 같은 경우에는 2,000억이 있었다고 말씀을 해주셨는데, 그러면 총 3,000억의 손실이 발생을 한 것인데, 그럼에도 불구하고 2분기에는 영업손익이 1,100억이 발생했다고 말씀을 해주셨기 때문에, 원료 래깅 효과로 인해서 긍정적인 효과가 여기서 어느 정도 비중을 차지하는 것인지 설명을 해주시면 감사하겠습니다. 그렇게 되면 2분기 손익에서 핵심 경상 손익이 얼마인지, 그리고 이러한 일회성 손실 부분이 얼마인지를 좀 더 명확하게 제가 이해할 수 있을 것 같습니다. 그리고 두 번째 질문을 드리도록 하겠습니다. 지금 Daesan의 사업 재편이 완료가 된 것으로 알고 있는데, 그렇다면 이로 인해서 OP 쪽에 얼마만큼의 영향이 있으리라 기대하고 계신지 알고 싶습니다. 그러니까 지분법 산정 방식 대비해서 OP에 어느 정도의 영향이 있을 거라 생각하시는지 그 예상 범위를 말씀해 주시고요.

Young Kyung Hwang: [Foreign Language]

Speaker #1: 그리고 두 번째 질문은, 이 손익... 아니, 두 번째 질문이 아니라, 그렇게 되면 2분기 손익에서 이제 핵심 경상 손익이 얼마인지, 그리고 이러한 일회성 손실 부분이 얼마인지를 좀 더 명확하게 제가 이해할 수 있을 것 같습니다.

Speaker #1: 그리고 두 번째 질문을 드리도록 하겠습니다. 지금 대산의 사업 개편이 이제 완료가 된 것으로 알고 있는데, 그렇다면 이로 인해서 이 OP 쪽에 얼마만큼의 영향이 있으리라 기대하고 계신지를 알고 싶습니다.

Speaker #1: 그러니까 지분법 산정 방식 대비해서 이 OP에 어느 정도의 영향이 있으리라 생각하시는지, 그 예상 범위를 좀 말씀을 해 주시고요. 좀 구체적으로 제가 예시로 말씀드리자면, 이제 2분기 손익 대비해서 3분기에는 OP 쪽에, 그리고 이제 이 지분법 산정법에 기초해서 어떠한 변동이 예상되는지 말씀해 주시면 감사하겠습니다.

Young Kyung Hwang: 그럼 구체적으로 제가 예시로 말씀드리자면, 2분기의 손익 대비해서 3분기에는 OP 쪽에, 그리고 이제 지분법 산정법에 기초해서 어떠한 변동이 예상이 되는지 말씀해 주시면 감사하겠습니다.

Young Kyung Hwang: [Foreign Language]

Speaker #5: 이게 재무혁신본부 서낙선입니다. 두 번째 질문에 대한 답변 먼저 드리겠습니다.

Nak-sun Sung: 예. 재무관리본부 성낙선입니다. 두 번째 질문에 대한 답변 먼저 드리겠습니다.

Nak-sun Sung: [Foreign Language]

Speaker #1: So, this is the CFO, Nak-sun Sung. Let me take your second question first.

Young Kyung Hwang: This is the CFO Sung Nak-sun. Let me take your second question first.

[Translator]: This is the CFO Sung Nak-sun. Let me take your second question first.

Speaker #5: 대산 사업 개편은 사업 경쟁력 강화뿐만 아니라 재무 구조 개선 측면에도 의미가 있습니다.

Nak-sun Sung: 대산 사업 재편은 사업 경쟁력 강화뿐만 아니라 재무구조 개선 측면에도 의미가 있습니다.

Nak-sun Sung: [Foreign Language]

Speaker #1: So the restructuring of the Daesan business is quite significant, not only in terms of enhancing our business competitiveness but also in improving our financial structure as well.

Young Kyung Hwang: The restructuring of the Daesan business is quite significant, not only in terms of enhancing our business competitiveness, but also in improving our financial structure as well.

[Translator]: The restructuring of the Daesan business is quite significant, not only in terms of enhancing our business competitiveness, but also in improving our financial structure as well.

Speaker #5: 이미 진행된 대산 사업 개편의 경우, 자이컴 약 1조 6,000억이 기간이 완료되었습니다.

Nak-sun Sung: 이미 진행된 대산 사업 재편의 경우 차입금 약 1조 6천억이 이관이 완료되었습니다.

Nak-sun Sung: [Foreign Language]

Speaker #1: In the case of the restructuring of the Daesan business, already in terms of bonds, ₩1.6 trillion has been completely transferred.

Young Kyung Hwang: In the case of the restructuring of the Daesan business already in terms of bonds, KRW 1.6 trillion has been completely transferred.

[Translator]: In the case of the restructuring of the Daesan business already in terms of bonds, KRW 1.6 trillion has been completely transferred.

Nak-sun Sung: 여수 사업 재편 역시 절차가 진행됨에 따라 관련 채권이 이관될 예정이며, 이에 따라 재무구조는 추가적으로 개선될 것으로 기대하고 있습니다.

Nak-sun Sung: [Foreign Language]

Speaker #5: 요소 사업 개편 역시 절차가 진행됨에 따라 관련 자산이 이관될 예정이며, 이에 따라 재무 구조는 추가적으로 개선될 것으로 기대하고 있습니다.

Speaker #1: In the case of the Yeonsu business restructuring as well, as we progress with the relevant process, the borrowings will be transferred. As such, the financial structure will undergo additional improvement.

Young Kyung Hwang: In the case of the Yeosu business restructuring as well as we progress with the relevant process, the borrowings will be transferred and as such, the financial structure will undergo additional improvement.

[Translator]: In the case of the Yeosu business restructuring as well as we progress with the relevant process, the borrowings will be transferred and as such, the financial structure will undergo additional improvement.

Speaker #5: 25년 말 별도 기준의 부채비율은 60% 중반 수준대를 나타내고 있었으며, 사업 개편이 완료가 되면 의미 있는 숫자의 부채비율 감소가 예측되고 있습니다.

Nak-sun Sung: 25년 말 별도 기준의 부채 비율은 60% 중반 수준대를 나타내고 있었으며, 사업 재편이 완료가 되면 의미 있는 숫자의 부채 비율 감소가 예측이 되고 있습니다.

Nak-sun Sung: [Foreign Language]

Speaker #1: As of the end of 2025, on a separate basis, the debt-to-equity ratio stood in the mid-60% range. And so, when the restructuring is completely completed, we believe that the debt ratio will come down even further.

Young Kyung Hwang: As of the end of 2025 on a separate basis, the debt equity ratio stood at mid 60% range. When the restructuring is completely completed, we believe that the debt ratio will come down even further.

[Translator]: As of the end of 2025 on a separate basis, the debt equity ratio stood at mid 60% range. When the restructuring is completely completed, we believe that the debt ratio will come down even further.

Speaker #5: 대산 사업 개편이 완료되면 손익 측면에서는 사업 포트폴리오가 보다 효율적으로 재편되면서 적자 규모가 축소되고, 수익성이 개선되는 효과를 기대하고 있습니다.

Nak-sun Sung: 대산 사업 재편이 완료가 되면 손익 측면에서는 사업 포트폴리오가 보다 효율적으로 재편되면서 적자 규모가 축소가 되고 수익성이 개선되는 효과를 기대하고 있습니다.

Nak-sun Sung: [Foreign Language]

Speaker #1: When the business restructuring at the Daesan site is completed, in terms of our earnings, we expect that the business portfolio will become more efficient.

Young Kyung Hwang: When the business restructuring at the Daesan site is completed in terms of our earnings, we expect that the business portfolio will become more efficient, thus leading to less losses and improvement of our profitability.

[Translator]: When the business restructuring at the Daesan site is completed in terms of our earnings, we expect that the business portfolio will become more efficient, thus leading to less losses and improvement of our profitability.

Speaker #1: That's leading to fewer losses and an improvement in our profitability.

Speaker #5: 또한, 기초 사업 비중이 감소함에 따라 시황 변동에 따른 손익 변동성도 완화될 것으로 보고 있습니다.

Nak-sun Sung: 또한 기초 사업 비중이 감소함에 따라 시장 변동에 따른 손익 변동성도 완화될 것으로 보고 있습니다.

Nak-sun Sung: [Foreign Language]

Speaker #1: And also, because the share of the Basic Chemicals will go down, our expectation is that the volatility of the earnings, according to market condition changes, will also be eased.

Young Kyung Hwang: Because the share of the basic chemicals will go down, our expectation is that the volatility of the earnings owing to market condition change will also be eased.

[Translator]: Because the share of the basic chemicals will go down, our expectation is that the volatility of the earnings owing to market condition change will also be eased.

Speaker #5: 끝으로, 3분기 지분법 손익은 2분기 대비 대산 관련 사업 개편에 따라 지분법 손익이 개선될 것으로 예상됩니다. 이상입니다.

Nak-sun Sung: 끝으로 3분기 지분법 손익은 2분기 대비 대산 관련 사업 재편에 따른 지분법 손익은 개선될 것으로 예상됩니다. 이상입니다.

Nak-sun Sung: [Foreign Language]

Speaker #1: And finally, compared to the second quarter, the gains and losses on equity method into the third quarter, because of the completion of the restructuring of the Daesan plant, we believe this will be improved.

Young Kyung Hwang: Finally, compared to Q2, the gains and losses on equity method into Q3 because of the completion of the restructuring of the Daesan plant, we believe this will be improved.

[Translator]: Finally, compared to Q2, the gains and losses on equity method into Q3 because of the completion of the restructuring of the Daesan plant, we believe this will be improved.

Speaker #2: 네, 기초 소재 경영 지원 본부장 곽희섭 상무입니다. 첫 번째 질문인 재고 평가 손실과 긍정적 원재료 레깅 효과에 대해서 말씀드리겠습니다.

Ki-seok Kwak: 네, 기초소재경영지원본부장 곽기섭 상무입니다. 첫 번째 질문인 재고 평가 손실과 긍정적 원재료 레깅 효과에 대해서 말씀드리겠습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: This is Kwak Hee-seop, the head of Corporate Planning for Basic Chemicals. Let me take your first question about the inventory as well as the feedstock issues.

Young Kyung Hwang: This is Kwak Ki-seop, the Head of Corporate Planning of the Basic Chemicals. Let me take your first question about the inventory as well as the feedstock issue.

[Translator]: This is Kwak Giseop, the Head of Corporate Planning of the Basic Chemicals. Let me take your first question about the inventory as well as the feedstock issue.

Speaker #2: 기초 소재 재고 평가 손실은 약 1,000억 원, 타이탄도 같은 수준인 재고 평가 손실이 약 1,000억 원 발생하였습니다.

Ki-seok Kwak: 기초소재 재고 평가 손실은 약 1천억 원, Titan도 같은 수준인 재고 평가 손실이 약 1천억 원 발생하였습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: In the case of the Basic Chemicals division as well as Titan, each of the businesses saw losses on inventory valuation of KRW 100 billion each.

Young Kyung Hwang: In the case of Basic Chemicals division as well as Titan, each of the businesses saw the losses on inventory valuation of KRW 100 billion each in Korean won.

[Translator]: In the case of Basic Chemicals division as well as Titan, each of the businesses saw the losses on inventory valuation of KRW 100 billion each in Korean won.

Speaker #2: 레깅 효과의 경우, 중동 전쟁 영향으로 2분기 초인 4월에는 긍정적 레깅 효과가 발생하였으나, 5월, 6월에는 원료 가격 급락으로 역레깅 효과가 발생하였습니다.

Ki-seok Kwak: 레깅 효과의 경우 중동 전쟁 영향으로 2분기 초인 4월에는 긍정적 레깅 효과가 발생하였으나, 5월, 6월에는 원료 가격 급락으로 역레깅 효과가 발생하였습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: In the case of the lagging effect, because of the war in the Middle East, in the month of April in the second quarter, there was a positive lagging effect.

Young Kyung Hwang: In the case of the lagging effect because of the war in the Middle East in the case of the month of April in Q2, there was positive lagging effect. In the case of May and June because of the fall in the feedstock prices, the reverse lagging effect occurred.

[Translator]: In the case of the lagging effect because of the war in the Middle East in the case of the month of April in Q2, there was positive lagging effect. In the case of May and June because of the fall in the feedstock prices, the reverse lagging effect occurred.

Speaker #1: But in the case of May and June, because of the fall in feedstock prices, the reverse lagging effect occurred.

Speaker #2: 총 역레깅 효과 금액은 재고 평가 손실과 비슷한 규모로 이해하시면 될 것 같습니다. 이상입니다.

Ki-seok Kwak: 총 역래깅 효과 금액은 재고 평가 손실과 비슷한 규모로 이해하시면 될 것 같습니다. 이상입니다.

Giseop Kwak: [Foreign Language]

Young Kyung Hwang: The size of the total reverse lagging effect is at a level that is similar to the losses that we have incurred in terms of the inventory valuation.

[Translator]: The size of the total reverse lagging effect is at a level that is similar to the losses that we have incurred in terms of the inventory valuation.

Speaker #1: The size of the total reverse lagging effect is at a level that is similar to the losses we have incurred in terms of inventory valuation.

Speaker #3: 다음으로 질문을 주실 분은 KB증권의 전우재 님입니다. The following question will be presented by Woohye Joon from KB Securities. Please go ahead with your question.

Operator: 다음으로 질문해 주실 분은 KB증권의 전우제 님입니다. The following question will be presented by Woojae Jeon from KB Securities. Please go ahead with your question.

Operator: [Foreign Language]

[Translator]: The following question will be presented by Wooje Chun from KB Securities. Please go ahead with your question.

Speaker #2: 안녕하세요, KB증권 전우재입니다. 두 가지 질문이 있는데요. 첫 번째는 미국 ECC 실적이 상당히 잘 나왔을 텐데, 2분기 가동률과 최근 에탄 가격, 그리고 MEG 판매가 추이도 공유해 주시면 감사하겠습니다. 미국 MEG 같은 경우에는 특수 탱커로 중국에 판매하는 걸로 알고 있는데요, 그러면 운임이 많이 올랐는지, 혹은 특수한 선박이어서 운임 변동이 크지 않았는지 궁금합니다.

Woojae Jeon: 안녕하세요. KB증권 전우재입니다. 두 가지 질문이 있는데 첫 번째는 미국 ECC 실적 성장률 잘 나왔을 텐데, 2분기 가동률이랑 최근 에탄 가격 판매가, 그리고 MEG 판매가 추이 공유해 주시면 감사하겠고, 미국 MEG 같은 경우에는 특수 탱커로 아마 중국에다가 판매하는 걸로 알고 있는데 그러면 운임이 많이 올랐는지 혹은 특수한 선박이라서 운임이 큰 변동이 없었는지 궁금하고요. 유사하게 우즈베키스탄 ECC 상황도 업데이트 주시면 감사하겠습니다. 두 번째는 6월 공세 해제 이후에 고객사들이 유가가 하락하면서 환가가 빠질 거다라고 생각해서 수요를 많이 줄인 걸로 듣고 있는데, 7월 재공세

Wooje Chun: [Foreign Language]

Speaker #2: 유사하게 우즈베키스탄 ECC 상황도 업데이트해 주시면 감사하겠습니다. 두 번째는 6월 달 공세 해제 이후에 고객사들이 이제 유가가 하락하면서 선가가 빠질 거다라고 생각해서 수요를 많이 줄인 걸로 듣고 있는데, 7월 달 재공세 하면서 다시 한번 수요가 살아났는지, 8월 영업에서 보시는 수요가 어떻게 되는지 좀 공유해 주시면 감사하겠습니다.

Ki-seok Kwak: 하면서 다시 한번 수요가 살아났는지, 8월 영업에서 보시는 수요 어떻게 되시는지 공유해 주시면 감사하겠습니다. 이상입니다.

Wooje Chun: [Foreign Language]

Speaker #2: 이상입니다.

Speaker #1: Thank you very much. I have two questions. The first has to do with US ECC and MEG. Can you share the status of the operating rate for the second quarter and also the sales price?

Young Kyung Hwang: Thank you very much. I have two questions. The first has to do with US, ECC, and MEG. Can you share the status of the operating rate for Q2 and also the sales price? In the case of the US plant, I understand that you're selling to China. Because of the geopolitical issues, did you also experience any rise in the freight cost? Because you're using specialized vessels, there has been no change in terms of the freight cost? That is my first question. Can you also provide an update on the Uzbekistan ECC as well? My second question has to do with the fact that after June, with the lifting of the blockade, oil prices have gone down, and this led to reduction of demand by customers. With the new developments globally, is demand picking up again?

[Translator]: Thank you very much. I have two questions. The first has to do with US, ECC, and MEG. Can you share the status of the operating rate for Q2 and also the sales price? In the case of the US plant, I understand that you're selling to China. Because of the geopolitical issues, did you also experience any rise in the freight cost? Because you're using specialized vessels, there has been no change in terms of the freight cost? That is my first question. Can you also provide an update on the Uzbekistan ECC as well? My second question has to do with the fact that after June, with the lifting of the blockade, oil prices have gone down, and this led to reduction of demand by customers. With the new developments globally, is demand picking up again?

Speaker #1: In the case of the US plant, I understand that you're starting to China. So then, because of the geopolitical issues, did you also experience any rise in the flight cost?

Speaker #1: Or, because you’re using specialized vessels, there has been no change in terms of the freight cost. That is my first question. And can you also provide an update on the Uzbekistan ECC as well?

Speaker #1: And my second question has to do with the fact that after June, with the lifting of the blockade, oil prices have gone down. This led to a reduction in demand by customers.

Speaker #1: With the new developments globally, is demand picking up again? What is your outlook for the month of August?

Young Kyung Hwang: What is your outlook for the month of August?

[Translator]: What is your outlook for the month of August?

Speaker #2: 네, 기초소재 경영지원본부장 곽희섭 상무입니다. 첫 번째 질문에 대해서 답변드리도록 하겠습니다.

Ki-seok Kwak: 네. 기초소재경영지원본부장 곽기섭 상무입니다. 첫 번째 질문에 대해서 답변드리도록 하겠습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: So, this is 곽희섭, the head of Corporate Planning for Basic Chemicals. Let me take your first question.

Young Kyung Hwang: This is Kwak Ki-seop, the head of the corporate planning for the basic chemicals. Let me take your first question.

[Translator]: This is Kwak Giseop, the head of the corporate planning for the basic chemicals. Let me take your first question.

Speaker #2: 먼저, 미국 사업인 LCUSA는 미국 내 생산되는 에탄을 원료로 사용하고 있으며, 이번 이란 전쟁으로 인한 원료 상승 영향은 없습니다. 연초에 계절적인 요인으로 인한 원료가 상승했던 것에 비해 2분기 에탄가는 하락하였습니다.

Ki-seok Kwak: 먼저 미국 사업인 LC USA는 미국 내 생산되는 에탄을 원료로 사용하고 있으며, 이런 전쟁으로 인한 원료 상승 영향은 없고, 연초에 계절적인 요인으로 인한 원료가 상승 대비 2분기 에탄가는 하락하였습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: In the case of LCUSA, it uses as feedstock the same that is produced within the United States. So, there has been no impact in terms of rising feedstock prices owing to the Iranian war.

Young Kyung Hwang: In the case of LC USA, it uses as feedstock ethane that is produced within United States. There has been no impact in terms of rising feedstock prices owing to the Iranian war.

[Translator]: In the case of LC USA, it uses as feedstock ethane that is produced within United States. There has been no impact in terms of rising feedstock prices owing to the Iranian war.

Speaker #2: 반면, 제품 측면에 LCUSA는 유럽향 판매 비중이 높은 상황에서, 통상 유럽의 중동산 MEG 수입 비중이 약 30%를 차지하고 있습니다.

Ki-seok Kwak: 반면 제품 측면에 LC USA는 유럽향 판매 비중이 높은 상황에서 통상 유럽의 중동산 MEG 수입 비중이 약 30%를 차지하고 있습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: However, in terms of the products, LCUSA has a high share of products that are sold to the European markets. In the case of Europe, typically the share of MEG imports from the Middle East is around 30%.

Young Kyung Hwang: However, in terms of the products, the LC USA has a high share of products that are sold to the European markets. In the case of Europe, typically the share of MEG imports from Middle East is around 30%.

[Translator]: However, in terms of the products, the LC USA has a high share of products that are sold to the European markets. In the case of Europe, typically the share of MEG imports from Middle East is around 30%.

Speaker #2: 전쟁으로 인해 유럽 내 중동산 MEG 수입 차질로 인해 제품가 상승 영향이 있어 1분기 대비 제품 스프레드는 약 $100 이상 상승한 긍정적인 효과가 있었습니다.

Ki-seok Kwak: 전쟁으로 인해 유럽 내 중동산 MEG 수입 차질로 인해 제품 가 상승 영향이 있어 1분기 대비 제품 스프레드는 약 $100 이상 상승한 긍정적인 효과가 있었습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: Because of the war in the Middle East, there were disruptions in the importing of MEG from the Middle East, and so this had an impact in increasing the product prices.

Young Kyung Hwang: Because of the war in the Middle East, there were disruptions in the importing of MEG from Middle East. This had an impact in increasing the product prices. Compared to Q1, the product spread has increased by more than $100. There was a positive impact.

[Translator]: Because of the war in the Middle East, there were disruptions in the importing of MEG from Middle East. This had an impact in increasing the product prices. Compared to Q1, the product spread has increased by more than $100. There was a positive impact.

Speaker #1: So compared to the first quarter, the product spread has increased by more than $100. So there was a positive impact.

Speaker #2: 2분기 가동 현황은 크래커, MEG, 몰드 100%로 정상 가동 중에 있습니다.

Ki-seok Kwak: 2분기 가동 현황은 크래커 MEG 모두 100%로 정상 가동 중에 있습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: In the case of the operating status, in the second quarter, Cracker MEGR was undergoing normal operation at 100%.

Young Kyung Hwang: In the case of the operating status in Q2, cracker MEG are undergoing normal operation at 100%.

[Translator]: In the case of the operating status in Q2, cracker MEG are undergoing normal operation at 100%.

Speaker #2: 4월 휴전 합의 이후 공급망 안정화에 대한 기대감으로 국제가는 하향세를 보였으나, 7월 초 분쟁 격화 및 호르무즈 봉쇄와 추가적인 홍해 리스크로 공급망이 다시 상승세로 전환 중입니다.

Ki-seok Kwak: 4월 휴전 합의 이후 공급망 안정화에 대한 기대감으로 국제가 하향세 이후 7월 초 분쟁 격화 및 호르무즈 봉쇄 및 추가적인 홍해 리스크로 공급망 불확실성 재점화로 국제가 상승세 전환 중입니다.

Giseop Kwak: [Foreign Language]

Young Kyung Hwang: After the ceasefire in the month of April, because of expectations of stabilizing supply chain, the international prices have fallen. Since then, in the earlier part of July, with a new escalation of the conflict and also the blockade of the Hormuz Strait and additional Red Sea risk, the uncertainty surrounding the supply chain has been reignited, this had led to a rising international price trend.

[Translator]: After the ceasefire in the month of April, because of expectations of stabilizing supply chain, the international prices have fallen. Since then, in the earlier part of July, with a new escalation of the conflict and also the blockade of the Hormuz Strait and additional Red Sea risk, the uncertainty surrounding the supply chain has been reignited, this had led to a rising international price trend.

Speaker #1: After the ceasefire in the month of April, because of expectations of stabilizing supply chains, international prices have fallen since then. In the earlier part of July, with the new escalation of the conflict and also the blockade of the Hormuz Strait, as well as additional Red Sea risk, the uncertainty surrounding the supply chain has been reignited.

Speaker #1: And this has led to a rising international price trend.

Speaker #2: 하지만 전쟁 초기 양상이 급상승은 제한적일 것으로 예상되며, 여전히 미국 내 에탄 가격에 대한 변동성은 없어 2분기 대비 분기 제품 스프레드는 소폭 하락할 것으로 전망하고 있으나, 견조한 수익 창출은 계속 유지할 것으로 전망되고 있습니다.

Ki-seok Kwak: 하지만 전쟁 초기 양상의 급상승은 제한적일 것으로 예상되며, 여전히 미국 내 에탄 가격에 대한 변동성은 없어 2분기 대비 분기 제품 스프레드는 소폭 하락할 것으로 전망하고 있으나, 견조한 수익 창출은 계속 유지할 것으로 전망되고 있습니다.

Giseop Kwak: [Foreign Language]

Speaker #1: However, we do not foresee any steep or sharp increases as we have seen in the earlier stage of the war. And still, the same prices within the United States are not seeing any major changes.

Young Kyung Hwang: However, we do not foresee any steep or sharp increases as we have seen in the earlier stage of the war. Still, the same prices within the US is not seeing any major changes. Compared to Q2, our outlook is that the product spread will drop slightly. However, we do believe that very solid profit generation will be maintained.

[Translator]: However, we do not foresee any steep or sharp increases as we have seen in the earlier stage of the war. Still, the same prices within the US is not seeing any major changes. Compared to Q2, our outlook is that the product spread will drop slightly. However, we do believe that very solid profit generation will be maintained.

Speaker #1: And so, compared to the second quarter, our outlook is that the product spread will drop slightly. However, we do believe that very solid profit generation will be maintained.

Speaker #2: 다음은 우즈코 에탄 크래커 역시 안정적인 에탄 가격과 수급으로 안정적인 가동을 하고 있으며, 수익도 계속 지속적으로 창출되고 있는 현황입니다. 이상입니다.

Ki-seok Kwak: 다음은 우즈베키스탄 에탄 크래커 역시 안정적인 에탄 가격과 수급으로 안정적인 가동을 하고 있으며, 수익도 계속 지속적으로 창출되고 있는 현황입니다. 이상입니다.

Giseop Kwak: [Foreign Language]

Speaker #1: And in the case of Uzbekistan, the same cracker there. Based on the stable, same prices and the stable supply and demand situation, very stable operations are being undertaken.

Young Kyung Hwang: In the case of Uzbekistan, the ethane cracker there, based on the stable ethane prices and the stable supply and demand situation, very stable operations are being undertaken and profit is being generated in a solid manner.

[Translator]: In the case of Uzbekistan, the ethane cracker there, based on the stable ethane prices and the stable supply and demand situation, very stable operations are being undertaken and profit is being generated in a solid manner.

Speaker #1: And the profit is being generated in a solid manner.

Speaker #2: 네, 영업 본부장 심영섭입니다. 최근

Hyun-Sub Shim: 네. 영업본부장 심형섭입니다. 최근 재발한 이란 전쟁 리스크에 관하여 당사는 안정적인 국내 나프타 공급과 LPG 활용, 그리고 이미 다양화시킨 여계 나프타 공급 등으로 인하여 안정적인 가동을 하고 있는 상황입니다.

Hyung-seob Shim: [Foreign Language]

Speaker #3: Regarding the renewed Iran war risk, our company is maintaining stable operations through reliable domestic naphtha supply prices, the utilization of LPG, and already diversified offshore naphtha supply sources.

Speaker #1: This is Shim Hyungseop, the Head of Sales. Let me take your question about the re-escalation of the Iranian war. Regarding this risk, we are responding by making use of the stable naphtha supplies from the domestic market, and also using LPG as an alternative feedstock.

Young Kyung Hwang: This is Shim Hyung-seob, the head of sales. Let me take your question about the re-escalation of the Iranian war. Regarding this risk, we are responding by making use of the stable naphtha supplies from the domestic market and also using LPG as an alternative feedstock, and also utilizing our non-Middle East sources of naphtha supply. Stable operations are being undertaken.

[Translator]: This is Shim Hyung-seob, the head of sales. Let me take your question about the re-escalation of the Iranian war. Regarding this risk, we are responding by making use of the stable naphtha supplies from the domestic market and also using LPG as an alternative feedstock, and also utilizing our non-Middle East sources of naphtha supply. Stable operations are being undertaken.

Speaker #1: And also utilizing our non-Middle East sources of naphtha supplies. So stable operations are being undertaken.

Speaker #3: 네, 고객들의 재고 수준은 전반적으로 정상화 단계에 진입한 걸로 판단하고 있습니다.

Hyun-Sub Shim: 네. 고객들의 재고 수준은 전반적으로 정상화 단계에 진입한 걸로 판단하고 있습니다.

Hyung-seob Shim: [Foreign Language]

Speaker #1: In the case of the inventory levels of the customers, our take is that they have entered into the normalization phase.

Young Kyung Hwang: In the case of the inventory levels of the customers, our take is that they have entered into the normalization phase.

[Translator]: In the case of the inventory levels of the customers, our take is that they have entered into the normalization phase.

Speaker #3: 최근 구매 패턴 또한 실수요 대응 중심으로 변화하고 있습니다.

Hyun-Sub Shim: 최근 구매 패턴 또한 실 수요 대응 중심으로 변화하고 있습니다.

Hyung-seob Shim: [Foreign Language]

Speaker #1: And if you look at their recent purchasing pattern, they are shifting to a pattern that is focused on the actual underlying demand.

Young Kyung Hwang: If you look at their recent purchasing pattern, they are shifting to a pattern that is focused on the actual underlying demand.

[Translator]: If you look at their recent purchasing pattern, they are shifting to a pattern that is focused on the actual underlying demand.

Speaker #3: 3분기에 지정학적 리스크가 확대될 경우, 2분기와 같은 규모의 리스토킹 수요가 반복될 가능성은 제한적이라고 봅니다.

Hyun-Sub Shim: 3분기에 지정학적 리스크가 확대될 경우 2분기와 같은 규모의 리스토킹 수요가 반복될 가능성은 제한적이라고 봅니다.

Hyung-seob Shim: [Foreign Language]

Young Kyung Hwang: If the geopolitical risk emerges again in Q3, our understanding or our outlook is that the likelihood of restocking occurring at the level that we have seen in Q2 will be quite limited.

[Translator]: If the geopolitical risk emerges again in Q3, our understanding or our outlook is that the likelihood of restocking occurring at the level that we have seen in Q2 will be quite limited.

Speaker #1: If the geopolitical risk emerges again in the third quarter, our understanding—or our outlook—is that the likelihood of restocking occurring at the level that we have seen in the second quarter will be quite limited.

Speaker #3: 이상입니다.

Hyun-Sub Shim: 이상입니다.

Hyung-seob Shim: [Foreign Language]

Speaker #4: 다음으로 질문해 주실 분은 아이엠증권의 전유진 님입니다. The following question will be presented by Eugene Jones from mSecurities. Please go ahead with your question. 전유진 님, 질문해 주시기 바랍니다.

Operator: 다음으로 질문해 주실 분은 iM증권의 전유진 님입니다. The following question will be presented by Yu-jin Jeon from iM Securities. Please go ahead with your question. 전유진 님, 질문해 주시기 바랍니다. If you can hear me, we welcome your questions.

Operator: [Foreign Language]

[Translator]: The following question will be presented by Yujin Jeon from iM Securities. Please go ahead with your question.

Operator: [Foreign Language]

Speaker #4: If you can hear me, we welcome your questions.

[Translator]: If you can hear me, we welcome your questions.

Speaker #1: 네, 안녕하세요. 저 아이엠증권 전유진이라고 합니다. 질문 기회를 주셔서 감사드리고, 간단하게 세 가지만 좀 여쭤보고 싶은데요. 저희가 최근에 중국 재고가 좀 궁금한데, ICICI에서 확인되는 걸 보면 벤젠이나 MEG 같은 것들은 재고가 되게 많은 것 같은데, 그러면 마이너한 제품들 말고 저희가 다루시는 PP나 ABS, PBG까지는 안 되시겠지만, 주요 제품들의 재고 레벨을 혹시 파악하고 계신 게 있으시다면 좀 공유해 주시면 좋을 것 같고, 전쟁 이전과 이후로 얼마나 재고 레벨이 낮아졌냐는 점이 궁금해서 질문을 드리는 겁니다.

Yu-Jin Jeon: 네, 안녕하세요. iM증권 전유진이라고 합니다. 질문해주셔서 감사드리고 간단하게 세 가지만 좀 여쭤보고 싶은데, 저희가 최근에 중국 재고가 좀 궁금한데 ICIS에서 확인되는 걸 보면 벤젠이나 MEG 같은 것들은 재고가 되게 낮은 것 같은데, 그런 minor 제품들 말고 다루시는 PE, PP나 ABS, PB까지는 안 되시겠지만 주요 제품들의 재고 레벨 혹시 파악하고 계신 게 있으시다면 공유해 주시면 좋을 것 같고. 그러니까 전쟁 이전과 이후로 얼마나 재고 레벨이 낮아졌냐라는 게 궁금해서 질문을 드린 거고요. 두 번째는 최근에 naphtha보다 LPG가 상대적으로 가격이 낮은 것 같은데 지금 LPG blending 비율이 어느 정도 들어가고 있으신 건지 말씀해 주시면 감사드리겠습니다. 그리고 마지막으로 저희가 구조조정을 하면서 차입금 1.6조가 이전된다고 말씀을 주셨는데, 그럼 연말 기준으로 총차입금 규모를 몇 조 언저리 정도까지 봐도 되는 건지 말씀해 주시면 감사드리겠습니다. 이상입니다.

Yujin Jeon: [Foreign Language]

Speaker #1: 두 번째는 최근에 납사보다 LPG가 좀 상대적으로 가격이 낮은 것 같은데, 저희 지금 LPG 블렌딩 비율이 어느 정도 좀 들어가고 있으신 건지 말씀해 주시면 감사드리겠습니다.

Speaker #1: 그리고 마지막으로 저희가 이제 구조조정을 하면서 차입금 1.6조가 이관된다고 말씀을 주셨는데, 그럼 연말 기준으로 저희 총 차입금 규모를 8조 언더, 이 정도까지 좀 봐도 되는 건지 말씀해 주시면 감사드리겠습니다.

Speaker #1: That concludes my remarks. Thank you very much for this opportunity to ask my questions. I have three questions. My first question has to do with inventory levels in China.

Young Kyung Hwang: Thank you very much for this opportunity to ask my questions. I have three questions. The first question has to do with inventory levels of China. I understand that their inventory levels for MEG and such minor products have gone down. Leaving aside these minor products, what about the key products like PE, PP, ABS? Do you have an understanding or take on what is the Chinese inventory levels when it comes to these major product lines? Can you give us a comparison of the inventory levels before and after the outbreak of war? Also, my understanding is that the price of LPG is actually lower than that of naphtha. Can you share the information regarding the blending percentage of LPG into your feeding system? My third question has to do with your borrowing.

[Translator]: Thank you very much for this opportunity to ask my questions. I have three questions. The first question has to do with inventory levels of China. I understand that their inventory levels for MEG and such minor products have gone down. Leaving aside these minor products, what about the key products like PE, PP, ABS? Do you have an understanding or take on what is the Chinese inventory levels when it comes to these major product lines? Can you give us a comparison of the inventory levels before and after the outbreak of war? Also, my understanding is that the price of LPG is actually lower than that of naphtha. Can you share the information regarding the blending percentage of LPG into your feeding system? My third question has to do with your borrowing.

Speaker #1: I understand that their inventory levels for MEG and such minor products have gone down. But leaving aside these minor products, what about the key products like PPP and ABS?

Speaker #1: Do you have an understanding or take on what the Chinese inventory levels are when it comes to these major product lines? And could you give us a comparison of the inventory levels before and after the outbreak of the war?

Speaker #1: And also, my understanding is that the price of LPG is actually lower than that of naphtha. So can you share the information regarding the blending percentage of LPG into your feeding system?

Speaker #1: And my third question has to do with your borrowing. So, in the course of restructuring, you said that 1.6 trillion won of borrowings will be transferred.

Young Kyung Hwang: In the course of restructuring, you said that KRW 1.6 trillion of borrowings will be transferred. Can you give us an idea of how much net borrowings will be transferred by the end of the year of 2026?

[Translator]: In the course of restructuring, you said that KRW 1.6 trillion of borrowings will be transferred. Can you give us an idea of how much net borrowings will be transferred by the end of the year of 2026?

Speaker #1: So, can you give us an idea of how much net borrowings will be transferred by the end of the year 2026?

Jin-Seok Park: 네, 기초소재 경영지원본부장 박지섭 상무입니다. 두 번째 질문인 naphtha, LPG 투입 비율에 대해서 답변드리도록 하겠습니다.

Jin-Seok Park: [Foreign Language]

Speaker #2: 네, 기초소재경영지원본부장 박기섭 상무입니다. 두 번째 질문인 납사, LPG 투입 비율에 대해서 답변드리도록 하겠습니다.

Speaker #1: This is Park Gi-seop, the Head of Corporate Planning for Basic Chemicals. Let me take your question about the blending ratio for LPG and naphtha.

Young Kyung Hwang: This is Park Ji-seop, the Head of Corporate Planning of the Basic Chemical. Let me take your question about the blending ratio for LPG and naphtha.

Young Kyung Hwang: This is Park Jin-seok, the Head of Corporate Planning of the Basic Chemical. Let me take your question about the blending ratio for LPG and naphtha.

Speaker #2: 당사는 원료 경쟁력 확보 및 운영 유연성 제고를 위해 LPG 혼용이 가능한 설비를 운영 중에 있습니다.

Jin-Seok Park: 당사는 원료 경쟁력 확보 및 운영 유연성 제고를 위해 LPG 혼용이 가능한 설비를 운영 중에 있습니다.

Jin-Seok Park: [Foreign Language]

Young Kyung Hwang: In the case of our company, in order to secure feedstock competitiveness and to enhance the operational flexibility, we are running facilities that enable the feeding of LPG as alternative feedstock.

[Translator]: In the case of our company, in order to secure feedstock competitiveness and to enhance the operational flexibility, we are running facilities that enable the feeding of LPG as alternative feedstock.

Speaker #1: In the case of our company, in order to secure feedstock competitiveness and to enhance operational flexibility, we are running facilities that enable the feeding of LPG as an alternative feedstock.

Speaker #2: 2분기는 여수공장 전기 보수로 인해 제한적으로 LPG를 투입하였습니다.

Jin-Seok Park: 2분기는 Yeosu 공장 정기 보수에 의해서 제한적으로 LPG를 투입하였습니다.

Jin-Seok Park: [Foreign Language]

Speaker #1: In the case of the second quarter, due to the turnaround of the Yeosu plant, we have input LPG in a limited manner.

Young Kyung Hwang: In case of Q2, due to the turnaround of the Yeosu plant, we have input LPG in a limited manner.

[Translator]: In case of Q2, due to the turnaround of the Yeosu plant, we have input LPG in a limited manner.

Speaker #2: 전기 보수 종료 후 스타트업이 진행된 7월 기준 LPG 투입 비중은 약 37% 수준입니다.

Jin-Seok Park: 정기 보수 종료 후 startup이 진행된 7월 기준 LPG 투입 비중은 약 37% 수준입니다.

Jin-Seok Park: [Foreign Language]

Speaker #1: After the completion of the turnaround, with the startup in July, the LPG blending ratio came to 37% for July.

Young Kyung Hwang: After the completion of the turnaround, when the restart was implemented in the month of July, the LPG blending ratio came to 37% for July.

[Translator]: After the completion of the turnaround, when the restart was implemented in the month of July, the LPG blending ratio came to 37% for July.

Speaker #2: 하반기에도 원료 경제성 및 설비 운영 조건을 기반으로 탄력적으로 운영해 나가며, 여건이 되는 한에서 투입을 확대해 나갈 예정입니다. 이상입니다.

Jin-Seok Park: 하반기에도 원료 경제성 및 설비 운영 조건을 기반으로 탄력적으로 운영해 나가며 여건이 되는 한에서 투입을 확대해 나갈 예정입니다. 이상입니다.

Jin-Seok Park: [Foreign Language]

Speaker #1: Going into the second half, based on feedstock economics and facility operating conditions, we intend to flexibly manage and operate our facilities, and when conditions permit, we intend to expand the blending ratio of LPG.

Young Kyung Hwang: Going into H2, based on the feedstock economics and also the facility operating conditions, we intend to flexibly manage and operate our facilities. When the conditions permit, we intend to expand the blending ratio of LPG. Thank you very much.

Speaker #1: Thank you very much.

Speaker #3: 네, 영업본부장 심형섭입니다. 중국 재고 레벨에 있어서, 중국은 5월, 7월에 다수의 크래커들이 전기 보수를 하였습니다.

Hyun-Sub Shim: 네, 영업본부장 심형섭입니다. 중국 재고 레벨에 있어서 중국은 5월, 7월에 다수의 크래커들이 정기 보수를 하였습니다.

Hyung-seob Shim: [Foreign Language]

Speaker #1: So this is Shim Hyungseop. I'm the head of Marketing. Let me take your question about the Chinese inventories. In the case of Chinese plants, in the months of May and June, many of their crackers actually have undergone turnaround.

Young Kyung Hwang: This is Shim Hyung-seob. I am the Head of Marketing. Let me take your question about the Chinese inventories. In the case of our Chinese plants in the month of May and June, many of their crackers actually have undergone turnaround.

[Translator]: This is Shim Hyung-seob. I am the Head of Marketing. Let me take your question about the Chinese inventories. In the case of our Chinese plants in the month of May and June, many of their crackers actually have undergone turnaround.

Speaker #3: 현재 양대 석화의 재고는 약 60만에서 65만으로 예상되고 있습니다.

Hyun-Sub Shim: 현재 양대 석화의 재고는 약 60만에서 65만으로 예상되고 있습니다.

Hyung-seob Shim: [Foreign Language]

Speaker #1: In the case of the two top petrochemical companies, their inventory levels are assessed to be around 600,000 to 650,000.

Young Kyung Hwang: In the case of the two top petrochemical companies, their inventory levels is assessed to be around 600,000 to 650,000.

[Translator]: In the case of the two top petrochemical companies, their inventory levels is assessed to be around 600,000 to 650,000.

Speaker #3: 예, 지금 말씀드린 건 PPP 재고를 말씀드리는 겁니다.

Hyun-Sub Shim: 지금 말씀드린 건 PE, PP 재고를 말씀드리는 겁니다.

Hyung-seob Shim: [Foreign Language]

Speaker #1: So, I'm referring to the PE and PP inventory levels.

Young Kyung Hwang: I am referring to the PE and PP inventory levels.

[Translator]: I am referring to the PE and PP inventory levels.

Speaker #3: 네, 그리고 3분기까지는 높지 않은 재고로 재고 수준이 유지될 것으로 예상되고 있습니다. 이상입니다.

Hyun-Sub Shim: 그리고 3분기까지는 높지 않은 재고 수준을 유지될 것으로 예상되고 있습니다. 이상입니다.

Hyung-seob Shim: [Foreign Language]

Speaker #1: And our outlook is that up until the third quarter, their inventory levels will not be maintained at a high level.

Young Kyung Hwang: Our outlook is that up until the Q3, their inventory levels will not be maintained at a high level.

[Translator]: Our outlook is that up until the Q3, their inventory levels will not be maintained at a high level.

Speaker #2: 네, 첨단소재경영기획부문장 박진석입니다. ABS 관련된 재고 수준에 대해서 말씀드리도록 하겠습니다.

Jin-Seok Park: 첨단소재 경영기획부문장 박진석입니다. ABS 관련된 재고 수준에 대해서 말씀드리도록 하겠습니다.

Jin-Seok Park: [Foreign Language]

Speaker #1: This is Park Jin-seok, Head of Corporate Planning from Advanced Materials. Let me take your question about the inventory levels for ABS.

Young Kyung Hwang: This is Jin-Seok Park, Head of Corporate Planning from the Advanced Materials. Let me take your question about the inventory levels for ABS.

[Translator]: This is Jin-Seok Park, Head of Corporate Planning from the Advanced Materials. Let me take your question about the inventory levels for ABS.

Speaker #2: 최근 중국의 수요 약세로 가동률이 1분기에는 65%, 2분기에는 58%로 가동률이 하락하면서, 전체 재고 지수는 1분기 대비 87%까지 상승한 수준으로 예상하고 있습니다.

Jin-Seok Park: 최근 중국의 수요 약세로 가동률이 1Q에는 65%, 2분기에는 58%로 가동률이 하락하면서 전체 재고 지수는 1Q 대비 87%까지 상승한 수준으로 예상하고 있습니다.

Jin-Seok Park: [Foreign Language]

Speaker #1: Recently, due to weak demand in the Chinese market, the utilization rate of their plant in the first quarter was 65%, and in the second quarter, it went down to 58%.

Young Kyung Hwang: Recently, due to the weak demand in the Chinese market, the utilization rate of their plant in the Q1 was 65%, and in the Q2 it went down to 58%. Currently, their stocking levels have increased by 87% in the Q2 compared to the Q1.

[Translator]: Recently, due to the weak demand in the Chinese market, the utilization rate of their plant in the Q1 was 65%, and in the Q2 it went down to 58%. Currently, their stocking levels have increased by 87% in the Q2 compared to the Q1.

Speaker #1: And currently, their stocking levels have increased by 87% in the second quarter compared to the first quarter.

Speaker #3: 네, 이상입니다.

Jin-Seok Park: 네, 이상입니다.

Jin-Seok Park: [Foreign Language]

Speaker #1: So that is all.

Young Kyung Hwang: That is all.

[Translator]: That is all.

Nak-sun Sung: 세 번째 질문. 26년 말 기준 순차입금 규모에 대해서 답변드리겠습니다.

Nak-sun Sung: [Foreign Language]

Speaker #2: 순차입금 규모에 대해서 답변드리겠습니다.

Speaker #1: So let me take your third question on our estimation of the net borrowings by the end of 2026.

Young Kyung Hwang: Let me take your third question of our estimation of the net borrowings by the end of 2026.

[Translator]: Let me take your third question of our estimation of the net borrowings by the end of 2026.

Speaker #2: 연결 기준 2026년 6월 말 순차입금은 원료가 및 제품가 상승에 따라 운전자본의 증가 및 환율 인상 등의 영향으로 2026년 말 대비는 증가하였습니다.

Nak-sun Sung: 연결 기준 26년 6월 말 순차입금은 원료가 및 제품가 상승에 따라 운전자본의 증가 및 환율 인상 등의 영향으로 26년 말 대비는 증가하였습니다.

Nak-sun Sung: [Foreign Language]

Young Kyung Hwang: As of the end of June on a consolidated basis due to the rise of stock prices as well as the rise of the product prices, and also due to the impact of the foreign exchange rate compared to the end of 2025, net borrowings have increased.

[Translator]: As of the end of June on a consolidated basis due to the rise of stock prices as well as the rise of the product prices, and also due to the impact of the foreign exchange rate compared to the end of 2025, net borrowings have increased.

Speaker #1: As of the end of June, on a consolidated basis, due to the rise in feedstock prices as well as the rise in product prices, and also due to the impact of the foreign exchange rate, compared to the end of 2025, net borrowings have increased.

Speaker #2: 26년 말 순차입금은 앞서 말씀드린 바와 같이 대상차입금 이관 수준으로 감축이 될 것으로 예상되나 외화 차입금이 많이 가진 당사의 특수성에 따라서 환율 변동 부분이 클 것으로 되어서 환율 변동 부분을 제외하고는 이관 차입금 수준으로 예상하고 있습니다.

Nak-sun Sung: 26년 말 순차입금은 앞서 말씀드린 바와 같이 대산 차입금 이관 수준으로 감축이 될 것으로 예상되나, 외화 차입금이 많이 가진 당사의 특수성에 따라서 환율 변동 부분이 클 것으로 보여서 환율 변동 부분을 제외하고는 이관 차입금 수준으로 예상하고 있습니다. 이상입니다.

Nak-sun Sung: [Foreign Language]

Speaker #2: 이상입니다.

Speaker #1: And by the end of this year, our estimation of the net borrowing is that it will be at a level that is similar to the transferred amount for the Daesan restructuring.

Young Kyung Hwang: By the end of this year, our estimation of the net borrowing is that it will be at a level that is similar to the transferred amount for the Daesan restructuring. However, in the case of our company, assets in the foreign denominated currency is actually quite large. The volatility of the FX takes up a large portion. If we exclude that part, then the net borrowings at the end of the year will be similar to what has been transferred.

[Translator]: By the end of this year, our estimation of the net borrowing is that it will be at a level that is similar to the transferred amount for the Daesan restructuring. However, in the case of our company, assets in the foreign denominated currency is actually quite large. The volatility of the FX takes up a large portion. If we exclude that part, then the net borrowings at the end of the year will be similar to what has been transferred.

Speaker #1: However, in the case of our company, assets in foreign-denominated currency are actually quite large. So, the volatility of FX takes up a large portion.

Speaker #1: So, if we exclude that part, then the net borrowings at the end of the year will be similar to what has been transferred.

Speaker #4: 이상으로 2026년 2분기 롯데케미칼 실적 발표 컨퍼런스콜을 모두 마치겠습니다. 추가 문의 사항이 있으시면 IR팀으로 연락 주시기 바랍니다. 참석해주신 분들께 다시 한 번 감사드립니다.

Young Kyung Hwang: 이상으로 2026년 2분기 Lotte Chemical 실적 발표 컨퍼런스 콜을 모두 마치겠습니다. 추가 문의 사항 있으시면 IR팀으로 연락 주시기 바랍니다. 참석해 주신 분들께 다시 한번 감사드립니다.

Young Kyung Hwang: [Foreign Language]

Speaker #1: With this, we would like to conclude the earnings conference call for the second quarter of 2026 for Lotte Chemical. If you have any further questions, please contact our IR team.

Young Kyung Hwang: With this, we would like to conclude the earnings conference call for the Q2 of 2026 for Lotte Chemical. If you have any further questions, please contact our IR team. Thank you very much.

[Translator]: With this, we would like to conclude the earnings conference call for the Q2 of 2026 for Lotte Chemical. If you have any further questions, please contact our IR team. Thank you very much.

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Q2 2026 Lotte Chemical Corp Earnings Call

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