Good afternoon. This is O-Nyun Hwang, Head of the IR Team at Lotte Chemical.

I thank everyone for your time and interest in Lotte Chemical and your participation in this conference call. We will start with the presentation on the company's 2026 Q1, followed by a briefing by the CFO on the main business issues, then a Q&A session.

Please be informed that the presentation will be conducted in simultaneous interpretation and the Q&A in consecutive interpretation. The presentation slides can be downloaded from the company's website.

I will now introduce the executives in attendance. First, from the HQ, Vice President and CFO Sung Nak-sun, Vice President and CSO Kim Min-woo; from Basic Chemical, Vice President Kwak Giseop, Head of the Strategy Management Division, Vice President Shim Young-Seop, Head of the Monomer Division, Vice President Cheon Yang-Sik, Head of the Polymer Division; from Advanced Materials, we have Vice President Park Jin-seo from the Corporate Planning Division.

Let me now turn to business results of '26 Q1. Page 2, Q1 profit and loss on a consolidated basis.

Revenue in Q1 was ₩4.9905 trillion with operating profit—the company turned around to profit, operating profit of ₩73.5 billion thanks to improved performance in Basic Chemical. EBITDA was ₩412.8 billion.

Pretax income and net income in Q1 were ₩46.2 billion and ₩33.5 billion, respectively. Next is page 3, the company's financial position on a consolidated basis.

Asset at the end of Q1 was ₩31.9 trillion, liabilities were ₩13.8 trillion, shareholders' equity was ₩18.1 trillion. Debt-to-equity ratio stood at 76%, improving slightly QoQ.

Next, I will explain the performance and outlook by business division. First, please refer to page 4, the Basic Chemicals.

In the first quarter of 2026, the Basic Chemicals recorded revenue of ₩3 trillion and ₩449 billion, operating profit of ₩45.5 billion, and an operating profit margin of 1.3%. Amid expanding geopolitical risks in the Middle East region, the product selling prices increased, leading to improved spreads.

In addition, positive lagging effects resulting from higher raw material prices were also reflected, contributing to the return to profitability. Next is the Advanced Materials division.

In the first quarter of 2026, the division recorded sales revenue of ₩1 trillion and ₩23.3 billion, operating profit of ₩61.5 billion, and an OPM of 6.0%. Following customers' year-end inventory adjustments, profitability improved significantly compared to the previous quarter, driven by recovery in the downstream industry demand and increased sales volume.

Next is Lotte Fine Chemical. As the details were already explained during the earnings release presentation on April 28, I will briefly go over the results.

In the first quarter, the company recorded sales revenue of ₩510.7 billion, operating profit of ₩32.7 billion, and OPM of 6.4%. Performance improved due to rising international prices of major products and increased sales volumes.

Last is Lotte Energy Materials. As the details were also covered during the earnings conference call held earlier this morning, I will briefly summarize the results.

In the first quarter, the company recorded sales revenue of ₩159.8 billion and an operating loss of ₩5.0 billion. Despite continued uncertainties in downstream industries, profitability improved as positive lagging effects resulting from higher raw material prices were reflected.

This concludes the explanation of the company's first quarter 2026 business results. Our CFO Nak-seon Sung will now provide further details on the results and the key management issues.

Good afternoon. This is Nak-seon Sung, CFO of Lotte Chemical.

I would like to sincerely thank all of you for taking interest in and attending our earnings presentation despite your busy schedules. In the first quarter of this year, uncertainties in business environment increased due to geopolitical risks in the Middle East, and there remained various different views regarding the persistence of the current situation and its subsequent impact.

As positive raw material lagging effects were reflected amid feedstock price increases caused by risk in the Middle East region, our first quarter results recorded ₩5 trillion in revenue and ₩73.5 billion in operating profit. With external uncertainties expected to continue going forward, the company has proactively secured feedstock at a level sufficient to maintain stable operations, and we will continue to actively respond to risk based on flexible operational strategies such as diversification of raw material procurement and inventory optimization.

In addition, even under such business conditions, the company is steadily pursuing its mid-to-long-term strategy in the direction previously communicated, maintaining and strengthening competitiveness in the basic chemicals business while building a more balanced portfolio through expansion of our future growth businesses. First, we are actively participating in the petrochemical restructuring initiatives for domestic industrial complexes currently being promoted by the Korean government.

Following government approval, the Daesan business restructuring secured approximately ₩2.1 trillion in financial support. After the planned physical spin-off on June 1st, we are targeting the launch of the integrated corporation and commencement of integrated operations in September.

The Yeosu business restructuring will also proceed in phases through cooperation with the government and partner companies following the submission of the restructuring plan on March 20th. Through these restructuring efforts, rather than simply downsizing the basic chemicals business, we aim to pursue high-value-added transformation centered on profitability and continuously strengthen business competitiveness by improving operational efficiency in existing businesses based on ongoing investments for future growth.

At the same time, we'll continue to expand functional materials and high-value-added businesses over the mid to long term, centered on the advanced materials business. Based on our global supply chain and the Yulchon compounding project scheduled for completion within the year, we also plan to significantly expand high-value-added product lines such as super EP.

In addition, we will continue to promote investment and technology development in future growth industries such as functional semiconductor materials, food and pharmaceutical materials, AI circuit foils and high-end elecfoils, and eco-friendly hydrogen businesses, while fostering high-value-added growth businesses aligned with changes in the global market. Even amid the prolonged challenging business environment, the company continues to maintain a sound debt ratio in the 70% range, and we expect our financial structure to gradually improve through this restructuring.

Furthermore, under a cash flow-oriented management principle, we will secure financial stability by conservatively managing investment execution within the scope of EBITDA. Dear investors and shareholders, although the petrochemical industry is currently facing a highly uncertain business environment, the company is moving forward smoothly with the ongoing Daesan business restructuring thanks to your continued interest and support.

At the same time, we were also able to achieve meaningful earnings improvement during this quarter. Going forward, we will continue to do our best to enhance corporate value based on sustainable growth and repay the trust and support that you have shown us.

Thank you very much. 지금부터 질의응답을 시작하겠습니다.

질문을 하실 분은 전화기 버튼의 별표와

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 two questions per each participant. 다음으로 질문해 주실 분은 신영증권의 신홍주 님입니다.

The first question will be provided by Hong-ju Shin from Shin Young Securities. Please go ahead with your question.

아, 네, 안녕하세요. 저 신영증권 신홍주 연구원입니다.

저 질문 기회 주셔서 감사하고, 두 가지 질문이 있는데요. 우선 첫 번째로는 저희 현재 국내, 그리고 인도네시아, 말레이 쪽 납사 재고 보유 일수, 그래서 향후 이제 원료 조달 방안이랑 그에 따른

2분기, 그리고 뭐 하반기까지 가동률 계획 좀 궁금합니다. 그리고 이제 두 번째 질문은 지금 전쟁으로 인해서 화학 업황이 좀 많이 변동이 있는데요.

그래서 2026년 회사에서 보시는 연간, 단기 전망이랑 또 2028년까지 봤을 때 좀 중장기 전망 관련해서 지금 저희 뭐 연간 흑자 전환 시점을 좀 앞당길 수 있는지, 아니면 시황 회복이 좀 일시적인지, 요런 것들 전망 공유 부탁드립니다. 질문입니다.

Thank you very much for taking my question. I have two.

The first is about the naphtha stock as well as the utilization. What is the number of days of holding of naphtha both in Korea and also in Malaysia and Indonesia?

Also what is the utilization plan for the second half of the year? The second question is, because of the Middle Eastern war, there are quite a lot of changes and fluctuations in the industry at this time.

What is the company's short-term outlook for this year, 2026, and also what is the longer, medium-term outlook up until 2028? When does the company believe that the turnaround to profit can be achieved?

네. 모노머본부장 심명섭입니다.

국내, 인니 납사, 말레이의 납사 보유는 현재 안정적 조업을 할 수 있도록 충분히 보유를 하고 있으며, 지속적으로 납사를 공급함으로써 현재 가동에는 전혀 지장이 없는 상황입니다. 조달 방안에 있어서는 국내 같은 경우에는 국내 납사를 중심으로 하여서 역외 물량들을 보강하여서...

This is Vice President Shim Young-Seop from the Basic Chemical Division, Monomer Division responding to the question. Now with regards to the naphtha inside Korea as well as from Malaysia and Indonesia, we are getting stable procurement, and the procurement continues, meaning that our utilization is seeing no disruptions or problems.

As for additional procurement, when it comes to the domestic supply, then we intend to get the domestic naphtha first, combined with overseas procurement as well. 네, 향후 조달 방안으로서 국내 납사의 경우에는 그 내수 납사를 중심으로 하여서 역외 납사 물량을 추가적으로 확보하여 진행할 예정이며, 그 인니나 말레이 같은 경우에도 주변에 싱가포르나 그 이쪽에서 납사를 구매해서 진행할 예정입니다.

Again, for the domestic supply, we will be getting the naphtha from inside Korea combined with overseas supply. Then also for our businesses in Indonesia and Malaysia, we would also procure them from nearby regions like Singapore.

네, 마지막으로 하반기 가동 계획은 시장 상황을 면밀히 관찰하면서 유동적인 그 시장 적응형 그 가동을 계획할 예정입니다. 이상입니다.

As for the utilization plan for the second half of the year, we will keep a close watch over the market movements and try to adjust our utilization according to the market circumstances. 네, 기초소재 경영지원본부장 곽기섭 상무입니다.

두 번째 질문에 대해 답변드리도록 하겠습니다.

This is

Giseop Kwak of the Corporate Planning Division responding to the second part of your question. 아시다시피

1분기 기초소재 기준의 손익은 전 분기 대비 큰 폭 개선되어서 흑자 전환을 달성하였습니다.

As you would know, in the first quarter, the profitability in Basic Chemical Division has improved considerably, turning around to profit. 중동 리스크 발생 이후 주요 제품 스프레드가 확대되고 분기 말 납사 가격 상승으로 인한 긍정적 재고 래깅 효과가 발생하였던 점도 주요한 배경으로 알고 있습니다.

I understand that one major factor was the positive inventory lagging effect caused by the Middle Eastern risk, for example, the increase in the major product spread as well as the rise in the naphtha cost.

2분기에는 긍정적 요인으로는 타이트한 수급 상황이 일시적으로 지속될 것으로 예상되고 있으나, 실적 개선 추세는 단기적으로 지속될 것으로 전망되고 있습니다. Now

looking ahead to the second quarter, one positive factor may be the continued tight supply of feedstock, but we believe that the performance improvement will continue for the time being. 부정적인 요인으로는

2월 말 전쟁 발발 이후 급등한 납사 구매 가격이 2분기부터 제품 생산에 실제로 투입되면서 투입 원가가 높아지는 부정적인 래깅 효과가 발생될 것으로 예상되고 있습니다.

One negativity could be the inverse lagging effect, meaning that the soaring naphtha prices that were caused by the war since February would then be input into production in the second quarter, meaning that this is going to increase the production cost. 현재 중동 전쟁이 매우 유동적이기 때문에 현시점에서

2026년 단기적으로 실적에 대한 전망을 하기는 좀 쉽지 않은 상황입니다.

As for the outlook for 2026, please understand that given the fluidity of the Middle Eastern war, it is quite difficult for us to look ahead into the performance of this year. 또한 시장에 알려졌듯이 중국의 신증설은 지금 지속적으로 진행되고 있어서

27년, 28년까지도 석유화학 시황은 아주 긍정적이지는 않은 상황으로 보여집니다.

As the market already knows, the capacity addition continues in China, the petrochemical industry outlook into 2027, 2028 is not entirely bright. 따라서 당사는 시장 정상화 이루어진 이후에 유동적으로 시장 상황을 모니터링하면서 이에 대해서 대응하도록 하겠습니다.

이상입니다. The company continues to keep a close watch over the market even after the market normalization and respond according to the changes.

다음으로 질문해 주실 분은

The following question will be presented by Parsley Ong from J.P. Morgan.

Please go ahead with your question.

Hi,

thank you for the chance to ask question. For the first question, could you share give us some numbers on the first quarter one-off, for example, you mentioned the raw material lag impact or inventory gain?

How much was that? Could you quantify that number in first quarter?

Or maybe break down the profit between January, February, and March? Then for the second question, I think the outlook for naphtha cracking margins is or outlook for chemicals is gradually getting better following industry consolidation.

Could you just give us a status update on your Yeosu and Daesan restructuring, how much effective capacity Lotte had Lotte had before and then after? What is your long-term aim in terms of how much capacity you plan to have after all this restructuring is done?

Thank you. 질문 감사 질문 받아주셔서 감사드립니다.

제 질문 두 가지인데요. 일단 첫 번째로는

1분기에 그 일회성 비용이 있었다고 설명을 하셨는데, 예를 들면 원료 비용이라거나 또는 재고 평가 손실 환원 등과 같은 일회성 비용이 있었는데, 이런 일회성 비용이 구체적인 수치를 알려 주실 수 있으신지요? 아니면 수익에 대해서 1월, 2월, 3월로 나눠서 말씀해 주실 수 있으실런지가 이제 첫 번째 질문이고요.

또 두 번째로는 지금 현재 업계에서 또 그 통합이나 사업 재편이 이루어지고 있는 상황에서 결과적으로는 납사 크래킹 마진이나 또는 이 전반적인 뭐 사업성이 더 개선이 되지 않을까, 그래서 이 화학 업계에 있어서는 앞으로의 전망이 더 개선되지 않을까라는 기대가 있습니다. 관련하여서 여수나 대산의 사업 재편에 대해서 지금까지의 현황을 좀 설명을 부탁을 드리고요.

그리고 이 대산, 여수 사업 재편 전후로 이 카파가 실질적인 카파가 어느 정도가 될 것이라고 예상을 하시는지, 그리고 보다 장기적으로 봤을 때도 카파를 어느 정도로 가져갈 것으로 계획하고 계신지요? 네.

재무혁신본부 성낙선입니다. 재고 평가 손 및 일회성 비용, 일회성 수익이 있을 부분에 대해서는 제가 설명드리도록 하겠습니다.

This is the CFO Sung Nak-sun responding to the first part of the question about the gain from the inventory valuation loss reversal as well as the one-off cost.

1분기 재고자산 평가손 환입 규모는 납사 가격 상승 및 실질적으로 제품, 그 폴리머와 모노머 제품의 상승으로 인해서 전체 규모는 500억 수준으로 환입이 되었습니다. Now

first of all, in the first quarter, the reversal in the inventory valuation was in the amount of around ₩50 billion, thanks to the rise in the naphtha prices as well as the rise in prices of polymer and monomer products. 그 외에 그 질문하신 그

1분기에는 일회성 수익으로 특별하게 말씀드릴 수 있는 큰 규모의 수익은 발생하지 않았음을 말씀드립니다. 이상입니다.

As for others, there were no other major one-off gains that occurred in the first quarter. 네, 기초소재 경영지원본부장 곽기섭 상무입니다.

첫 번째 질문에 원재료 래깅 효과에 대해서 말씀드리도록 하겠습니다. This is Kwak Giseop from the Corporate Planning Division, and I would like to respond to your question about the lagging effect of the feedstock.

아시다시피 전쟁 이후에 납사 가격이 크게 상승을 하면서 긍정적인 래깅 효과가 발생하였고, 기초소재 기준으로 약

2,500억 이상으로 원재료 긍정적 래깅 효과가 발생한 것으로 파악되고 있습니다. 이상입니다.

As you would know, since the Middle Eastern war, there has been positive lagging effect because of the rise in the naphtha prices, in the amount of about ₩250 billion for the feedstock. 네.

전략본부장 김민우입니다. 사업 재편 전후 납사 크래커 에틸렌 생산 규모에 대해서 답변드리겠습니다.

This is Kim Min-woo of the CSO responding to your question about the business alignment, and particularly about the ethylene production before and after the realignment. 당사가 보유한 대산 공장

110만 톤, 현대케미칼 보유한 약 90만 톤의 크래커를 기준으로 할 때 저희가 50% 지분을 갖게 되면 대산은 여전히 한 100만 톤 정도를 보유하게 됩니다. Now

given the 1.1 million tons that we currently have at Daesan plant, and the 900,000 tons that we have at the Hyundai Chemical plant, then based on this cracking capacity at this time, and assuming that we will be having 50% share, that will leave about 1 million tons at Daesan plant. 여수의 경우는 당사 보유한

123만 톤, 그리고 YNCC가 보유한 200 230만 톤 정도의 캐파를 고려할 때 당사 지분 현재 논의되는 3분의 1을 고려하면 여전히 110만 톤 정도 규모가 될 것으로 예상하고 있습니다. Then

for Yeosu, we currently own 1.23 million tons, YNCC owns 2.3 million tons, and assuming the company's share of one-third, that will leave 1.1 million tons for us. 그렇지만 좀 설명드리고 싶은 부분은 여수, 대산 공히 향후

2, 3년간 예상되는 굉장히 안 좋은 석유화학 시황을 상정하고 그 사이에서 통합 운영의 효율성을 고려하고 있는 그러한 곳입니다.

Now here I would like to explain one caveat. Now for both the Yeosu and Daesan, the assumption is that the petrochemical industry for the next two to three years is going to really suffer.

We are assuming efficiency to be gained from an integrated operation. 그런 관점에서 대산 공장에는 두 개의 납사 크래커 중에 하나, 여수 같은 경우에는 총 네 개의 납사 크래커 중에서 통합 운영의 효율성이 떨어지는 두 개를 사업 재편이 완성될 경우에 일단 셧다운해서 운영하는 것을 고려 중에 있습니다.

Then for the Daesan plant, out of the two naphtha cracking facilities, out of the two NCCs, one would yield less efficiency from integrated operation. Then in Yeosu, out of the four NCCs, two would have less efficiency coming from the integrated operation.

Our plan is that after the business realignment is completed, then it is likely that we will be shutting down these less efficient NCCs. 시황에 따라 유동적이긴 하지만 결과적으로는 사업 재편 기간 중에는 저희가 실질적으로 운영하는 납사 크래커의 캐파는 기존 대비 감축되는 효과를 거둘 수 있을 것입니다.

Of course, it would largely depend on the market circumstances, but during the period of the business realignment, then the NCC capacity that we would be running would be less than it used to be. 마지막으로 그렇지만 당사는 납사 크래커가 임시적으로 셧다운한 납사 크래커가 한

3년 이후에 시황 회복과 함께 다시 돌릴 수 있는 상황이 올 것이다라고 일단 판단하고 있습니다. 네.

Also at the same time, for the NCCs that would be temporarily shut down, depending on the market improvement, it is also likely that they can be reopened within the next three years or so. 그렇지만 사업 재편을 통해서 대산 사업장, 여수 사업장 공히 저희가

50% 이하의 지분을 갖게 되어 저희 연결 재무제표 상에 손익계산서 그다음에 대차대조표 상에서도 일단 제외되는 효과는 기대할 수 있을 것입니다. 이상입니다.

Again, after the business alignment for both the Daesan and Yeosu, our share will fall below 50%, meaning that they will be excluded from the consolidated financial statements like the profit and loss statement and the balance sheet. 다음으로 질문해 주실 분은

The following question will be presented by Yujin Jeon from IM Securities. Please go ahead with your question.

네, 안녕하세요.

IM증권 전유진입니다. 질문 기회 주셔서 감사드립니다.

두 가지인데요. 하나는 아까 말씀 주시면서 2분기부터 고가 납사가 투입된다고 말씀해 주셨는데, 그러면 2분기 때는 이 역래깅이 좀 반영이 되고 이번에 반영됐던 500억 재고 이익도 소멸이 되면 결국 다시 적자로 전환되는 방향으로 저희가 좀 바라봐야 하는지 가이던스를 조금 주시면 좋을 것 같고, 두 번째는 중동 사태로 인해서 기존에 보셨던 것 대비 글로벌 뭐 에틸렌, PE, PP 이러한 제품들에 대한 축소 규모가 좀 바뀌는 걸로 파악하고 계시는 건지, 그리고 보시는 숫자를 조금 같이 공유해 주시면 감사드리겠습니다.

이상입니다. Now

I also have two questions. Now first, it was explained earlier that starting in the second quarter, the higher price naphtha will be input.

Does that mean that now there will be inverse lagging effect to be applied, meaning that is there a likelihood that the company will return to loss again after the second quarter? I would just like to seek your guidance on the performance outlook.

Then the second question is about the ethylene. Since the Middle Eastern crisis, then what does the company foresee in terms of the global ethylene capacity increase?

Will there be any changes in this? 네, 기초소재 경영지원본부장 곽기섭 상무입니다.

첫 번째 질문에 대해서 답변드리도록 하겠습니다. Thank you.

This is Kwak Giseop from the Corporate Planning Division responding to the first part of your question. 현재 시장 상황상 역래깅이 일어날 시점을 예단하기는 좀 섣부른 상황인 것 같습니다.

Now given the high fluidity in the market today, it would be very difficult to predict when the inverse lagging effect is going to occur. 아직까지 전쟁 전의 제품 가격도 전쟁 전보다 많이 높이 올라가 있는 상황이고, 원재료값도 올랐지만 스프레드는 전쟁 전보다는 지금 많이 개선되어 있는 그런 상황입니다.

If

to this day, we see that the product prices have gone up since the beginning of the war, and also the prices of the finished products have also gone up. At the same time, the spread has improved.

향후에 제품이나 원재료 가격이 하락이 되면 부정적인 역래깅 효과가 발생하겠지만, 이게 연말까지도 계속 좀 슬로우하게 간다고 하면 그렇게 크나큰 영향은 없을 것 같고, 다만 앞에서 말씀드렸듯이 아직까지도 전체적인 이 수급이 전반적으로 개선된 것은 아니기 때문에 계속까지 시장 상황을 보면서 회사를 운영하도록 하겠습니다. 이상입니다.

Now if the prices for the products and the raw materials were to fall, then yes, it is likely that some inverse lagging effect will occur. At the same time, if it is gradually drawn out until the end of the year, then we believe that the impact coming from it is not likely to be large.

Given that right now there is little improvement in the supply demand situation, we will be very closely watching the market circumstances. 안녕하십니까?

기초소재 폴리머공장 천양식입니다. This is Cheon Yang-Sik from the Polymer Division.

이번 질문 관련해서 답변드리겠습니다. Now I will respond to the second part of the question.

중동 사태 이후에 글로벌 에틸렌,

PE, PP 감소는 각 지역별로 좀 차이는 있습니다만 한국 같은 경우 가동률이 한 15% 정도 감소를 했고, 중국 같은 경우는 10% 정도 감소를 했습니다. Now

since the outbreak of the war in the Middle East, of course, how much the ethylene or PE and PP production has fallen is different by country and regions. Then in the case of Korea, the utilization rate has fallen by about 15%, whereas in China, it has fallen by about 10%.

동남아나 서남아 쪽도 마찬가지로 한

10% 정도의 공급 감소가 있었습니다.

Similarly, in Southeast Asia as well as the Southwest Asia, the supply has fallen by about 10%. 중동 지역 같은 경우는

4월 초 이란의 피격을 받은 사우디나 그 주변 지역의 설비들이 한 60%에서 70% 정도 셧다운되면서 지금 현재 공급은 정상적으로 이루어지지 않고 있는 상황입니다.

In the Middle East, in the early April, there were some attacks by Iran on the surrounding countries, including Saudi Arabia. The facilities that had been attacked, about 60% to 70% of them have been shut down, and supply has yet to go back to normal.

중동 사태로 인해서 아시아 지역 및 중동 지역의 공급 감소분을 미국의 에탄 크래커의 가동률이 한

10%에서 15% 상승하면서 실제 시장의 그 공급 부족분을 메우고 있는 상황입니다.

Now where supply has fallen in the Middle East and in Asia because of the situation in the Middle East, now it is being made up for by the ethane cracker in the US where the utilization rate has gone up by more than 15-30%. 또한 역외 지역 등의 사회 내에 있는 재고 등이 지금 최고 상당히 감소한 수준을 보이고 있어서 5월 이후부터 중동 공급이 정상화되지 않으면은 타이트한 부분은 당분간 이어질 것으로 지금 예상을 하고 있습니다.

이상입니다. Also in the other regions, we see that the inventory continues to fall since April.

Unless the Middle Eastern supply goes back to normal in May, then the tight supply is likely to continue. 현재 질문을 요청하신 분은 없습니다.

질문을 하실 분은 전화기 버튼에 별표와

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네. 이상으로

Thank you very much. That concludes the earnings release conference call by Lotte Chemical for 2026 Q1.

If you have any further comments or questions, then please contact the IR team. Thank you very much for your participation.