Lotte Chemical Corporation and Its Subsidiaries
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Lotte Chemical Corporation and its subsidiaries Consolidated financial statements for the years ended December 31, 2017 and 2016 with the independent auditors’ report Contents Independent auditors’ report Page Consolidated financial statements Consolidated statements of financial position 1 Consolidated statements of profit or loss and other comprehensive income 3 Consolidated statements of changes in equity 4 Consolidated statements of cash flows 6 Notes to the consolidated financial statements 8 Independent auditors’ report The Shareholders and Board of Directors Lotte Chemical Corporation We have audited the accompanying consolidated financial statements of Lotte Chemical Corporation (the “Company”) and its subsidiaries (collectively referred to as the “Group”), which comprise the consolidated statements of financial position as at December 31, 2017 and 2016, and the consolidated statements of profit or loss and other comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information. Management's responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that we comply with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at December 31, 2017 and 2016, and its financial performance and cash flows for the years then ended in accordance with Korean International Financial Reporting Standard. March 8, 2018 This audit report is effective as at March 8, 2018, the independent auditors’ report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the date of the independent auditors’ report to the time this report is used. Such events and circumstances could significantly affect the accompanying consolidated financial statements and may result in modifications to this report. Lotte Chemical Corporation and its subsidiaries Consolidated financial statements for the years ended December 31, 2017 and 2016 “The accompanying consolidated financial statements, including all footnotes and disclosures, have been prepared by, and are the responsibility of, the Company.” Kim, Gyo-Hyun President and Chief Executive Officer Lotte Chemical Corporation Lotte Chemical Corporation and its subsidiaries Consolidated statements of financial position as at December 31, 2017 and 2016 (Korean won in thousands) Notes 2017 2016 Assets Current assets: Cash and cash equivalents 42 \ 1,685,211,989 \ 2,202,944,465 Short-term financial instruments 4 3,086,656,513 425,756,559 Financial assets at fair value through profit or loss (FVTPL) 6 2,434,730 6,685,073 Available-for-sale (AFS) financial assets 7 100,046,195 20,588,275 Trade accounts and other accounts receivable 5,41 1,667,550,761 1,551,920,459 Inventories 9 1,535,989,484 1,477,157,254 Finance lease receivables 10 138,598 138,598 Current income tax assets 15,381,901 16,403,225 Other financial assets 8,23 19,507,537 13,242,873 Other current assets 11 112,551,631 136,839,115 8,225,469,339 5,851,675,896 Non-current assets: Long-term financial instruments 4 67,512,500 67,515,500 Non-current AFS financial assets 7 255,241,155 304,235,250 Non-current finance lease receivables 10 2,888,358 3,014,311 Investments in associates 12 1,438,963,136 1,288,114,097 Investments in joint ventures 13 945,616,487 848,082,771 Property, plant and equipment 15 6,716,184,181 5,546,663,157 Investment properties 16 114,606,809 99,471,563 Goodwill 17 723,796,857 723,796,857 Other intangible assets 18 986,777,410 1,068,600,007 Other non-current financial assets 4,8,23 20,253,421 20,898,713 Other non-current assets 11 15,230,235 5,552,910 Deferred tax assets 36 38,431,213 39,213,138 11,325,501,762 10,015,158,274 Total assets \ 19,550,971,101 \ 15,866,834,170 (Continued) 1 Lotte Chemical Corporation and its subsidiaries Consolidated statements of financial position as at December 31, 2017 and 2016 (cont'd) (Korean won in thousands) Notes 2017 2016 Liabilities Current liabilities: Trade accounts and other accounts payable 19,41 \ 1,420,006,265 \ 1,076,521,956 Financial liabilities at FVTPL 20 133,610 - Short-term borrowings and current portion of bonds payable 21 1,498,617,635 1,745,873,962 Income tax payables 516,405,147 365,609,756 Other financial liabilities 22,23 181,182,416 94,350,572 Other current liabilities 25 161,173,577 146,913,527 Current provisions 26 13,372,649 19,540,529 3,790,891,299 3,448,810,302 Non-current liabilities: Financial liabilities at FVTPL 20 25,238,395 - Long-term borrowings and bonds payable 21 2,703,800,471 2,439,574,476 Net defined benefit liability 24 26,509,773 23,195,913 Deferred tax liabilities 36 587,754,528 524,809,517 Other non-current financial liabilities 22,23 43,060,202 14,558,573 Other non-current liabilities 25 10,557,221 7,735,920 Non-current provisions 26 108,392,151 7,332,298 3,505,312,741 3,017,206,697 Total liabilities 7,296,204,040 6,466,016,999 Equity Equity attributable to equity holders of the parent: Issued capital 27 171,377,095 171,377,095 Other paid-in capital 28 880,743,872 478,576,150 Retained earnings 29 10,582,113,943 8,486,992,509 Other components of equity 30 (144,606,746) 226,166,597 11,489,628,164 9,363,112,351 Non-controlling interests 765,138,897 37,704,820 Total equity 12,254,767,061 9,400,817,171 Total liabilities and equity \ 19,550,971,101 \ 15,866,834,170 The accompanying notes are an integral part of the consolidated financial statements. 2 Lotte Chemical Corporation and its subsidiaries Consolidated statements of profit or loss and other comprehensive income for the years ended December 31, 2017 and 2016 (Korean won in thousands except per share amounts) Notes 2017 2016 Sales 3,31,41 \ 15,874,510,690 \ 13,223,540,874 Cost of sales 37,41 (12,081,876,223) (9,956,835,878) Gross profit 3,792,634,467 3,266,704,996 Selling and administrative expenses 32,37,41 (862,913,509) (722,451,059) Operating income 3 2,929,720,958 2,544,253,937 Finance income 3,33 253,053,656 156,147,423 Finance costs 3,34 (273,186,323) (241,023,186) Share of profit in associates and joint ventures 12,13 284,443,693 71,447,129 Other non-operating income 3,35 213,268,097 232,893,826 Other non-operating expenses 3,35 (322,614,040) (276,346,029) Income before income tax 3 3,084,686,041 2,487,373,100 Income tax expense 36 (800,109,103) (650,188,181) Net income 2,284,576,938 1,837,184,919 Other comprehensive income (loss) Other comprehensive income not to be reclassified to profit or loss in subsequent periods: Remeasurement loss on defined benefit plans 24 (14,646,011) (5,608,108) Retained earning adjustments in equity method 12,13 553,134 1,658,336 Foreign currency translation differences of foreign operations (43,476,748) 1,200,129 Other comprehensive income to be reclassified to profit or loss in subsequent periods: Gain (loss) on valuation of AFS financial assets 7 12,632,614 (6,609,388) Equity adjustments in equity method 12,13 (29,013,393) (2,207,050) Gain on valuation of derivative financial instruments 23 945,848 591,063 Foreign currency translation differences of foreign operations (355,338,412) 96,884,211 (428,342,968) 85,909,193 Total comprehensive income \ 1,856,233,970 \ 1,923,094,112 Net income attributable to: Equity holders of the parent \ 2,243,875,142 \ 1,835,812,632 Non-controlling interests 40,701,796 1,372,287 Comprehensive income attributable to: Equity holders of the parent 1,859,116,215 1,920,537,276 Non-controlling interests (2,882,245) 2,556,836 Earnings per share Basic and diluted 38 \ 65,625 \ 54,488 The accompanying notes are an integral part of the consolidated financial statements.