Lotte leaders hold secret meeting in search of ways to salvage chemical biz

Lotte Academy Osan Campus in Gyeonggi Province / Courtesy of Lotte Group

Lotte Group’s regular executive gathering, called the Value Creation Meeting (VCM), began its second-half edition Wednesday in an unusual format, stretching to two days for the first time since the retail-to-petrochemical conglomerate launched the biannual event.

Unlike previous editions, the meeting was held behind closed doors at the group’s employee training center in Osan, Gyeonggi Province, instead of the usual venue, a company-owned hotel in Seoul where reporters can typically get comments from CEOs. The secretive setting is seen as a reflection of the group’s concerns over a slowdown across key business areas, particularly petrochemicals.

Lotte Group Chairman Shin Dong-bin, left, listens to a group affiliate presentation on innovations with artificial intelligence technology during the Value Creation Meeting at Lotte World Tower in Seoul, Jan. 9. Courtesy of Lotte Group

Roughly 80 top leaders, including Chairman Shin Dong-bin and his son Shin Yoo-yeol, the vice president overseeing future growth, arrived at Lotte Academy Osan Campus Wednesday morning. Reporters were barred from interviews and denied entry.

Lotte typically holds VCMs twice a year, in January and July, and previous meetings lasted half a day at Lotte World Tower in southeastern Seoul.

This year’s agenda remained confidential, but industry officials expect leaders from Lotte’s retail, food and chemical businesses to unveil their plans for the second half and discuss strategies for long-term growth.

The crisis at Lotte Chemical is likely to top the agenda.

Once a reliable cash cow, the company has now posted operating losses for six consecutive quarters, hit by a prolonged economic slowdown and undercutting by Chinese rivals. Its second-quarter losses are estimated to have exceeded 180 billion won ($130 million).

As a result, Korea’s three leading credit rating agencies downgraded Lotte Chemical last month, triggering lower ratings for Lotte Corp., the group’s holding company.

“Despite selling assets and cutting investments, Lotte Chemical’s recovery will remain slow,” Korea Investors Service said.

Industry officials anticipate that discussions may have focused on more aggressive restructuring and possible details on Lotte Chemical’s partnership with HD Hyundai Oilbank to reduce unprofitable petrochemical production at each company’s Seosan plants in South Chungcheong Province.

Amid these challenges, attention is on the chairman’s message at the gathering.

During January’s VCM, Shin said 2024 was “the most difficult year” in the group’s history, and urged Lotte leaders to “change the conventional way of setting goals.”

He criticized Lotte affiliates for losing their fundamental competitiveness and urged CEOs to carry out bold reforms and expand their global businesses, which resulted in Lotte companies taking an aggressive approach in the global markets in the first half of this year.