DL Chemical Group Issuer Flash: 2026 1Q Results

Report date: 2026-05-21 Event date: 2026-05-08 Event title: Q1 2026 Results

Flash Conclusion

DL Holdings’ preliminary 1Q 2026 results are near-term positive for the credit view on DL Chemical group. The chemical business and Kraton, both of which had turned loss-making in 4Q 2025, returned to profitability. DL Holdings reported consolidated operating profit of KRW112.9bn, DL Chemical reported consolidated operating profit of KRW56.2bn, and Kraton reported operating profit of KRW31.3bn. Kraton reversed from an operating loss of KRW56.1bn in 4Q 2025, with confirmed improvements in utilisation rates, sales volumes, product prices, and SBS and TOR/TOFA spreads.

However, this is not sufficient to move the credit assessment higher, and should be viewed only as confirmation of a rebound from 4Q 2025. DL Chemical separate recorded a year-on-year decline in operating profit, Cariflex also posted lower profit due to customer inventory adjustment, and DL Holdings’ consolidated net interest-bearing debt remained heavy at KRW4.386tn as of end-March 2026. The unsecured credit of DL Chemical group itself remains subject to confirmation of sustained profitability at Kraton and operating cash flow/FCF. Kraton’s issuer credit has improved on an initial basis, but the credit of the KDB-guaranteed Kraton USD bonds is centred on the legal effectiveness of the KDB guarantee and KDB’s own credit quality. The latest earnings improvement alone should not be treated as equivalent to unsecured DL Chemical group credit.

What Was Announced

On 8 May 2026, DL Holdings disclosed preliminary operating results based on consolidated financial statements through DART, and posted its official 1Q 2026 Earnings Results and Data Sheet in its IR materials. The reporting period is from 1 January 2026 to 31 March 2026. The IR materials are K-IFRS consolidated-basis investor materials prepared before completion of the external auditor’s review.

In the chemical business, DL Chemical separate improved quarter on quarter due to the lagged effect of higher product prices. Kraton returned to profit on the back of a recovery in utilisation rates, sales volumes, and product prices. SBS in Polymer and TOR/TOFA in Chemical were cited as improvement factors. Kraton itself also announced price increases for SBC, CTO refinery products, and all polymer products from February to March 2026, making price pass-through from 2Q onward important. By contrast, Cariflex was weak due to customer inventory adjustment, and the high profit level in 4Q 2025 should not be treated as normalised earnings capacity.

Credit Read-Through

For the unsecured credit of DL Chemical group itself, 1Q indicates that “the deterioration scenario has paused for now”. In 4Q 2025, Kraton’s losses, weaker chemical earnings, and Kraton-related impairments and non-operating expenses overlapped. DL Chemical consolidated returned to operating profit of KRW56.2bn in 1Q 2026, easing near-term downside pressure on earnings. However, DL Chemical group standalone operating cash flow, FCF, short-term debt, cash by legal entity, and FX hedging remain unconfirmed. It is therefore not yet appropriate to assess repayment capacity strongly based on operating profit alone.

The read-through for Kraton’s issuer credit is more directly positive. The recovery from a full-year 2025 operating loss of KRW45.3bn to operating profit of KRW31.3bn in 1Q 2026 is an improvement consistent with the most important monitoring item identified in the recent summary. That said, the operating margin was only 4.5%, and the price increases are also a response to higher raw material, energy, and logistics costs. Kraton standalone cash flow, borrowings, working capital, and capex remain unconfirmed again, and there is still insufficient basis for a major reassessment of its standalone credit.

For Cariflex, the view that it is a high-profitability business is maintained, but its support capacity was weak this quarter. Its operating margin remained profitable at 10.8%, but fell sharply from 28.2% in 4Q 2025. Even if Cariflex is a good-quality earnings source, the view is unchanged that it is not large enough on its own to absorb Kraton’s low profitability or market-cycle volatility at DL Chemical separate.

For the KDB-guaranteed Kraton USD bonds, the latest earnings improvement is a secondary factor. The credit centre of gravity for these bonds is the KDB guarantee, not the operating profit of DL Chemical group itself or Kraton on a standalone basis. Because the full text of the guarantee agreement, guarantee claim procedures, ranking, timely payment provisions, and related terms has not been confirmed, the final assessment of the guaranteed bonds remains pending review of the legal documentation.

What To Watch Next

The most important item is the sustainability of Kraton’s profit from 2Q onward. The key point is whether the price increases for SBC, CTO refinery products, and all polymer products from February to March 2026 translate into spread improvement without reducing sales volumes.

Next, it is necessary to confirm whether Cariflex’s customer inventory adjustment is truly temporary. Medical IR latex demand, the ramp-up of the new Singapore plant, and customer concentration are the main focus areas. Finally, DL Chemical group’s own cash flow and debt should be monitored. Parent-level consolidated cash should not be simply attributed to Kraton or DL Chemical creditors. It is necessary to confirm cash by legal entity, short-term debt, the maturity profile, interest expense, foreign-currency debt, and undrawn committed lines.

Sources

• DL Holdings official IR Data page, 2026 1Q Earnings Results and 2026 1Q Data Sheet, accessed 2026-05-21: https://www.dlholdings.co.kr/en/ir/irinfo/irData.do
• DART, DL, "Consolidated Financial Statements Based Preliminary Business Performance", filed 2026-05-08: https://dart.fss.or.kr/dsaf001/main.do?rcpNo=20260508800440
• Kraton Corporation, "Kraton Corporation Announces a Global Price Increase for Styrenic Block Copolymers", 2026-02-02: https://kraton.com/newsroom/kraton-corporation-announces-a-global-price-increase-for-styrenic-block-copolymers/
• Kraton Corporation, "Kraton Corporation Announces Global Price Increase for CTO Refinery Products and Derivatives", 2026-02-24: https://kraton.com/newsroom/kraton-corporation-announces-global-price-increase-for-cto-products/
• Kraton Corporation, "Kraton Corporation Announces Global Price Increase for Polymer Products", 2026-03-15: https://kraton.com/newsroom/kraton-corporation-announces-global-price-increase-for-polymer-products/
• Kraton Corporation, "Kraton and DL Chemicals Successfully Raise USD 1 Billion in Global Bonds with KDB Credit Guarantee", 2024-07-11: https://kraton.com/newsroom/kraton-and-dl-chemicals-successfully-raise-usd-1-billion-in-global-bonds-with-kdb-credit-guarantee/
• Moody's Ratings headline via ResearchPool, "Moody's Ratings assigns Aa2 rating to Kraton's proposed notes guaranteed by KDB", 2024-06-26: https://app.researchpool.com/index.php/provider/moodys-investors-service/kraton-corporation-kra-moodys-ratings-assigns-aa2-rating-to-kratons-proposed-notes-guaranteed-CZa7UnU4Tx

Unverified / Pending