SK Innovation Co. (096770), which owns South Korea’s biggest oil refiner, reported a smaller-than-expected quarterly profit as earnings from cracking crude into fuel products narrowed on weak demand.
Net income was 228 billion won ($209 million) in the three months ended Dec. 31, from 151.2 billion won a year earlier, the Seoul-based company said today in a regulatory filing. That was less than the 392.9 billion won average of 18 analyst estimates compiled by Bloomberg News
SK Innovation follows domestic rival S-Oil Corp. in reporting smaller-than-expected earnings as crude refining profits came under pressure upon concerns over a U.S. and China economic slowdown. Sales rose 1.4 percent to 17.16 trillion won, while operating profit dropped 44 percent to 202.1 billion won, the company said.
“The global economic slowdown affected cracking margins of oil products, dragging down our earnings” from major businesses, Cha Sungkeun, head of corporate support office at SK Innovation, said today on a conference call with investors. “Despite sales growth last year, our operating profits drastically dropped.”
Shares of SK Innovation fell as much as 3.2 percent, the biggest intra-day decline since Jan. 14, and traded 2.0 percent lower at 168,000 won as of 11:38 a.m. in Seoul trading. Korea’s benchmark Kospi index fell 0.6 percent.
Korea’s overseas sales by volume of gasoline and other oil products increased 8.8 percent, the slowest growth since 2009, in the fourth quarter from a year earlier, according to data from state-run Korea National Oil Corp. Export prices for Korean refineres rose 0.2 percent a barrel, the smallest gain since 2008.
S-Oil Corp. (010950), South Korea’s third-largest refinery, posted a 99 percent drop in fourth-quarter net income to 3.4 billion won.
SK Innovation’s processing losses from cracking crude into fuel oil widened to $11.30 a barrel in the quarter, from a $2.80 a barrel loss a year earlier, SK Innovation said on its website. Still, cracking margins of gasoline were $22.90 a barrel, compared with $12.30 a barrel.
The company’s refining unit, SK Energy, had sales of 13.3 trillion won and operating profit of 78.5 billion won. The refinery plans to shut some of its crude distillation units for regular maintenance in March, May and August, Jo Eun Kee, an executive at SK Energy, said today, without elaborating.
SK Global Chemical Co., the company’s petrochemical unit, expects two aromatic plants under construction in Singapore and in Ulsan, South Korea, to begin operations in 2014, and contribute more than 200 billion won of operating profit a year.
This estimate was based on combined output of 700,000 metric tons a year and a processing margin of $300 a ton, Lee Hyeon Sam, senior manager of management analysis team of SK Global, said today. Separately, the company is also building a paraxylene plant in its Incheon refinery in South Korea.
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