SK posts record earnings

SK Innovation, Korea’s leading energy company, achieved record earnings last year after its subsidiaries posted the highest figures to date in sales and operating profits, the company said.

It announced via a teleconference in Seoul yesterday sales of 68.37 trillion won ($61.13 billion) for 2011, up 27 percent on-year. It also posted 2.84 trillion won in operating profit on a consolidated basis according to Korean International Financial Reporting Standards, marking a rise of 51 percent. On the back of this, net profit for the year stood at 3.18 trillion won.

SK Innovation serves as the operating holding company for SK Energy, SK Global Chemical and SK Lubricants.

In the fourth quarter alone, the company, including its subsidiaries, posted 16.93 trillion won in sales and 343.1 billion won in operating profit.

The company said the record results derived from its lucrative oil development business and the strong performances of its subsidiaries, with SK Global Chemical and SK Lubricants also setting new records.

Despite growing uncertainties in the global financial markets triggered in large part by the euro zone crisis, the oil and chemical-related group’s performance was helped by its successful transition to an independent management system.

This enabled its subsidiaries to specialize in and focus on their respective core businesses. It also sped up their decision-making and overall efficiency as they developed stronger understandings of the markets in which they operate, the company said.

“We will further strengthen our position as a general energy group by continuing to discover new growth engines such as electric car batteries, IT and electronic materials and oil development,” the company said, adding that it would pursue stability and growth.

SK Innovation also achieved remarkable success in its oil development business by posting record sales of 1.03 trillion won last year, with an operating profit of 494.3 billion won. This led it to post a sales-to-operating profit ratio of 48 percent. Its sales have doubled since they passed 500 billion won in 2008.

The company, Korea’s only oil explorer, can also develop and sell mines abroad, it said.

“Our company purchases a mine, makes it productive and sells it back to other companies,” said Yoo Jung-min at the company.

In the third quarter of last year, SK Innovation sold an oil mine in Brazil to Maersk Oil, a Danish company, for $2.4 billion. The sale helped its operating profit grow by around 1.5 trillion won, according to the official.

The company acquires liquidity in this way and continues to make new investments in more mines. This is considered a new paradigm in the oil development business, the company said. Its decision to make investments in operating mines rather than underdeveloped mines has proven successful, the company said.

“Global demand for oil is forecast to recover in the second half of the year, and SK Innovation will see its profits go up through its new businesses,” said Oh Jeong-il at Shinyoung Securities.

By Song Su-hyun [ssh@joongang.co.kr]