S-Oil suffers first loss in 34 years during 2014
S-Oil announced its performance for last year on Friday, which showed its first operating loss since 1980.
The nation’s third-largest refiner said it posted an operating loss of 258.9 billion won ($236 million) in 2014, a big dive from the 366 billion won in operating profit it recorded in 2013.
The company’s net loss was 264.3 billion won last year, which also is a decrease from 289.6 billion won profit in 2013. Revenue declined 8.3 percent year-on-year to 28.5 trillion won.
S-Oil was hit especially hard in the fourth quarter, as more than 82 percent of its operating loss for the entire year occurred in the October-December period following the steep oil price dive and squeezed profit margins.
“With falling oil prices, losses from inventory and margins were inevitable,“ the company said in a press release. “But by reducing inventories and enhancing margins, the size of the loss was minimized.”
Global oil prices took another downturn when the Organization for Petroleum Exporting Countries declined to cut production in late November as the supply of oil extracted from shale in North America continued to rise.
The loss from the refinery business, which accounts for 80 percent of S-Oil’s revenue, was mitigated by its petrochemical and lubricant business. But even that wasn’t enough to avoid an overall loss.
S-Oil said operating profit from lubricants was 257.8 billion won and from petrochemicals 182 billion won. Its refinery business suffered a 698.7 billion won operating loss.
S-Oil said the refinery business is likely to rebound this year because crude oil prices are expected to stabilize.
“Inventory losses will decline, and while the oversupply problem should be eased, the expansion of facilities in the industry is not likely,” said the company. “Low oil prices will give a boost to demand in the United States and China.”
The company expects the profit margin for paraxylene will recover starting from the second half of the year.
BY JOO KYUNG-DON [firstname.lastname@example.org]