In Q2, SK Innovation shows a solid comeback

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In Q2, SK Innovation shows a solid comeback

SK Innovation, which went into the red last year for the first time in 37 years, is back on track.

After making 321 billion won in operating profit in the first quarter, the nation’s leading oil refining company is predicted to report even better results in the second.

According to financial institutions on Monday, SK Innovation is expected to report 13 trillion won in revenues and about 800 billion won in operating profit in the second quarter. The estimated revenues are a 21 percent drop from a year ago, but the year-on-year operating profit is expected to be a turnaround from last year’s 50.2 billion won in operating losses.

“The company can thank the recent increase in international oil prices and improved profitability in the oil refining business,” said analyst Choi Ji-hwan of NH Investment & Securities. “Under the circumstances, this year’s operating profit for SK Innovation will be about 1.9 trillion won. The outlook for operating profit next year has been raised too.”

Last year, all of the nation’s oil refining companies had the cope with plunging international oil prices that caused oversupply in the global market. SK Innovation reported a 224.1 billion won operating loss last year, which compared to a 1.606 trillion won operating profit in 2013.

The lousy performance ended up impacting wages at the refining company. According to SK, the average salary per employee dropped by 1.8 percent last year from a year earlier, or from 67.14 million won to 65.93 million won. A similar thing happened at other companies including GS Caltex, where the average salary dropped by 8.8 percent from 91.07 million won to 84.02 million won during the same period.

Since the company has gotten back on track, it is investing again. According to the company, it is doubling the capacity of electric car battery production at the Seosan plant in South Chungcheong, which will enable it to churn out 30,000 electric vehicle batteries per year. The company currently supplies batteries for Kia Motors’ Soul EV box car and electric taxis and cars for public institutions in China.

In order to expand market share in China, the company established Beijing BE SK Technology, a joint venture with Beijing Auto, in January. The company is expected to supply batteries for hybrid buses to a Chinese company in the second half. The company also has plans to sell batteries for plug-in hybrid vehicles to both Korean and global automakers next year.

“We consider the current crisis as an opportunity to improve the company’s overall business structure,” said a spokesman for the company. “We will try to strengthen our partnerships with companies in Saudi Arabia and Kuwait and also will try to improve the overall car battery quality.”

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