Profits skid 67% at SK Innovation due to prices

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Profits skid 67% at SK Innovation due to prices

SK Innovation, Korea’s top oil refiner, said Friday that its second-quarter net profit tumbled 67 percent from a year earlier on weak refining margins.

Net profit stood at 168.9 billion won ($142 million) on a consolidated basis in the April-June period, compared with 512.6 billion won a year earlier, the company said in a regulatory filing.

Operating income plunged 41.6 percent on year to reach 497.5 billion won in the second quarter, with sales declining 2.5 percent on year to 13.1 trillion won over the cited period.

Industry data showed the benchmark Singapore complex gross refining margin (GRM) was around $3.4 per barrel in the second quarter this year, compared with $6 a year earlier.

Usually, Korean refiners generate profit if the refining margin stays above at least $4 per barrel. SK Innovation’s refining business accounts for more than 70 percent of its sales.

SK Innovation said its petrochemical business logged an operating income of 184.5 billion won in the second quarter, while its lubricant unit posted an operating income of 78.2 billion won during the three-month period.

However, its battery business had an operating loss of 67.1 billion, SK Innovation said.

The company said its earnings in the second half are expected to improve on a recovery in refining margins and high demand for low-sulfur fuel oils ahead of a new International Maritime Organization (IMO) regulation that comes into effect next year. The sulfur content cap for marine fuels will be lowered from 3.5 percent to 0.5 percent.

Regarding speculation that Japan may expand its trade restrictions to battery components, in addition to semiconductor materials, SK Innovation said it is closely monitoring the situation.

The company said its investment is expected to be around 3.5 trillion won this year, with 1 trillion won going toward the battery unit.

Meanwhile, SK Innovation said it has decided to pay out interim dividends worth 141.1 billion won.

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