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Title SK Innovation Exceeds the 1 Trillion Operating Profit Mark with More Than 50% from Non-oil Businesses Date 2017-04-25
Contents * Sales of KRW 11.3871 trillion, operating profit of KRW 1.43 trillion, and profit before taxes of KRW 1.163 trillion
* Maximized profit during global low prices
* Historical record in operating profit for the chemical industry with lasting effects from the development of the group III lubricant business


 

The 1st quarter performance data included in this press release has not undergone the external audit process and thus, may be subject to change.

 

SK Innovation (CEO: Jun Kim) announced on December 25, 2017 that its performances for the 1st quarter of the year amounted to KRW 11.3871 trillion in sales and KRW 1.43 trillion in operating profit, which amount to a KRW 1.9289 trillion (+20%) and KRW 159.5 billion (+19%) increase compared with the previous quarter, respectively.

This is the third time that SK Innovation’s quarterly operating profit has exceeded the KRW 1 trillion mark. In particular, this occasion is meaningful in that the company’s nonoil businesses, such as its chemical and lubricant businesses, contributed to more than 50% of the company’s operating profit, signifying a transition from the petrochemical business to the energy and chemical businesses in terms of profit generation.

  • Results per business area

The oil business recorded total sales of KRW 8.636 trillion and an operating profit of KRW 453.9 billion. With the refining profit margin remaining at steady levels and the loss of a boost from the high oil prices, the operating profit increased by KRW 61.5 billion compared with the previous year (+16%). This increase is interpreted as SK Innovation managing to maximize its profit despite the trend of low oil prices.

For the company’s chemical business, the reactivation of major production facilities following the regular maintenance in the previous quarter and the strong performance of major product spreads resulted in an operating profit of KRW 454.7 billion, which exceeds both the company’s historical record and the operating profit of its oil business.

The lubricant business recorded a KRW 8.5 billion (+10%) increase over the previous quarter amid the robust performance of lubricant spreads from the lack of supply, with a total operating profit of KRW 94.9 billion. Profits are expected to increase further during the 2nd quarter with a seasonal spike in demand.

The oil prospecting business benefited from the rise of global oil prices, with a KRW 28.5-billion increase over the previous quarter’s profits, which results to KRW 57.3 billion. The daily production average for the 1st quarter stood at 54,000 barrels or an 8,000-barrel decrease over the previous quarter.

  • Transition from an oil business to an energy-chemical business

For SK Innovation, the excellent performance of the 1st quarter is the evidence of its transition from an oil company to an energy-chemical company. This transition was built on the intensive investments in chemical and lubricant businesses as well as the development of new businesses in EV batteries and electronic materials.

Indeed, the recent results show the effects of these efforts. An examination of the operating profit ratio reveals that the oil business has faced a steady decline from 57% in 2015 to 50% and 45% for 2016 and the 1st quarter of 2017, respectively, while the chemical and lubricant businesses showed a steady increase from 46% in 2015 to 53% and 55% in 2016 and the first quarter of 2017, respectively.

New businesses are adding their weight to the profits as well. SK Innovation’s EV battery business is expected to increase its production facilities to 3.9 GWh, which is more than two times its present size, while the company plans to increase the driving distance per charge to 500 km by 2020. The electronic material business of Lithium-Ion Battery Separator (LiBS) and Flexible Copper Clad Laminate (FCCL) has contributed an operating profit of KRW 11.7 billion with the demand increase from China and the expansion of global IT and EV markets.