SK Energy Petrochemical biz marks record-breaking performance
SK Energy, Korea's leading energy provider, announced 2nd quarter earnings results for 2009. 2nd quarter revenue and operating profit decreased by 26% and 67% year-over-year(YoY) to stand at KRW 8,928.7 billion and KRW 177.6 billion respectively, while net income increased by 16% to KRW 301.4 billion from the same period 2008.
Revenue for the 2nd quarter declined by 26% YoY to KRW 8,928.7 billion due to a slowdown in the global marketplace and lower product prices caused by significantly lower crude oil prices.
In spite of the increased petrochemical and E&P earnings, SK Energy's operating profit for the 2nd quarter decreased by 67% YoY to KRW 177.6 billion, mainly due to weakness in the petroleum and lubricant businesses affected by depressed refining margins and reduced base oil margins respectively.
The quarter's net income increased by 16% YoY to KRW 301.4 billion, mainly due to foreign exchange gain from strategic foreign exchange risk management and higher equity method earnings from the improved earnings generated by SK Energy's subsidiaries, in particular SKEI, based in Singapore.
SK Energy's financial stability continued to strengthen in the last quarter despite challenging business environments. The company's debt-to-equity ratio decreased from 207% at the end of 2008 down to 184% at the end of 1st half this year. Net debt ratio of the company has also decreased from 85% to 77% for the same period.
Mr. Joon-Sung Choi, Head of Investor Relations and Controller at SK Energy, said, “Amid continued volatile business environment and global economic slowdown, SK Energy achieved rise in net income by 16% YoY due to the foreign exchange gain, in spite of drop in operating profits.” He added, “Although the business environment for the 2nd half of 2009 undoubtedly will be challenging, we are committed to maximizing our profits by implementing operational excellence and maintaining optimal utilization, supported by efficient and effective business and marketing strategies.”
Business Sector Performance:
• The revenue of petroleum business decreased by 30% YoY, to KRW 5,830.4 billion. The business experienced the first operating loss of KRW 68.3 billion since the 4th quarter of 2006, a main driver of the drop in operating profit of the company, is largely due to the sharp drop in simple and cracking refining margins.
• Refining margins dropped significantly quarter-on-quarter, from rising crude oil prices, relatively weak product prices caused by additional capacity from new refineries, and reduced demand for petroleum products.
• The business's export, however, showed strong results. The three light distillates – gasoline, diesel, and kerosene – export posted 45% increase YoY, to 18.9 million barrels in the quarter, while domestic sales of three light distillates in the quarter increased by only 7%, to 20.3 million barrels.