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Title SK INNOVATION REPORTS 4th QUARTER 2015 EARNINGS Date 2016-02-03
Contents ● Revenue in the 4rd quarter ended December 31, 2015 at KRW 10.868 trillion
● Operating profit in the 4th quarter was KRW 307.3 billion
● During fiscal year 2015, the revenue was KRW 48.359 trillion, while operating profit was KRW 1.98 trillion.


 


*Please note that the earnings results for the fiscal 4th quarter of 2015 are subject to further verification by independent auditors.

 

SEOUL, February 3, 2015 SK Innovation [KS 096770], Korea’s leading energy provider, today announced its financial results for the fourth quarter ending December 31, 2015.

 

Revenue in the fourth quarter was KRW 10.868 trillion, down by 12.7% from KRW 12.447 trillion from the previous quarter. The fourth quarter revenue declined as weak oil prices have pushed down product prices.

 

The fourth quarter operating profit stood at KRW 307.3 billion, down by 15.6% from KRW 363.9 billion, quarter-on-quarter. The drop in the operating profit mainly reflected one-time expenses such as a write-down related to Jurong Aromatics Corporation(JAC) in Singapore.

 

 

FISCAL YEAR 2015 RESULTS

 

SK Innovation’s revenue for the fiscal year 2015 was KRW 48.359 trillion, down 26.6% from FY2014. The company’s operating profit for FY 2015 was KRW 1.98 trillion. SK Innovation succeeded in returning to profit on the back of strong refining margins along with tight supply despite weak oil prices, compared to an operating loss in FY2014.

 

 

4rd QUARTER BUSINESS ANALYSIS

 

Petroleum

·         Petroleum business recorded revenue of KRW 7.764 trillion and an operating profit of KRW 285 billion in the fourth quarter, up by KRW178.2 billion quarter-on-quarter. The operating profit rose due to strong oil refining margins and smaller drop in oil prices compared to the previous quarter.  

·         Oil prices are expected to stay around the current level in 2016 as oil producers engage in intensified competition to take more market shares. However, it is likely to rebound a little if non-OPEC countries such as the United States cut production.

·         The refining margins are expected to maintain at a stable level due to the rising demand for gasoline along with weak oil prices. However, it is also noted that diesel crack spreads can be weaker if global refineries boost operation and the Chinese economic slowdown continues.

 

Petrochemical

·         Petrochemical business posted revenue of KRW 2.138 trillion and an operating loss of KRW 46.9 billion in the fourth quarter, down by KRW 166.7 billion compared to the previous quarter. The loss reflected weak product spreads for polymer and benzene and one-time expenses such as a write-down related to Jurong Aromatics Corporation(JAC) in Singapore.

·         The spread for ethylene remained strong as the supply in the market reduced due to troubles in cracker facilities in the region. Paraxylene spread remained stable, while the spread for benzene has lowered as the demand weakened due to seasonal reason.

·         The spread for ethylene is forecast to stabilize at the current levels based on the balance of supply and demand. Paraxylene spread is expected to improve gradually as the supply and demand sides stabilize.

 

Lubricants

·         Lubricants business posted revenue of KRW 680.6 billion and an operating profit of KRW 113.8 billion in the 4th quarter, a KRW 30.8 billion rise from the previous quarter.

·         The operating profit jumped as weak oil prices led to higher base oil margin and sales volume expanded.    

·         The base oil margin is expected to be stable as the demand for premium base oil gradually rises.

 

Exploration & Production

·         SK Innovation’s E&P business recorded revenue of KRW 144.6 billion and an operating loss of KRW 25.9 billion in the 4th quarter, down by KRW 24.1 billion from the previous quarter.

·         The operating loss reflected the impact from weak oil prices and one-time costs after closing the exploration for the Zhambyl block in Kazakhstan.

 

 

4Q 2015 FINANCIAL PERFORMANCE*

 

(Unit: KRW in billions)

4Q 14

3Q 15

4Q 15

QoQ

YoY

Revenue

16,105.0

12,447.5

10,868.6

-12.7%

-32.5%

Operating Profit

-456.6

363.9

307.3

-15.6%

N/A

 

 

 

4Q 2015 BUSINESS PERFORMANCE *

 

(Unit: KRW in billions)

4Q 14

3Q 15

4Q 15

Petroleum

Revenue

OP

11,986.2

-593.0

9,036.0

106.8

7,764.4

285.0

Petrochemical

Revenue

OP

3,013.8

78.3

2,354.3

119.8

2,138.5

-46.9

Lubricants

Revenue

OP

792.7

71.5

665.2

83.0

680.6

113.8

Exploration & Production

Revenue

OP

230.1

91.1

159.3

-1.8

144.6

-25.9