|SK ENERGY REPORTS 3rd QUARTER 2010 EARNINGS RESULTS:Oct. 22, 2010|
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o 3rd quarter 2010 revenue increased by 11% year-over-year(YoY), to KRW 10,166.8 billion, mainly driven by higher product price
* Please note that earnings results for 3Q 2010 are subject to further verification by independent auditors.
SEOUL, October 21, 2010 – SK Energy, Korea’s leading energy provider, today announced the 3rd quarter earnings results for 2010. The 3rd quarter revenue and operating profit increased by 11% and 296% year-over-year(YoY) to stand at KRW 10,166.8 billion and KRW 325 billion respectively. As a result, net income increased by 36% to KRW 343.8 billion from the same period in 2009.
SK Energy’s revenue growth for the quarter compared to the same period of year 2009 was largely driven by the higher product prices from rise in crude oil prices and higher operation rates.
SK Energy’s quarterly operating profit increased significantly by 296% YoY to KRW 325 billion, mainly due to the turnaround of its petroleum business and favorable performance of the exploration and production (E&P) business, in spite of weak performance of the petrochemical business.
The quarter’s net income increased by 36% YoY to KRW 343.8 billion, led by a sharp increase of operating profit and steady equity method earnings from the company’s subsidiaries, despite lower foreign exchange gains on the non-operating side.
SK Energy’s financial stability also continued to improve as the company lowered its debt-to-equity ratio from 179.7% at the end of 2009 down to 139% as of the end of the 3rd quarter this year. Net debt-to-equity ratio of the company also decreased from 72.3% to 60% during the same period.
Mr. Hyun-Chun Jung, Head of Treasury, Finance & Investor Relations at SK Energy, said, “SK Energy showed strong performance overall during the 3rd quarter compared to the same period of last year due to the turnaround of our petroleum business. Compared to the previous quarter, we were able to maintain its business performance with solid results from our E&P business and SK Lubricants, our biggest subsidiary, despite regular maintenance at refining units and the fluctuation in exchange rate.” He added, “In the upcoming 4th quarter, we expect the company’s performance to be further driven by favorable market conditions.”
BUSINESS SECTOR PERFORMANCE
· The company’s petroleum business recorded KRW 7,127.4 billion in revenue and KRW 155 billion in operating profit, turning to profit side compared to the same period in 2009.
· Steady simple refining margin and improved cracking margin, which was supported by solid demand, were the driving forces of the business’s performance.
· Regular maintenance and the F/X difference between the points of crude purchase and product sales, however, led to decrease in operating profit by 54% compared to the previous quarter.
· Petroleum business forecasts better performance in the 4th quarter due to strong refining margins as refineries in the U.S. and Europe will undergo regular maintenance. The business also forecasts that rising demand for heating oil in the winter season will also contribute to better performance.
· SK Energy’s petrochemical business marked revenue of KRW 2,767.4 billion, 2% YoY increase and 14% QoQ decrease, with operating profit of KRW 76.6 billion, 56% YoY and 49% QoQ decrease.
· The business showed weak performance as all product spreads showed annual low levels in July and remained weak throughout the 3rd quarter. The business’s weak profitability was largely due to weak performance of its aromatic products which take up more than 60% of its sales.
· As product prices have shown an upward trend since August and the business’s competitors plan regular maintenance, SK Energy’s petrochemical business forecasts improved performance in the 4th quarter. The business is also preparing for reactivating its No.1 Naphtha Cracker Center(NCC) which has been shut down since the end of 2008.
Exploration & Production (E&P)
· The E&P business posted revenue of KRW 206 billion, 32% YoY increase, with operating profit of KRW 110.9 billion, 60% YoY increase, driven by the increase in production from its major blocks and rise in exchange rates.
· The business’s average daily production in the quarter increased to 67,000 barrels of oil equivalent (BOE) per day, about 15,000 BOE per day increase compared to the previous quarter, thanks to the additional volume from Peru 88/56 and Brazil BMC-8 blocks. The E&P business is expected to show continuous production increase, led by successful commercial operation of Yemen LNG and Peru LNG.
· The business’ strong performance is forecast to continue until the 4th quarter as high oil prices are expected until the end of this year.
· SK Energy recorded equity method earnings of KRW 94 billion, 15% YoY decrease, resulting from weak performances of its subsidiaries except SK Lubricants.
· SK Lubricants recorded revenue of KRW 584.4, 51% YoY increase and operating profit of KRW 112.8 billion, 148% YoY increase, mainly driven by increase in base oil price and sales volume.
· SK Lubricants forecasts continued robust performance in the 4th quarter as global economy shows signs of recovery, and rising demand for its products continues due to increase in sales of new cars .
About SK Energy
Founded in 1962 as Korea’s first oil refiner, SK energy is one of the world’s leading energy and petrochemical companies with nearly 5,500 employees, KRW 35.82 trillion in sales, overseas branch offices and subsidiaries in 19 countries as of the end of year 2009. The company is strategically positioned as Korea’s largest and Asia’s fourth largest refiner with a refining capacity of 1.12 million barrels per day.
SK energy’s leadership allows it to maintain competitive advantages in regional refining markets while penetrating new markets around the world through a diversified business portfolio. SK energy’s rapid growth in its business sectors coupled with an expanding position in China has increased its global footprint and helped position it as one of the most significant enterprises in Asia Pacific’s energy marketplace.
Contact at SK Energy
Public Relations Team
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