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SK INNOVATION REPORTS 4Q and FY 2010 EARNINGS RESULTSJan. 06, 2012
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SK INNOVATION REPORTS 4Q and FY 2010 EARNINGS RESULTS:

 

        The 4th quarter revenue and operating profit increased to KRW 12,196.0 billion, KRW 443.2 billion, respectively. The company turned to net income for the 4th quarter of KRW 211.8 billion from net loss of KRW 116.9 billion for the same period last year.

        During the fiscal year 2010, SK Innovation’s revenue, operating profit and net income increased by 22%, 88%, and 82% YoY to KRW 43,867.5 billion, KRW 1,706.8  billion, and KRW 1,236.3 billion respectively.

        As of January 1, 2011, former SK Energy was changed to SK Innovation with three major subsidiaries, SK Energy (Petroleum), SK Global Chemical (Petrochemical), and SK Lubricants by spinning off its petroleum and petrochemical businesses.

 


* Please note that result figures are subject to further verification by independent auditors.

* Former SK Energy has been changed into SK Innovation as of January 1, 2011. The following results reflect performance of former SK Energy in the 4th quarter and 2010.

 

SEOUL, January 20, 2011 – SK Innovation [KS 096770], Korea’s leading energy provider, today announced the 4th quarter and full fiscal year earnings results of 2010. The 4th quarter revenue and operating profit increased to KRW 12,196.0 billion and KRW 443.2 billion, respectively. Its net income turned to profit side of KRW 211.8 compared to the same period in 2009. The growth resulted from the higher oil prices and improved refining margins during the quarter.

 

During the Fiscal Year 2010, SK Innovation’s revenue, operating profit and net income rose by 22%, 88% and 82% YoY, to KRW 43,867.5 billion, KRW 1,706.8 billion, and KRW 1,236.3 billion respectively.

 

The company, however, posted non-operation loss of KRW 176.3 billion, largely due to foreign exchange related loss and hedging loss from strong product margin. SK Innovation’s quarterly equity method earnings from its subsidiaries marked KRW 98.3 billion.

The company’s financial structure continued to improve during the fiscal year. Its debt-to-equity ratio and net debt ratio at the end of 2010 decreased by 38% points and 14% points YoY, to 142% and 58.2% respectively.

 

Mr. Jin Seok Cha, Chief Financial Officer at SK Innovation, said, “SK Innovation achieved healthy growth during the 4th quarter and the fiscal year 2010, spearheaded by strong performance of petroleum business and solid growth of E&P business.” He added, “We forecast continued strong performance in the fiscal year 2011 driven by favorable business outlook from further global economic recovery and positive effects of the spin-off, which took place at the beginning of this year”

 

In line with the company’s stable dividend policy, SK Innovation has decided to maintain 2010 cash dividends at KRW 2,100 per common share, the same level as 2009.

 

As of January 1, 2011, the former SK Energy renamed as SK Innovation and has spun off its petroleum and petrochemical businesses to 100% subsidiaries to form the new SK Energy and SK Global Chemical. Following the spin-off, SK Innovation now holds three major subsidiaries, SK Energy, SK Global Chemical and the previously spun off SK Lubricants. The spin-off of petroleum and petrochemical business is to respond rapidly to the changes in the business environment and expedite growth through fast decision-making process.

 

FISCAL YEAR 2010 RESULTS

 

The revenue for the fiscal year 2010 marked KRW 43,867.5 billion, a 22% increase from that of 2009. Operating profit for the year increased by 88% YoY to KRW 1,706.8 billion. The company’s net income also posted 82% increase from KRW 679.8 billion in 2009 to KRW 1,236.3 billion in 2010.

 

The company’s annual results were largely driven by strong performance of its petroleum business, which rallied on the back of healthier refining margins from strong demand for petroleum products in the region. Its E&P business has also shown steady and strong performance on rising oil price to support the overall growth of the company.

 

2011 BUSINESS OUTLOOK

 

Following are the company’s key assumptions that are the major variables for its businesses.

 

 

2010

2011(E)

Dubai Crude Price(USD/B)

78.0

85.0

Average F/X (KRW/USD)

1,156

1,115

CAPEX (KRW)

1.0 trillion

1.5 trillion

E&P Daily Production (BOE/D)

59,200

68,200

 

BUSINESS DIVISION PERFORMANCE

 

Petroleum

·         The 4th quarter revenue of petroleum business increased by 26% YoY to KRW 8,616.3 billion. The business turned to operating profit for the quarter of KRW 369.7 billion from operating loss of KRW 124.9 billion for the same period last year.

·         The main drivers of the strong performance were healthy refining margins on solid demand.  Increased demands for heating oil and aviation fuel as well as shortage of diesel in China lead to stronger refining margins.

·         SK Innovation forecasts continued growth of demand in 2011 based on global economic recovery, and limited capacity additions from China and Middle East.

 

Petrochemical

·         Petrochemical business posted KRW 3,301.0 billion in revenue, 28% YoY increase, and operating profit of KRW 8.7 billion, 86% YoY decreased, for the 4th quarter.

·         The business’s weak profitability for the quarter resulted from increased feed stock Naphtha price, which adversely affected product spreads. Non-recurring costs from the regular facility maintenance, incurred at the end of the year, also reduced the operating profit.

·         SK Innovation forecasts better market condition in 2011 as cracker expansion is expected to be limited while solid demand from China will continue based on better economic outlook.

 

 

 

Exploration & Production (E&P)

·         SK Innovation’s E&P business continued to increase its revenue and operating profit during the 4th quarter. Its revenue marked KRW 214.6 billion, 20% YoY increase, and its operating profit increased by 29% YoY, to KRW 116.4 billion, mainly due to higher production and crude oil prices.

·         The average daily production in the 4th quarter marked 74,000 barrels of oil equivalent per day (BoE/D), thanks to the increased production from Brazil BMC-8 and the stabilized gas production from Peru LNG and Yemen LNG.

·         In December, 2010, SK Innovation decided to sell entire shares owned by its subsidiary, SK do Brasil, to Maersk Oil in Denmark at USD 2.4 billion. Based on the liquidity secured from the sales, E&P business aims to strengthen its E&P portfolio and continue to seek operatorship.

 

Subsidiaries/SK Lubricants

·         During the 4th quarter, SK Innovation recorded total equity method earnings of KRW 98.3 billion, 465% YoY increase, resulting from strong performances of its subsidiaries including SK Lubricants.

·         SK Lubricants posted quarterly revenue of KRW 534.5 billion and operating profits of KRW 75.5 billion. SK Lubricants expects stable earnings to continue on sustained global economic recovery and increased automobile sales.

·         SK Lubricants plans to complete its first lubricants plant in Tianjin, China by the end of 2011, while the company continues to pursue a base oil plant in Europe under joint venture with Repsol, Spain.

4Q and FY 2010 FINANCIAL PERFORMANCE

<4Q and FY 2010 FINANCIAL PERFORMANCE>

(Unit: KRW billion)

4Q 09

4Q 10

YoY(%,Q)

2009

2010

YoY (%,FY)

Revenue

9,673.5

12,196.0

26%

35,827.5

43,867.5

22%

Operating Profit

0.7

443.2

N/A

907.7

1,706.8

88%

E B I T D A

158.6

567.9

258%

1,545.0

2,175.9

41%

Non-Operating Profit

-115.6

-176.3

N/A

-88.1

-227.5

N/A

Net Income

-116.9

211.8

N/A

679.8

1,236.3

82%
























About SK Innovation

 

Founded in 1962 as the Korea’s first oil refiner, SK Innovation, formerly called SK Energy, is one of the world’s leading energy and petrochemical companies with nearly 5,600 employees. It posted KRW 43.9 trillion in sales in 2010.

 

In January 2011, the former SK Energy has transformed into SK Innovation with its three subsidiaries of SK Energy, SK Global Chemical and SK Lubricants. The independent four-company management structure separating petroleum and chemical business is to respond rapidly to the changes in the business environment and expedite growth through fast decision-making process. Each company will be managed with optimized strategies fitted for its unique business environment under the new vision and goals.

 

Based on its technological expertise, SK Innovation will be renewed as a leading technology company focusing on lithium-ion batteries for electric vehicles, I/E(information electronic) materials, and E&P(exploration & development) business. SK Energy will evolve into a major trading company as it strengthens its position as the largest oil refiner and seller in Korea. SK Global Chemical will grow to become a leading chemical company in Asia by entering the burgeoning Chinese market. Moreover, SK Lubricants will continue to grow not only in the base oil market, but also in the lubricant market through affiliation with major European, North American and Asian companies.

 

 

Contact at SK Innovation

 

Taehoon Chung

Public Relations Team

Tel. (82)2-2121-5957

Mobile. (82)10-9026-2581

Email. thchung@sk.com

 

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