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Sun, June 11, 2023 | 09:59
Business
SK Innovation suffers loss for first time in 37 years
Posted : 2015-01-08 16:54
Updated : 2015-01-08 18:11
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By Lee Hyo-sik

SK Innovation, the nation's largest oil refiner, will most likely post an operating loss in 2014, hit by plunging oil prices.

If confirmed, it would be the first time in 37 years that the refiner posted an operating loss. The company is expected to announce its 2014 result on Feb. 5.

According to industry analysts, Thursday, SK Innovation and its five subsidiaries went into the red last year, the first time since 1977.

In the first nine months of 2014, they posted a combined operating profit of 238.8 billion won. But their bottom line deteriorated sharply in the fourth quarter in line with plummeting crude prices.

According to the Korea National Oil Corp., the price of Dubai Crude, which accounts for most of Korea's oil imports, has dropped over 50 percent in the past seven months. Oil prices fell at a much steeper pace in November and in December after the Organization of Petroleum Exporting Countries (OPEC) decided not to cut production. It fell $1.48 to $46.6 per barrel Wednesday, the lowest since March 2009.

"It is quite certain that SK Innovation failed to make profits in 2014," Daishin Securities analyst Yoon Jae-sung said. "The refiner can generate larger refining margins when oil prices are high. But its margins shrink when prices fall."

In addition, the value of company's oil reserves is estimated to have dropped by over 1 trillion won as crude became cheaper, according to Yoon, who said there wasn't much SK and other refiners could do to remain profitable.

"However, the things will likely improve for SK and others this year. Unless crude oil drops to $10 or $20 per barrel, they will turn around," the analyst said.

NH Investment Securities estimated that SK Innovation would lose 253.3 billion won in the fourth quarter of last year as a result of falling oil prices and the oversupply of Para-Xylene and other intermediate refined materials.

"Our bottom line deteriorated on falling crude prices last year," an SK Innovation spokesman said. "We do not know yet whether the company is in the red. What we can say is that we will do much better this year."

Emailleehs@koreatimes.co.kr Article ListMore articles by this reporter
 
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