By Kang Seung-woo
SK Group is expected to hail its new leading affiliate this year, as its oil-refining unit is on its way to becoming the most lucrative subsidiary of the nation’s third-largest conglomerate.
According to the group, headed by Chairman Chey Tae-won, SK Innovation, Korea’s top oil refiner, is certainly likely to beat SK Telecom in operating profit in 2011.
The nation’s leading mobile carrier has been the undisputed profit champion under SK’s wing for years.
However, the two subsidiaries’ earnings for the first quarter of this year show that the pecking order is likely to change.
Last week, SK Innovation announced that its earnings nearly tripled in the January-to-March period from a year ago on the strength of a rise in oil prices.
Operating profit advanced nearly three-fold to 1.19 trillion won and net income came to 853.3 billion won ($794.4 million), compared with 303.6 billion won.
Sales also rose 40 percent year-on-year to 17.08 trillion won in the cited period.
On the other hand, SK Telecom said Wednesday that its operating profit increased 29 percent to 614.3 billion won on eased marketing costs and stock sales.
Its net profit reached 537.3 billion won, compared with 343.3 billion won a year ago, while sales rose 3.8 percent year-on-year to 3.9 trillion won in the three-month stretch.
Market watchers expect that SK Innovation’s operating profit for the full year of 2011 will reach between 3 trillion won and 3.8 trillion won, while that of SK Telecom will come to between 2 trillion won and 2.6 trillion won.
Profits for the telecom operator has remained flat at around 2 trillion won over the past several years after failing to find a new growth engine.
For the oil-refining firm, it found sources of earning in overseas exploration and exports of petroleum products in its bid to become a comprehensive energy enterprise.
The sea of change is shown in their stock prices.
The stock price of SK Innovation, which remained at between 40,000 won and 50,000 won six or seven years ago, was 233,000 won as of Wednesday’s close, while that of SK Telecom remained at 166,000 won after hitting a five-year high of 278,500 won in December 2007.
In terms of market value, the refiner has already surpassed the mobile carrier ― 21.5 trillion won to 13.4 trillion won ― as of Wednesday.
“SK Innovation has evolved into a true cash cow for the business group after developing new business portfolios, while SK Telecom is having trouble coming up with new growth engines,” said an official of the SK Group.
SK Innovation, formerly known as SK Energy, spun off its petroleum and petrochemical businesses into two wholly-owned units ― SK Energy and SK Global Chemical ― in January this year. In September 2009, SK Energy split off its lubricants segment as SK Lubricants.