By Lee Hyo-sik
S-Oil, the country’s third-largest refiner by revenue, said Monday that its operating profit reached 238.1 billion won ($216.5 million) in the first three months of this year due to improved refining margins.
This is a turnaround from a 213.2 billion won operating loss in the previous three months.
However, the refiner’s sales fell 30.2 percent to 4.37 trillion won in the first quarter from 6.27 trillion won in the fourth quarter of 2014.
S-Oil’s improved bottom line in the first quarter indicates that three other local refiners ― SK Innovation, GS Caltex and Hyundai Oil Bank, which have yet to announce their first-quarter results ― could have performed better than in 2014.
“Our first quarter sales declined from the previous quarter amid the continued global economic downturn,” said an S-Oil spokesman. “In addition, falling gasoline and other fuel prices at home and abroad reduced the sales value. We expanded inventories ahead of scheduled facility maintenance in the second quarter. But rising refining margins helped improve our profitability from January to March.”
The firm’s 5.4 percent operating margin was the highest since the third quarter of 2013. Saudi Aramco, the world’s largest crude exporter, holds a 63.4 percent stake in S-Oil.
By sector, S-Oil’s refining business generated a 119 billion won operating profit, posting a surplus for the first time since the second quarter of 2013.
The company expects its refining operation will likely contract in the coming months due to falling demand for heating fuel. But many of refiners in the Asia-Pacific region will suspend their operations in the second quarter for routine maintenance, which would help S-Oil maintain its margin at healthy levels.
The refiner’s petrochemical business posted a 46.1 billion won operating profit, up 63 percent from the fourth quarter of 2014, thanks to declining inventory losses.
“An outlook for our petrochemical operation this year has become more positive in line with an easing of the global paraxylene (PX) supply glut. A series of recent explosions at China’s paraxylene chemical plants have helped alleviate the oversupply,” the spokesman said.
S-Oil’s lubricating oil division earned 73 billion won in operating profit in the first quarter, up 12 percent from 65.2 billion won three months earlier, thanks to growing demand for high-quality lubricants at home and abroad. The firm expects demand will continue to head upward.
S-Oil shares fell 2.61 percent, or 2,000 won, to 74,500 won Monday.