SK Innovation strives to pump up stock price
SK Innovation Ulsan plant / Courtesy of SK Innovation
Refiner to debut at CES as battery specialist
By Nam Hyun-woo
SK Innovation is striving to pump up its stock price, which plunged on the global oil price decline, by expanding its business portfolio beyond oil refining into batteries.
The move comes as the battery business could dispel worries on oil price uncertainties, while the company's existing oil-refining business is largely swayed by the global oil price cycle.
According to the Korea Exchange, Monday, SK Innovation ended at 181,000 won ($160), down 0.82 percent from 182,500 won a session earlier.
The decline is the latest episode of the stock's downturn which has continued for three months. Since Oct. 2 when it ended at 225,500 won, the stock has declined by a whopping 19.7 percent as of Monday.
Analysts attribute the drop to the company's inventory valuation loss, which will likely hurt its earnings in the fourth quarter of this year.
The inventory loss came amid the sharp decline in the global oil prices which started in October. Since refiners refine crude purchased about three months earlier, a drop in oil price directly devalues their inventory crude.
Reportedly, domestic refiners accumulated inventory losses worth more than 800 billion won in the recent global oil price drop.
Along with the inventory losses, the refining margin, which directly affects a refiner's profitability, continues to drop.
According to Yuanta Securities Korea, Singapore Gross Refining Margin dropped to $2.60 per barrel as of Dec. 12, which is less than half of $7.20 per barrel, the average in December last year. Asian refiners use Singapore Gross Refining Margin as their standard reference.
Faced with headwinds, brokerages expect SK Innovation will log 215.7 billion won in operating profit in the fourth quarter of this year, down 74.5 percent from a year earlier.
As its stock continues to shed, SK Innovation published an article on its own PR website that investors should not miss high-dividend shares including SK Innovation, citing analysts saying “it is the right timing to buy SK Innovation given its potential to recover.”
Along with the move, the refiner released a series of press releases in October, promoting its potential to recover, but fell short of making a rebound.
To resuscitate the faltering price, the company is pinning its hope on the battery business, debuting next month at the upcoming Consumer Electronics Show (CES) in Las Vegas.
It will be the first Korean refiner to participate in the world's largest electronics technology event.
At the show, the company is expected to showcase its electric vehicle batteries, energy storage and other mobility technologies.
Though SK Innovation produces the lowest volume among the three domestic rechargeable battery makers, it has been making the most aggressive battery investment recently, building new plants in China and Hungary.
“Though SK Innovation is expected to show sluggish movements for a while due to aggravated profitability in its refining business, the demand for electric vehicles will likely make a significant contribution to its growth,” Eugene Investment & Securities analyst Hwang Sung-hyun said.