Major refiners suffer weak Q2 earnings, set to see rebound in Q3

SEOUL, Aug. 12 (Yonhap) -- South Korean oil refiners, led by top player SK Innovation Co., logged weaker than expected earnings in the April-June period due to low oil prices and inventory losses, but expect things to improve in the current quarter on better refining margins, industry sources said Saturday.

SK Innovation posted a net profit of 292 billion won (US$262 million) in the second quarter, more than halved from a profit of 626 billion won a year earlier because of lower oil prices and inventory losses.

Operating income plunged 62.4 percent on-year to reach 421 billion won, with sales rising 2.7 percent to 10.56 trillion won over the cited period.

The refiner said low oil prices led to an increase in inventory losses, which sharply dented its bottom line. Such a slump was partly offset by a growth in its petrochemical business, SK Innovation said.

GS Caltex Corp., the No. 2 refiner in South Korea, reported that its second-quarter earnings dipped 71 percent on-year to reach 135 billion won, with operating income also down 73 percent to 210 billion won over the cited period.

Its sales, however, rose 12.5 percent to 6.95 trillion won, it added.

S-Oil Corp., the third-largest refiner, also saw its second-quarter net profit drop to 67 billion won from 444 billion won a year earlier due to lower oil prices and a rise in inventory losses.

The company said its operating income dropped 82 percent on-year to reach 117 billion won over the cited period, while sales rose 11.1 percent on-year to reach 4.67 trillion won.

The price of Dubai crude, South Korea's benchmark, stood at $49.8 per barrel on average in the second quarter, down from $53.1 per barrel in the previous quarter. But local refiners suffered a massive loss in their crude inventory due to volatile movement in global oil prices.

Analysts said demand for gasoline may strengthen as the global economy is showing signs of a recovery and their product margins will be good on the back of tight supply.

"Local refiners' margins have improved thanks to a rise in oil prices, and their current pace will be extended under the current quarter," said Park Yun-joo, an analyst at Mirae Asset-Daewoo Securities.

Refining margins will stay firm this year, in part due to solid demand for oil from Asian countries, and demand for power generation will also remain solid.

Refiners in South Korea racked up record earnings last year largely due to improved cracking margins, inventory gains and solid demand for petrochemical products.

The country's four major oil refiners logged a combined operating income of 8.03 trillion won last year, an all-time high figure.

sam@yna.co.kr

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