SK Innovation said on the 13th that first-quarter results improved sharply, led by the refining business. International oil prices surged due to the Middle East crisis, increasing inventory-related gains and improving export margins.
That day, SK Innovation disclosed that first-quarter sales on a consolidation basis were 24.2121 trillion won, up 15.2% from a year earlier, and operating profit swung to a surplus at 2.1622 trillion won. Net profit also swung to a surplus at 896.0 billion won.
The first-quarter improvement was driven by the lagging effect arising from the time gap between crude oil procurement and petroleum product sales and by higher inventory-related gains. Domestic refiners secure inventories in advance, considering the geographic distance from oil-producing countries and the time required for crude transport, storage and refining. During periods of rising oil prices, crude imported at lower prices in the past is reflected in costs with a lag, boosting refining margins and operating profit.
On Feb. 28, after the outbreak of the Iran war, the March average price of Dubai crude came to $128.5 per barrel, a sharp rise from the prior three-month average of $63.9. As oil prices climbed, sales prices for petroleum products such as diesel and jet fuel rose, while crude brought in before the price rise was reflected at an average price in product costs, creating a lagging effect.
A SK Innovation official said, "The lagging effect and inventory-related gains are numbers on the accounting books and are temporary gains that may shrink or disappear if oil prices fall going forward."
SK Energy's first-quarter sales were 11.9786 trillion won and operating profit was 1.2832 trillion won. Of the first-quarter operating profit, inventory-related gains were tallied at 780.0 billion won, about 60%.
SK Geocentric posted sales of 3.2130 trillion won and operating profit of 127.5 billion won. On the back of inventory effects from higher prices of naphtha feedstock, first-quarter operating profit swung to a surplus from the previous quarter. Profitability also improved as the spread (margin) for aromatic products rose, helped by regular maintenance at regional paraxylene (PX) facilities and the partial resumption of offshore sales of benzene (BZ).
SK Enmove recorded sales of 1.2223 trillion won and operating profit of 188.5 billion won. Despite margin declines due to higher oil prices in the first quarter, operating profit increased by 7.4 billion won from the previous quarter thanks to inventory effects and other factors.
SK On (battery business) posted sales of 1.7912 trillion won and an operating loss of 349.2 billion won. With a slight increase in North American sales volume and a recovery in Europe and Asia, the operating deficit narrowed by 91.6 billion won from the previous quarter.
SK Innovation E&S reported sales of 3.6961 trillion won and operating profit of 283.2 billion won. As city gas sales expanded on higher winter heating demand and the system marginal price (SMP) rose, operating profit increased by 165.2 billion won from the previous quarter.
SK Earthon posted sales of 117.7 billion won and operating profit of 64.7 billion won. With improved blended selling prices due to higher oil and gas prices, operating profit increased by 39.0 billion won from the previous quarter.
In addition, ◇ SK Incheon Petrochemicals: sales 3.0154 trillion won, operating profit 647.1 billion won ◎ SK On Trading International: sales 15.1092 trillion won, operating profit 15.6 billion won ▲ SK IE Technology: sales 35.9 billion won, operating loss 73.2 billion won, respectively.
Seo Geon-gi, chief financial officer at SK Innovation, said, "Even amid a rapidly changing business environment, we will work to secure stable profitability based on optimized operations and a competitive business portfolio," adding, "We will also continue to play a responsible role in the stable supply of domestic petroleum products and in maintaining the energy supply chain."