SK Gas and E1, the two major liquefied petroleum gas (LPG) importers in Korea, posted mixed results in their first-quarter earnings announcements. In overseas LPG trading, SK Gas made a profit while E1 booked a loss. In the domestic market, both companies posted losses as they could not pass the sharp rise in the international LPG contract price (CP) through to domestic selling prices due to the government's price-stability stance.
On the 22nd, the industry said SK Gas posted first-quarter revenue of 2.6352 trillion won on a consolidation basis, up 44.2% from a year earlier, and operating profit of 227.687 billion won, up 101.7%. By contrast, E1's revenue in the same period fell 19.6% to 1.7084 trillion won, and it recorded an operating loss of 156.1887 billion won.
The two companies' operating profits diverged based on overseas LPG trading results. The trading business refers to a type of energy intermediation trade that conducts transactions with third countries by leveraging regional price differences, supply-demand adjustments, and timing gaps. As the limits of the domestic LPG market became clear, both companies turned to overseas LPG trading. Overseas sales now account for more than half of total sales.
SK Gas said it booked a profit by transacting LPG volumes stockpiled in the second half of last year during the first quarter. The LPG division's first-quarter operating profit was 162.3 billion won, up 164% from 61.5 billion won a year earlier. SK Gas sold a total of 2,297,000 tons of LPG in the first quarter, of which overseas sales were 1,416,000 tons, accounting for 62% of the total. Overseas sales volume jumped 52.3% year over year, driving growth in revenue and profit.
By contrast, E1 said it incurred a loss in its first-quarter overseas LPG trading business. The Middle East crisis curtailed traffic as the Strait of Hormuz was blocked, hampering major transactions. Of total first-quarter revenue, overseas sales accounted for 58% and domestic sales 42%.
However, E1 recorded a pre-tax profit as derivative valuation gains were reflected during hedging (risk avoidance) of the gap between international LPG prices and spot LPG prices. Although it posted an operating loss of 227.2 billion won in the first quarter, non-operating gains lifted profit before income tax to 51.268 billion won.
Both SK Gas and E1 did not disclose specific figures, but said they incurred losses in domestic sales. International LPG prices and the won-dollar exchange rate rose, but the government's price-stability stance kept them from reflecting this in domestic selling prices. In addition, higher freight rates and insurance premiums overlapped, and the industry sees upward price pressure of 400–500 won per kg. The actual increase this year was limited to 225 won per kg.
With the government's price-stability stance continuing, second-quarter results are expected to be similar to the first quarter. According to FnGuide, the consensus first-quarter estimate compiled over the past three months by securities firm research centers shows SK Gas's second-quarter operating profit at 127.7 billion won. There is no estimate for E1.
Domestic LPG prices are more likely to rise in the second half. When international crude oil rises, international LPG prices also rise, and domestic LPG prices reflect international price increases with a time lag. Even if international crude later falls, domestic LPG prices may continue rising for a while. LPG is considered a typical fuel for ordinary households, so price increases add a heavy burden on consumers.
An industry official said, "In the case of retail LPG, joining the government's price-stability stance has kept us from fully passing price increases through to selling prices, which is pressuring results through higher costs," and added, "In the second half, the ongoing war and heightened volatility in international LPG prices make the situation unpredictable."