Operating Losses Top 1 Tril. Won in Q1
S-Oil posted an operating loss of 1,007.3 billion won in the first quarter of this year. Concerns are mounting over the possibility of huge operating losses of the other South Korean oil refining companies such as SK Innovation and GS Caltex.
S-Oil announced on April 27 that its Q1 sales and net loss totaled 5.19 trillion won and 880 billion won, respectively. Its sales dropped 4.2 percent from a year ago and operating and net profits fell below zero.
The negative earnings surprise is mainly due to its inventory valuation losses attributable to a drop in oil price. Specifically, the losses amounted to 721 billion won in the first quarter with the international oil price dropping from US$60 or so to about US$20 per barrel. The company’s quarterly average selling price fell 13.4 percent and sales volume fell 7.3 percent quarter on quarter.
The refining margin of the company’s oil refining business unit remained low due to a rapid decrease in demand for jet fuel, gasoline, etc. The business unit’s operating loss amounted to 1.19 trillion won. Meanwhile, its petrochemical business unit posted an operating profit of 66.5 billion won based on lowered raw material prices.
Previously, the operating loss of S-Oil was estimated at less than 500 billion won. The actual figure is much larger than that and the other oil refining companies’ crisis is becoming a reality. At present, the operating loss estimates of SK Innovation, Hyundai Oilbank and GS Caltex are 750 billion won, 400 billion won and 500 billion won, respectively.