SK Innovation has suffered an annual operating loss for the first time in 37 years.
The company announced on Feb. 5 that its sales stood at 65.8757 trillion won (US$6.04 billion) last year, while its operating losses reached 224.1 billion won (US$205.46 million).
Sales slightly declined to 793.8 billion won (US$727.79 million), a 1.2 percent decrease, from the previous year, but its operating profits fell by 1.6069 trillion won (US$1.47 billion), going into the red. This is the first time for SK Innovation to record an annual operating loss since 1977.
The major factors of the operating loss are the demand reduction in the global market, the poor performance of the oil business due to excessive supply, and the increase in loss of inventory valuation due to a sharp drop in oil prices.
In oil refining business alone, the company returned a loss of nearly 1 trillion won (US$916.84 million). Until the third quarter, it suffered an operating loss of 406 billion won (US$372.24 million), but this figure increased to 991.9 billion won (US$909.42 million) in the fourth quarter due to the additional loss from the valuation of its inventory. The company’s chemicals business was weak as well.
However, SK Innovation showed a good performance in the petroleum development and lubricants businesses. Regardless of the current unfavorable condition of a sharp decline in oil prices, the petroleum development business recorded an operating profit of 428.6 billion won (US$392.96 million), playing a vital role in making up for losses in the business. SK Innovation can now expect additional profits in the future, as the company increases its daily oil production to 77,000 barrels through additional production in mines in the U.S. and Vietnam.