One-off items dampen SK’s Q2 profits

Despite a 30% increase in sales during the second quarter to 17.18 trillion won (US$15.8 billion) compared to the same period a year ago, operating profits dropped 32% to 451.3 billion won (US$417.1 million) for South Korea’s largest refiner, SK Innovation. One-off items, namely a 100 won (US$0.09) per liter reduction in domestic prices and a 137.9 billion won (US$127.4 million) fine imposed by South Korea’s Federal Trade Commission (FTC) brought down operating profits. Subsidiary SK Lubricants reported higher sales volume and earnings due to better base oil spreads and prices in the second quarter. The company said the base oil market continued to experience tightness due to strong demand and limited supply growth. Sales rose 41.2% to 672.9 billion won ($621.7 million), from 476.3 billion won ($440.1 million) Operating profit rose 118.2% to 130.5 billion won ($120.5 million) from 59.8 billion won ($55.2 million). SK said construction of its fourth lube base oil joint venture with Repsol is underway, with an expected start-up of 2013. Plant capacity is 650,000 tons per year. SK is also expecting to complete construction of a lube blending plant in China by December, with an 80,000 ton annual capacity. (July 29, 2011)