Volatile oil prices eroding SK profit margins

Fluctuations in global oil prices have led to feeble profit margins for oil refiners in South Korea (SK), industry experts said. The total sales revenue of the nation’s top four oil refiners in 2008 hit 117.9 trillion won (US$88.48 billion), with operating profit reaching 4.3 trillion won (US$3.22 billion) and net income totaling 970 billion won (US$727.9 million), according to the Financial Supervisory Service, SK’s financial regulating body. Compared to 2007, total sales revenue plunged by 48%, operating profit gained merely 3.7%, while net profit contracted by 66.9%. Industry experts say the industry’s average operating profit margin for 2007 was much less than that of the manufacturing industry, which stood at 8.3% in 2008. Its operating profit hit 1.4 trillion won (US$1.05 million), up 28%, while its net profit reached 446.2 billion won (US$334.86 million), down 40.2%. Its operating profit totaled 62.4 billion won (US$48.18 million), down 85.4%, while its net profit totaled 254.2 billion won (US$190.77 million), also resulting in a loss. The main business categories of the country’s oil refiners are gasoline, kerosene, diesel and petrochemical products. Experts say the rising trend reflects the shift of the oil-refining industry becoming more export-oriented from a previous domestic-oriented position. (April 8, 2009)