o Narrower refining margins lead to decrease in fourth quarter sales and operating profits
o Petrochemical and Lubricant divisions show strong quarter results with a 267 percent and 126 percent year-over-year increases in operating profits, respectively
o Record full year sales of KRW 23.6 trillion reported, an 8 percent increase over 2005
o Company announces dividend increase, to KRW 1,900 per share
* The figures in this Press Release are subject to further verification by independent auditors.
SEOUL, January 23, 2007 ?SK Corporation, [KS 003600] today announced 2006 fourth quarter revenue of KRW 6,108 billion, down 2 percent, compared to KRW 6,214 billion reported a year ago. The company’s operating profit for the 2006 fourth quarter was KRW 181 billion, a 28 percent decrease from the previous year’s operating profit of KRW 251 billion.
Despite the strong results from the petrochemical and lubricant divisions in the quarter, weak global refining margins and domestic market oversupply due to warm early winter temperatures led to an oversupply of petroleum products. As a consequence, profits were lower at SK Corp.’s petroleum division, which led to a decline in the company’s overall operating profit for the fourth quarter.
SK Corp.’s petrochemical division reported a 267 percent operating profit increase for the fourth quarter, over the same period in 2005, to KRW 110 billion in operating profit, on sales of KRW1,457 billion, an increase of KRW 116 billion, or 9 percent over the previous year . The company’s lubricant division reported KRW 61 billion operating profit for the fourth quarter of 2006, an increase of KRW 34 billion, or 126 percent, over the final quarter of 2005, on sales of KRW 268 billion, which were KRW 63 billion more than lubricant sales recorded in the fourth quarter of 2005, or an increase of 31 percent. Non-operating profit for the fourth quarter of 2006 decreased to KRW 72 billion, due to rise in interest rate and a consequent increase in net interest expenses coupled with a lower profit realized from the equity gain method.
“While the past quarter’s market conditions inhibited SK Corporation’s performance, the company is well positioned for 2007, with a strong focus on growth and profitability improvement. Our recently announced alliance with Nippon Oil Corp., and other strategic initiatives already being implemented, provide SK Corp. with increased competitive advantage for 2007, in terms of scale and efficiency, ?said SK Corp. President and CEO, Heon Cheol Shin. “We also expect the rising demand from China and Asia Pacific region to spur improvement in refining margins. We expect that improved refining margins coupled with SK Corporation’s continued global expansion in trading and exploration and production will help the company achieve its 2007 operating guidance of KRW 1.42 trillion.?
FULL YEAR 2006 RESULTS
Results for SK Corp.’s full year ended December 31, 2006 were KRW 1.17 trillion operating profit on sales of KRW 23.6 trillion, compared to KRW 1.2 trillion operating profit on KRW 21.9 trillion sales in 2005. Lower operating margins in petroleum refining, resulting from higher crude oil prices, decreased domestic demand due to high retail prices, and capacity reduction due to planned maintenance at SK refining facilities, were key factors affecting the year’s profitability.
SK Corp. also announced today that with its continued commitment to maximizing shareholder value, the company would increase the annual dividend to KRW 1,900 per share, an increase of KRW 50 over 1,850 paid out for 2005.
The company’s net non-operating profit for 2006 was KRW 716 billion, a decrease of KRW 289 billion year-over-year. The difference was mainly originated from the impact of a one-off increase of KRW 422 billion from the write-back provision for allowance of exchangeable bond in 2005.
Petrochemicals Business Sector Performance
- Increase in product prices and<
Source : SK corp.
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