By Kim Seung-yeon
SEOUL, Sept. 29 (Yonhap) — Analysts predict that major South Korean refiners will experience a turnaround in their third quarter earnings, recovering from losses and weak gains in the prior quarter, thanks to an increase in margins as a result of rising oil prices.
SK Innovation Co., the energy arm of SK Group, is anticipated to generate 667.5 billion won (US$498 million) in operating profit for the July-September period, bouncing back from a deficit of 107 billion won in the previous three months, according to the median estimate compiled by Yonhap Infomax, the financial news division of Yonhap News Agency.
Income is predicted to reach 18.8 trillion won, a slight increase from the previous quarter’s 18.7 trillion won.
Compared to the same period last year, the third-quarter consensus reflects a 17 percent decrease in sales and a 5.2 percent decrease in operating income. The oil refinery industry flourished in 2019 due to rising oil prices.
SK Innovation’s refinery complex in Ulsan, 299 kilometers southeast of Seoul (Yonhap)
S-Oil Corp. is predicted to record 544 billion won in operating profit, recovering from 36 billion won in the previous quarter. Its revenue is estimated at 9.03 trillion won, a 15.51 percent increase from three months prior.
GS Caltex Corp. is predicted to report 980 billion won in operating profit in the third quarter, turning to the black from a loss of 19 billion won in the second quarter. Its revenue is estimated at 12.9 trillion won, a 20.1 percent increase on-quarter.
A steady rise in the cracking margin, a key measure of profitability for oil refiners, aided the bottom line.
The cracking margin jumped to $14.5 per barrel from $7.6 per barrel over the three-month period, according to a Samsung Securities report.
“Given that the average Dubai crude rose to $92 (per barrel) in September from $74.6 in June, the inventory value is also expected to have improved significantly,” said Cho Hyun-ryul, a Samsung Securities analyst.
Refining margins are related to international oil prices. Higher crude prices mean bigger margins, or the difference between the total value of petroleum products and the cost of crude and related services.
“The cracking margin appears to be heading for a stable downtrend in the fourth quarter, but strong downstream demand from China and India is expected to continue, keeping the margin level above the average,” said Kim Do-hyun, an analyst at SK Securities Co.
elly@yna.co.kr
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