Hyundai Oilbank Q2 Operating Profit 13.2 Billion Won... "Turned to Profit Despite COVID-19 Impact"

Successful Turnaround to Profit Compared to Previous Quarter Amid COVID-19

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[Asia Economy Reporter Hwang Yoon-joo] Hyundai Oilbank succeeded in turning a profit in the second quarter despite the impact of the novel coronavirus disease (COVID-19). It is expected to be the only domestic oil refiner to record an operating profit in the second quarter.

Hyundai Oilbank announced on the 30th that its consolidated operating profit for the second quarter was 13.2 billion KRW, down 91.4% compared to the same period last year. Sales amounted to 2.5517 trillion KRW, a decrease of 52.0%.

Compared to the first quarter, which was directly hit by COVID-19, operating profit (-563.2 billion KRW) turned positive, while sales (2.5517 trillion KRW) decreased by 42.2%.

The biggest reason Hyundai Oilbank’s surprising performance was possible is that despite negative refining margins in Singapore, it minimized losses in its core refining business through excellent facility competitiveness and flexible facility operations. This stands out compared to competitors who offset large losses in refining with petrochemical and lubricating base oil businesses.

The difference was made in the processing volume of cheap extra-heavy crude oil. Hyundai Oilbank expanded the proportion of extra-heavy crude oil input to 33%, 5 to 6 times higher than competitors, reducing costs. Flexible operation of production facilities and focusing on diesel production with favorable margins also contributed to improving profitability.

A Hyundai Oilbank official explained, "Processing volume of cheap extra-heavy crude oil is high in impurities such as sulfur, making refining difficult, but we increased the input ratio," adding, "Hyundai Oilbank’s advanced facilities, including desulfurization units, are the best in the industry."

By business segment, the refining sector recorded an operating loss of 18.6 billion KRW, which is only about 1/10 to 1/20 of competitors who previously announced their results.

Hyundai Oilbank expects a significant improvement in performance in the second half. This is because crude oil prices are expected to rise due to the extension of production cuts by oil-producing countries, and refining margins are expected to improve significantly as petroleum product demand recovers with the easing of movement restrictions.

It is also encouraging that the economics of its main crude type, extra-heavy crude oil from South America, are improving. The price increase of extra-heavy crude oil is expected to be slower than that of Middle Eastern crude, which is anticipated to further enhance Hyundai Oilbank’s competitiveness.

A Hyundai Oilbank official stated, "During the regular maintenance period, we completed the expansion of desulfurization facilities with a capacity of 20,000 barrels per day, enabling additional input of extra-heavy crude oil," adding, "The economics of extra-heavy crude oil are expected to improve further in the second half, so if the petroleum product market improves, an annual turnaround to profit is also achievable."

Meanwhile, the mixed xylene manufacturing business, carbon black business, and commercial fuel terminal business also contributed to the profit turnaround by recording operating profits of 32.3 billion KRW, 6.5 billion KRW, and 4.3 billion KRW, respectively.

This content was produced with the assistance of AI translation services.