S-OIL Fails to Overcome COVID-19 Challenges, Posts Third Consecutive Quarterly Loss (Update)

Q3 Operating Loss of 9.3 Billion KRW
Refining Business Operating Loss Reduced
Chemical Business Turns to Loss, Dragging Down Performance

S-OIL's Q3 2020 Performance

[Asia Economy Reporter Hwang Yoon-joo] S-OIL recorded losses for the third consecutive quarter, unable to overcome the challenges posed by the novel coronavirus disease (COVID-19). Although the operating loss in its core refining business significantly decreased, the chemical division turned to a loss.

On the 28th, S-OIL announced a consolidated operating loss of 9.3 billion KRW for the third quarter, marking a return to the red compared to the same period last year. Sales during the same period fell 37.4% to 3.8992 trillion KRW.

S-OIL explained, "Despite expanded regular maintenance of plants and continued negative refining margins in the regional market, the gradual recovery in demand, inventory-related gains, and the company's active profit improvement efforts reduced the operating loss by 155 billion KRW compared to the second quarter." However, sales increased by 13% from the second quarter due to higher product selling prices despite a decrease in sales volume caused by regular maintenance.

By business segment, only the lubricants base oil division (96.6 billion KRW) recorded a profit, while the main refining division (-57.6 billion KRW) posted losses for the third consecutive quarter. The chemical division, which was profitable in the first half of this year, turned to a loss (-48.3 billion KRW), dragging down overall performance.

The refining division saw limited demand recovery centered on middle distillates, including jet fuel, due to the resurgence of COVID-19, resulting in negative refining margins for the third quarter as well.

In the petrochemical division, paraxylene (PX) spreads declined further compared to the second quarter due to continued weak demand. Benzene spreads also continued to fall amid a sharp drop in demand and oversupply. Polypropylene (PP) spreads remained at a favorable level as demand for packaging and textiles offset increased supply, while polyolefin (PO) spreads rose sharply due to increased demand amid reduced supply from regional plant maintenance.

In the lubricants base oil division, spreads narrowed due to rising raw material costs driven by higher crude oil prices, despite gradual demand recovery.

S-OIL forecasted, "In the fourth quarter, refining margins are expected to improve with increased demand for kerosene and diesel ahead of winter, but the extent of improvement will be limited due to the resurgence of COVID-19. PX margin increases are also expected to be modest due to oversupply."

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