S-Oil Turns Profitable in One Quarter... Operating Profit of 515.7 Billion Won (Update)

2023 1st Quarter Preliminary Earnings Announcement

S-Oil announced on the 27th that its preliminary figures for the first quarter of this year showed sales of 9.0776 trillion KRW and an operating profit of 515.7 billion KRW.

Although the operating profit decreased by 61.3% compared to the same period last year, it significantly improved compared to the previous quarter's loss of 160.4 billion KRW. Sales decreased by 2.3% year-on-year and by 14.3% quarter-on-quarter.

Regarding the first quarter results, S-Oil stated, "Sales were affected by a decline in selling prices due to the drop in international oil prices," and "Operating profit reflected inventory-related losses of 123.4 billion KRW due to the decline in oil prices." Nevertheless, they added, "Margins in the refining and lubricants sectors remained solid, and the petrochemical sector turned profitable."

Refining and Petrochemicals Turn Profitable Compared to Previous Quarter... Lubricants Alone Decline

Looking at each sector, refining operating profit turned positive from a loss of 379.6 billion KRW in the previous quarter to a profit of 290.6 billion KRW in the first quarter of this year. Despite easing diesel market conditions, regional demand in Asia increased due to China's reopening, maintaining solid refining margins in the region. Gasoline spreads turned strong due to the recovery of mobility demand in China and supply disruptions outside the region, such as in the US and Europe.

Petrochemical operating profit also turned positive from a loss of 57.4 billion KRW in the previous quarter to a profit of 29.3 billion KRW in the first quarter. Despite the operation of large-scale new aromatic facilities in China, the start-up of new downstream facilities and gradual improvement in derivative demand following China's reopening supported the sector. In the olefin downstream, although the PP and PO markets faced downward pressure due to capacity expansions in Asia, regional maintenance and gradually improving demand from China's reopening supported market conditions. The lubricants sector's operating profit was 195.8 billion KRW, a 30% decrease from the previous quarter's 279.5 billion KRW, making it the only one of the three business divisions to decline.

Upward Revision of Demand Outlook

Regarding the refining business outlook for the second quarter, S-Oil expects that although refining margins in Asia have recently been revised downward, the increase in demand during the summer driving season and scheduled maintenance by global refiners will positively impact performance. Following the lifting of China's lockdown measures, the first Labor Day holiday and the arrival of the seasonal peak are also expected to increase demand for gasoline and jet fuel.

The petrochemical sector is also expected to be supported by increased downstream demand and gasoline blending demand during the summer driving season. Although the PP and PO markets will continue to face supply increases due to new plants operating in China and Southeast Asia, gradual recovery is expected through demand improvements from China's reopening and holidays such as Ramadan and Labor Day. In fact, major institutions have revised upward their global oil demand growth forecasts for this year based on the resumption of economic activities and increased mobility following China's reopening.

The lubricants base oil fundamentals are expected to strengthen due to seasonal demand increases and scheduled maintenance by major suppliers, and the lubricants base oil spread is also expected to show strength under solid fundamentals.

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