SK Corp., Asia's third-biggest oil refiner, posted a sharp fall in its quarterly profit due to weak
refining margins and mild winter weather that has been hindering demand for fuel oil Tuesday.
SK, which controls nearly a third of South Korea's oil market, earned 189.1 billion won ($201.2 million) in net profit in three months to Dec. 31, the company said.
That was well below the 482 billion won profit earned a year ago, and missed a consensus forecast for a 404.5 billion won profit from Reuters Estimates.
Fourth-quarter sales were 6.11 trillion won, down 1.7% from the year-earlier period.
Simple refining margins remained weak throughout the latter half of the year, tarnishing brisk performances from the refiner's petrochemical division and overseas energy development division, analysts said.
Stagnated heating oil demand in the United States due to a mild winter also influenced the kerosene margin, they said. "As a result of warm weather in the U.S., heating oil demand was sluggish in the fourth quarter, narrowing down the crack spreads for SK Corp.," said Park
Dae Yong, analyst at Hyundai Securities. "Demand for gasoline likewise was lackluster as winter was an off-season," he added.
Simple refining margins in Asia plummeted from $3.40 per barrel in 2005 to a mere 20 cents at the end of 2006. Analysts expect margins to benefit this year from growth in demand for
lighter oil products such as jet fuel and diesel. They also see margins on naphtha rebounding after suffering last year from a supply glut, as demand for petrochemical products and motor gasoline grows.
Shares of SK Corp. gained 16.05% in the fourth quarter, outperforming the wider market's 4.6% rise in the same period.