Profits Up for SK, S-Oil, Apar


Korean base oil refiners SK Lubricants and S-Oil realized increased revenue and operating profits for full year 2017 due to a wider base oil spread in 2017, while profits jumped for Indias Apars transformer and specialty oils segment during its third quarter.

SK Lubricants

SK Innovation said its base oil and lubricants segment recorded 504.9 billion won (U.S. $469.6 million) of operating profit in its earnings report this week, up 7.8 percent from 468.5 billion won a year earlier. The South Korean energy giant said it is the segments second-highest annual operating profit, just below 509.6 billion won in 2011. Revenue also increased 20.2 percent to 3 trillion won from 2.5 trillion won in 2016.

Operating profit for the fourth quarter increased 68.6 percent to 145.7 billion won from 86.4 billion won a year ago. Quarterly revenue was 811.9 billion won, a 22.8 percent gain from 661.3 billion won. Base oil spread slipped in the fourth quarter due to rising oil prices. But we maintained operating profit by stepping up our sales volume SK said in a written statement.

On the market outlook, Even though capacity increase is planned, the market will start to expand gradually because of significant entry barrier in the base oil business. And quite a number of turnarounds are also scheduled this year. So we see the 2018 market will be favorable on tight demand and supply dynamics, SK Lubricants official Shin Incheol said in an earnings conference call.

About the initial public offering of SK Lubricants, We are considering an IPO as a way to enhance corporate value. We set up a team to review the potential of an IPO, but details like the size and the timing of a public offering are not decided yet. Once they are finalized, well communicate with the market through regulatory filings, he said.


S-Oil announced that its annual operating income from base oil business increased 3.8 percent to 427.7 billion won (U.S. $397.8 million) in 2017 from 412 billion won the previous year. Revenue grew 22.9 percent to 1.6 trillion won from 1.3 trillion won, said the Seoul-based refiner in its earnings report this week. S-Oils base oil segment, which comprised only 7.7 percent of the companys total revenue, accounted for 29.2 percent of the companys entire operating income.

Operating income for the fourth quarter was 87.8 billion won, a 48.8 percent jump from 59 billion won in the year earlier period. Revenue increased 30.9 percent to 419.4 billion won, up from 320.5 billion won. S-Oil official Goh Gwangchol said in an earnings conference call, in the fourth quarter, the lube base oil spread decreased due to low seasonality and lagging effect.

Last years capacity addition for Group III lube base oil was about 5,700 barrels per day, and there will be about 11,000 barrels per day additional to come this year, he said. But we still expect quite a strong spread due to solid demand for high quality products and the high entrance barrier of this market.


Indias Apar Industries Ltd. reported that its third-quarter consolidated operating profit in its transformer and specialty oils segment increased nearly 21 percent to Rs 43.4 crore (Rs 434 million or U.S. $6.8 million), compared to a year earlier.

Revenue for the segment, which includes automotive lubricants among over 400 types of specialty oils, rose 20 percent to Rs 568.4 crore in its third quarter that ended Dec. 31, the Mumbai-based diversified company said in a regulatory filing this week. The transformer and specialty oils segment accounts for approximately 38 percent of the companys total revenue.

Revenue from Apars specialty oils segment surged 34 percent to Rs 567 crore, Chairman and Managing Director Kushal Desai said on a conference call with analysts. Specialty oils volume jumped 16 percent to a record 105,758 kiloliters, he stated, adding that the companys Hamriyah plant in Sharjah also posted its highest ever quarterly sales total.

We saw substantial growth in industrial process oils, rubber process oils, export for white oils, and industrial and automotive lubricants, Desai said. He added the transformer oils business in the third quarter was slightly subdued, but the company expects business to pick up in the fourth quarter.

Desai said the companys costs increased across all products during the quarter due to the sharp rise in crude oil prices coupled with tight base oil supply, but Apar will pass this increase on to customers in most categories through announced price increases that will take effect in its fourth quarter.

Theres some lag in the industrial and automotive side, but price increases have been announced, and within this [fourth] quarter we should see higher prices materializing, he noted.

The Indian transformer oils and lubes manufacturer said its automotive segments sales volume increased 52 percent to a record 8,716 kl during the quarter. This was largely led by growth in the [original equipment manufacturer] OEM segment and also a 10 percent increase in terms of our retail sales, Desai said. He noted that higher raw material prices impacted the segments profitability, but this was offset by higher volumes.

For the April to December 2017 period, the transformer and specialty oils segments profit declined about 15 percent Rs 112.8 crore before finance costs and taxes, compared to the year-earlier period. Revenue, however, jumped 16 percent to Rs 1,629.9 crore. The company said that specialty oils volume increased 14 percent to reach 297,686 kl in the first nine months of the current fiscal year.

Desai stated that base oil prices are expected to increase further in the fourth quarter as the rise in crude prices has continued through December into January.

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