Earnings Up for S-Oil, Down for SK


Earnings Up for S-Oil, Down for SK

Among South Korean base oil refiners, SK Lubricants posted lower operating profit and S-Oil reported much higher operating income for 2020, while both companies had lower sales revenue.


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SK Innovation’s base oil and lubricants segment reported 262.2 billion South Korean won (U.S. $235 million) in operating profit in 2020, down 11% from 293.9 billion won in 2019, the company announced yesterday. Sales revenue in 2020 declined 17% to 2.4 trillion won.

For the fourth quarter, the company recorded operating profit of 125.3 billion won, up 44% from 86.9 billion won in the same period in 2019. Sales for the fourth quarter decreased to 7% to 652 billion won.

The company said operating profit improved in the fourth quarter thanks to margins that improved on the back of tight supply of base oil and increased demand. It anticipates this year’s base oil market will experience a gradual recovery, with a better global economy and demand improvement due to stricter environmental regulations.

The company makes Group II and III base oil at its plant in Ulsan, South Korea. A joint venture with Pertamina makes Group III base oil in Dumai, Indonesia, while another with Repsol produces Group II and III base oil at a plant in Cartagena, Spain.


S-Oil’s base oil segment posted 426.3 billion won in operating income in 2020, up 97% from 216.9 billion won in 2019. Revenue decreased to 1.3 trillion won in 2020, down 12% from 1.5 trillion won in the previous year.

For the quarter ending Dec. 31, the company’s base oil sector reported operating income of 110.1 billion won, up 12% from 98.2 billion won. The segment’s revenue for the fourth quarter declined 10% to 361.7 billion won.

S-Oil makes API Group II and Group III base oils at its plant in Onsan, South Korea.

In its earnings presentation, S-Oil said that with demand recovery and refiners’ low run rates continuing in the fourth quarter, the lube base oil spread – the product price spread between base oil and high sulfur fuel oil prices in Asia – widened again, thanks to lighter supply from maintenance of major plants.  S-Oil expressed optimism that the base oil spread would continue to be healthy in 2021, driven by consistently growing demand for high-quality base oil products, “although tight supply would be eased as refiners increase utilization rates.”

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