SK, S-Oil Up, Valvoline Down


For the quarter ending Dec. 31, lubricant blender Valvoline reported a slight decline in operating income and a rise in sales compared to the year-earlier period. The lubricants divisions of South Korean base oil refiners SK Energy and S-Oil each reported increases in quarterly operating profit and sales compared to 2007s fourth quarter, and for the full year compared to 2007.

According to parent company Ashland, Valvoline reported operating income of $19 million for the three months ending Dec. 31, which is the first quarter of Ashlands fiscal year. Ashland attributed the 2 percent increase from the year-earlier first quarter to increased average selling prices. Lubricant volume declined 17 percent, driven primarily by the do-it-for-me markets installer channel.

Valvoline Instant Oil Change continued to post strong results, Ashland said, as company-owned stories increased car counts, helping to drive same-store sales up 9 percent and increase the number of franchise units by 7 percent to 584.

Covington, Ky.-based Ashland on the whole reported a net loss of $119 million, on just shy of $2 billion revenue in the quarter. In November, the company completed its $3.3 billion acquisition of Hercules, which provides a variety of specialty chemicals, including biocides, dispersants and surfactants, and synthetic lubricant basestocks. As part of Ashland, Hercules contributed $238 million in revenue for the quarter ending Dec. 31.

Citing the global economic recession, Ashland announced a series of cost-cutting actions which it said will eliminate 500 positions through the end of the December quarter, and a total of 1,000 through fiscal 2009. By the end of fiscal 2010, we should have reduced the global workforce by 1,300, or approximately 9 percent excluding the Valvoline retail employees, said Ashland Chairman and CEO James OBrien.

The lubricants division of SK Energy for the three months ending Dec. 31 saw a 109 percent increase in operating profit, to 81.2 billion South Korean won (U.S. $59 million), up from 38.9 billion won ($28 million) in 2007s fourth quarter. For 2008, the Seoul-based refiners lubricants division recorded an operating profit of 254.2 billion won ($185 million), up 34 percent from 190.3 billion won ($139 million) during 2007. The company attributed the increases mainly to a 12 percent increase in base oil export volume from the SK-Pertamina joint ventures 7,250 barrels per day Group III plant in Dumai, Indonesia. The new plant began production in late April 2008, according to sources outside the company.

Sales for SK Energys lubricants division totaled 493.9 billion won ($360 million) in the fourth quarter of 2008, up 47 percent from 335 billon won ($244 million) in the year earlier period. For the full year, lubricants division sales reached almost 1.9 trillion won ($1.4 billion), up 66 percent from 1.1 trillion won ($801 million) during 2007.

In its earnings presentation, SK was more sober in its outlook for 2009, expecting weaker earnings due to decline in demand product prices following lower oil prices.

S-Oil reported that operating income for its lube segment totaled 114.5 billion won ($82 million) in 2008s fourth quarter, up 114 percent from 53.5 billion won ($39 million) in the year earlier period. For the full year, lube segment operating income reached 327.3 billion won ($234 million), up 19 percent from 274.2 billion won ($198 million) for 2007.

Revenue for Seoul-based S-Oils lube segment totaled 388 billion won ($281 million) in the fourth quarter, up 23 percent from 314.9 billion won ($227 million) in the year-ago quarter. For the full year, revenue reached 1.7 trillion won ($1.2 billion), up 55 percent from 2007s lube segment revenue of 1.1 trillion won ($793 million).

In its fourth quarter earnings presentation, S-Oil said it expected the lubricant market to recover upon the rebound of transportation demand in the second half of 2009. Group III demand will continue to lead the growth, the company opined.

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