SK Corp. Posts a 13 % Rise
to Record of 6.5 Tln
in 3Q Revenue

Its operating profit doubles to 56.2 billion won

SK Corporation has announced record quarterly revenue of 6,514.7 billion won, up 13% compared to 5,754.9 billion won reported for the third quarter a year ago. Sales revenue was primarily driven by increased oil prices and higher product prices. The company's overall operating profit was up 5% year-over-year supported by strong performance by both the lubricant and petrochemical divisions, the company said in the Oct. 24 news release.
Commenting on the results, Lee Seung-hoon , the head of Investor Relations, said: "We are pleased with the increase in operating profit this quarter compared to a year ago, especially given the fact that we achieved record profit in last year's third quarter."Mr. Lee continued, "With a diversified business portfolio that allows the company to hedge against cyclical nature of the energy business, SK Corporation is well positioned to continue its solid performance through the fourth quarter. Improved refining margins coupled with solid performances from other business divisions will help the company achieve its 2006 operating guidance of 1.41 trillion won."The company's non-operating profit decreased by 45% year-on-year, due to a 134.5 billion won write-back of provisions for allowances of exchangeable bonds (EB) in the 3rd quarter of 2005. Excluding this one-off write-back, non-operating profits are considerably stronger year-on-year.
Third quarter lubricant division sales and operating profit increased 51% and 91% year-over-year to KRW 262.8 billion and KRW 56.2 billion respectively.
This improved operating profit was attributed to many factors, including the increased capacity of the Lube Base Oil plants, resulting from the change of de-waxing catalysts earlier this year. In addition, tight supply market conditions and increased demand for Group III VHVI base oil, contributed to the increase in sales and operating profit.
The petrochemicals division's third quarter total sales and operating profit increased by 27% and 30%, to 1,565.5 billion won and 139.4 billion won , respectively. The increase was propelled by the New Reforming Center亮s (NRC) successful operation, coupled with favorable market conditions.
During the quarter, many companies in North East Asia scheduled regular maintenance shutdowns for their naphtha crackers, which resulted in tightened supply. SK Corporation was able to leverage the market conditions and achieved another strong quarterly performance, despite shutting down its own number two naphtha cracker center for regular maintenance.
The E&P division's sales and operating income for the third quarter of 2006 decreased by 3% and 9 % year-over-year, to 95.8 billion won and 62.8 billion won, respectively.
The company continued to be an active E&P player during the third quarter, preparing its exploration activities in Kazakhstan where it has a 50% share in Kazakhstan Block 8.
The division expects additional oil production from Brazil BMC-8 from the second half of 2007, along with LNG production from Yemen LNG and Peru LNG projects from the end of 2008 and 2009, respectively. The company's average daily production and operating profit for E&P division in 2009 is expected to at least double the current levels.
Although local market demand weakened during the quarter, sales revenue for the petroleum division increased 9% to 4,528.4 billion won, primarily due to increased exports and higher petroleum product prices. Operating profit decreased by 21% as compared to the exceptional third quarter of 2005, due to lower simple refining margins.
However, after steadily expanding in new markets such as Indonesia, Singapore and China, the petroleum division's export sales volume surpassed domestic sales for the first time in a single quarter, with a total of approximately KRW 2.4 trillion. The fourth quarter's outlook for the petroleum market is in the company's favor. Refining margins are forecasted to improve and the coming winter season in the Northern Hemisphere should spur increased demand, on a quarter over quarter basis. nw

SK Corp. Chairman Chey Tae-won