S-Oil's Record Profit

Oil refiner also sells 28.4 percent stake to Hanjin Group

S-Oil recorded 14.555,9 trillion won in sales last year, 925.7 billion won in operating profit and 758.6 billion won in net profit. The company said its sales increased 19 percent, operating profit 4.2 percent and net profit 15.8 percent. The company said on March 2 on its official announcement of the 2006 performance.
The company said it was able to record an outstanding net profit due to increases in demands for light oil in the world market, while its cracking margin was strong, although refining margin remained weak, which helped the S-Oil which has a world-class bunker-C cracking center.
The oil refiner said its maximum production capacities for non-oil petroleum products with high value-added portions such as paraxylene, and propylene and increases in the sale of lubrication oil through the discovery of new markets have contributed hugely to a surge in operating profit.
S-Oil has been able to record such an enviable results by utilizing its high value-added production facilities and exploration of new oil markets.
S-Oil will be a big growth engine for the Hanjin Group, said Cho Yang-ho, chairman of the group at the signing ceremony for the group's takeover of S-Oil's 28.4 percent stake totaling 31,983,000 shares on March 6.
Chairman Cho said S-Oil, AOC and Hanjin Group forged a strong three-way partnership with the takeover and the investment has brought Korean Air one step closer to its objective to be a leading airline in the world, winning the recognition of the airline's global service over 30 countries in five continents. He said it will also help the growth of Hanjin Group as its affiliates will have a stable supply source for their fuel, especially, the aviation fuel for Korean Air from S-Oil.
Chairman Cho will participate in the oil company's management as a member of board.
A.A. Tubayyeb, CEO of AOC, a major shareholder of S-Oil, said S-Oil represents a symbol for the successful friendly relations between South Korea and Saudi Arabia. He is very glad that Korean Air has become an important partner for S-Oil and its participation in the S-Oil board will benefit the oil company very much.
Samir A. Tubayyeb, CEO of S-Oil, said he is sure the partnership with the largest logistics group will help S-Oil's growth in the future.
The Hanjin Group paid 2.4 trillion won to take over the stake from AOC and S-Oil after lengthy negotiations and it comes to 74,979 won per share. The group set up Hanjin Energy Co. to facilitate its move into the energy business. Korean Air has put up 850 billion won, Hanjin Shipping 150 billion won and Korea Airport 30 billion won and the balance of 1.37 trillion won has been financed from banks.
Hanjin as the second largest shareholder in the oil company, expects to get fuel oils for its affiliates, especially, Korean Air and Hanjin Shipping at cheaper prices than those procured on the market.
Korean Air has been a big customer in the oil market with its annual expenditure for fuel oil running to 2.37 trillion won (28 million barrels of aviation fuel) and Hanjin Shipping spent 950 billion won annually for 3.27 million tons of bunker C oil.
The Hanjin Group expects to offset some of its spiraling fuel bills with the earnings from its investment in the second largest oil company in the country. High oil prices now mean a high return on its investment in the oil company. In addition, Hanjin Shipping would be able to transport some of the crude oil from Saudi oil fields to Korea for S-Oil.
Hanjin and S-Oil plan to start a joint marketing program by pooling the free mileage systems of Korean Air and S-Oil. Important customers of S-Oil will be entitled to free air tickets from Korean Air, for example.
The joint marketing program, if realized, is feared to jolt the oil refining industry with a deep impact because S-Oil will getaccess to 12 million customers of Korean Air and gets to supply most of fuel oil needed by Korean Air and Hanjin Shipping. Korean Air secured only 18 percent of its fuel oil at the domestic oil market, while Hanjin Shipping got 26 percent.
Industry experts agreed that the deal is a win-win one for both partners, which will bring a big impact to the domestic oil industry and the aviation industry. nw

Samir A. Tubayyeb, CEO of S-Oil

Samir A. Tubayyeb, CEO of S-Oil, 3rd Right, shakes hands with President Han Kyung-hwan of Hanjin Energy Co. after signing an agreement to sell a 28.4 percent stake in S-Oil in Seoul. Among those looking on was Chairman of Hanjin Group and also Chairman of Korean Air Cho Yang-ho, 6th from Left.