Fitch retains SK Innovation’s ratings despite poor Q4 results

04 February 2013 08:51  [Source: ICIS news]

SINGAPORE (ICIS)--Fitch has maintained South Korea’s SK Innovation’s ratings at BBB despite its poor performance in the fourth quarter last year, the global rating agency said on Monday.

A weak performance in its petroleum refining and marketing business and an unexpected operating loss in its lubricant business in the fourth quarter caused SK Innovation’s 2012 results to fall short of Fitch’s and general market’s expectations.

SK Innovation posted a revenue and operating profit of won (W) 17.2tr ($15.7bn) and W202bn respectively. Although revenues increased by 13% year on year, operating profit fell by 40%.

For the full year, revenue and operating profit were W73.3tr and W1.7tr respectively; its operating profit was 43% lower than its 2011 results and broadly 15% lower than Fitch's expectations.

Fitch does not believe that its current performance is a strong indicator of its 2013 prospects.

Fitch’s forecasts for SK Innovation over 2013-2014 includes reduced margins for its refining, petrochemical and lubricant businesses.

However, upstream operations are expected to benefit from high oil prices while its chemical division should benefit from its 3.1m tonne paraxylene (PX) capacity expansion which is starting commercial operations from 2014.

Although lower margins are expected for lubricants because of incremental global capacity, its margins should see an improvement in the late first quarter this year on the back of the driving season in US.

($1 = W1,095)

By: Surinder Malhi
+65 6780 4327

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