SK Lubricants’ 4Q profit rises

OREANDA-NEWS. SK Lubricants, the lubes unit of South Korea's SK Innovation and the world's largest producer of Group III base oils, saw its operating profit rise in the last quarter of 2014 as sales surged to a record high.

Operating profit rose by 26pc from a year earlier for October-December to 71.4bn Korean won (\\$65.08mn). Sales rose for a fifth quarter out of six, climbing by 8pc to W799bn. The rise in sales since second-half 2013 followed the start-up of a Group II heavy-grade production train at SK Lubricant's South Korea plant in June 2013, along with the start-up of a new 630,000 t/yr Group III plant in Spain in a joint-venture with Repsol.

The plant in Spain began operations in September, with first shipments from the plant in October. With supplies from this plant targeting the European market, South Korean base oil exports to Europe have subsequently slumped in recent months.

With the rise in its profit outpacing higher sales, SK Lubricants' profit margin firmed to 8.94pc, up from 7.63pc for the same period a year earlier. But the profit margin fell from 10.44pc during the previous three months. The drop in profit margin reflected the 14pc rise in sales from the third quarter, while operating profit nudged down from W73.2bn.

Lube margins held firm as Group III base oil prices fell much less than the steep slide in crude prices during the second half of last year. Group III prices in Europe fell by 7pc in the fourth quarter from the previous three months. Dubai crude prices by contrast fell by 25pc during the same period.