South Korea’s largest oil refiner SK Innovation Co. reported its operating profit for the first quarter fell 29.1 percent from a year earlier as the volatile oil market and stronger won hurt its bottom line.

The Korean company in its regulatory filing on Tuesday said its operating profit for the quarter ended March was 711.6 billion won ($662.1 million) on a consolidated basis, down 29.1 percent on year and 15.8 percent on quarter. Sales totaled 12.2 trillion won, up 6.8 percent on year but down 3.1 percent from the previous quarter. Net profit plunged 45 percent to 472.7 billion won against the year-ago period.

The lackluster results were largely due to oil price fluctuations from the political unrest in the Middle East and strengthening of the Korean won against the U.S. dollar. But its widened portfolio of non-refinery businesses, which now make up 64.4 percent of its total profit at 458.2 billion won, has helped it weather the blow, the company added.

Shares of SK Innovation closed Tuesday down 0.49 percent at 204,000 won.

By sector, operating profit from its oil refinery business dropped 183.9 billion won from the previous quarter to 325.4 billion won on narrowed refining margin - the difference between the cost of crude oil and the average selling price of refined products - and reduced inventory-related profits. Profits from the lubricants business were also down 17.1 billion won on quarter at 128.6 billion won, and the crude oil exploration and production business down 6.4 billion won at 44.8 billion won.

Only its chemical business saw a profit gain of 21.9 billion won at 284.8 billion won.

SK Innovation earlier this month announced a 1 trillion won share buyback plan after withdrawing the initial public offering of its wholly-owned entity SK Lubricants upon a disappointing book-building session.

“We decided to buy back our stock to help lift our undervalued shares,” said an SK Innovation official, adding that the company plans to continue its stable dividend payout policy.

The firm said it will also keep up efforts to diversify its crude oil sources. Its reliance on Middle Eastern oil is expected to fall to 77 percent in the second quarter from 80 percent in full 2017.

By Kang Doo-soon and Kim Hyo-jin

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