South Korea’s largest refiner SK Innovation Co. said its operating profit jumped to 1 trillion won ($890 million) in the first quarter of this year, benefiting more from its non-refining chemical business.

SK Innovation said in a regulatory filing on Monday that it raised 1 trillion won in operating income on a consolidated basis in the January-March period, up 19 percent from the same period a year ago. Sales also jumped 20 percent to 11.4 trillion won over the same period.

The company’s first quarter operating income is the third-highest-ever after it reported a record high of 1.36 trillion won in the first quarter of 2011 and 1.12 trillion won in the second quarter of last year.

Profit surge was mainly led by its non-refining business, with its petrochemical business outperforming its refining business, the company said.

The petroleum division raised 453.9 billion won in operating profit on sales of 8.06 trillion won in the first quarter. Profit is down from the previous quarter’s 609.4 billion won as the cracking margin, or profit margin of petroleum business in the oil refining industry, fell slightly, due to limited gain in international oil prices. From a year ago, operating income was up 16 percent.

The petrochemical division raised record quarterly profit of 454.7 billion won in the first quarter, outperforming the income of SK Innovation’s petroleum business. The spread - or the price difference between a product and raw material - of main products including ethylene and p-xylene remained strong.

The lubricants division reported 94.9 billion won in operating income in the first quarter, up 10 percent from the previous quarter, thanks to improved profitability of lube base oil amid a supply shortage.

On increased earnings, shares of SK Innovation on Tuesday jumped 3.34 percent, or 5,500 won from the previous session to finish at 170,000 won.

Kim Joon, president of SK Innovation, said that the company’s first quarter performance is a result of its efforts to enhance cost competitiveness and expand petrochemical and lubricants businesses based on balanced business portfolio. The company’s value will reach 30 trillion won based on improved fundamental pursuing deep change and aggressive investment, he added.

With regard to capital expenditures or facility investment this year, SK Innovation said in a conference call that its tangible plan is in the low 1 trillion won range but the figure could go up to as high as 3 trillion won depending on investment expansion in various growth options.

SK Innovation also said that it is preparing to finalize the acquisition of Dow Chemical Co.’s ethylene acrylic acid business by August 1.

By Jung Wook

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]