South Korea’s third largest conglomerate SK Group will hold executive meeting this week involving all key units from battery to chip making names chaired by its chief Chey Tae-won as its flagship refining business faces worst-ever crisis from plunging oil prices and virus-devastated global demand.
According to SK Group on Sunday, Chey will meet with the heads of its major affiliated companies this week to study the current business conditions and prepare corporate actions against the virus impact.
“SK Group is planning to have regular meetings to respond the current crisis,” said an industry source.
SK Group that has chip-making unit SK Hynix and battery-producing company SK Innovation under the family has already shifted into emergency mode as the novel virus outbreak has serious worsened the business of affiliated units.
Oil refinery unit SK Energy has decided to reduce its refining capacity to below 90 percent for the first time in a decade in the face of subdued demand from the global virus spread. It lowers the capacity to 85 percent within the month and is reviewing further cut in April depending on market demand.
Oil prices have dipped to the $20 level per barrel recently after the bust-up between the world’s largest oil producer Saudi Arabia and Russia. The gross refining margin fell to $2.33 per barrel on Mar. 18, the lowest since Dec. 22, 1997.
SK Innovation is projected to report an operating loss of 830.2 billion won in the first three months, with revenue down 18 percent to 10.51 trillion won from the previous year, according to estimates by KB Securities.
SK Hynix must revise down business plans as clients in U.S. and Europe are coping with worsening virus impact.
It had planned to finish construction of M16 plant in Icheon, Gyeonggi Province within the year at a cost of 20 trillion won and upgrade of production facilities in its Wuxi fab in China.
“The server DRAM market had been projected to rebound in the second quarter, but whether the capital investment and business plans will stay intact remains to be seen,” said Lee Seung-woo, an analyst at Eugene Investment & Securities.
Sangsangin Investment & Securities in its report projected SK Hynix could swing to an operating loss in the third and the fourth quarters this year in the worst scenario.
Fledgling battery and bio units are not safe, either, under worsening business conditions. Global finished vehicle brands have halted production. SK Biopharmaceuticals’ IPO plan has turned murky amid overall slowdown in the market.
By Won Ho-sup, Chun Gyung-woon and Lee Ha-yeon
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