Korea refiners swing to Q4 loss amid windfall tax calls

South Korean refiners such as SK Innovation Co. and S-Oil Corp. are estimated to incur a combined loss of over 1 trillion won ($800 million) in the fourth quarter of last year, offsetting their handsome profits for all of the year. 

Their dismal quarterly results come amid growing calls to impose a windfall tax on their extra gains created from soaring oil prices, or refining margins.

SK Innovation saw its consolidated operating loss widening to 683.3 billion won in the fourth quarter, versus a 62.2 billion won shortfall a year before, according to the company’s announcement on Tuesday. 

For all of 2022, it posted an operating profit of 4 trillion won, a 129.6% on-year surge. But the profit missed a consensus forecast of 5.4 trillion won.

Revenue soared 66.6% to 78 trillion won. 

In the fourth quarter, its petroleum business, including the wholly owned subsidiary SK Energy Co., led the shortfalls with a combined operating loss of 661.2 billion won. 

Thinning profit margins from petroleum and gasoline products dented its bottom line. A decline in global oil prices led to inventory valuation losses. 

S-OIL

S-Oil, a unit of Saudi Aramco, reported a 157.4 billion won loss in the fourth quarter. Unlisted GS Caltex Co. is projected to have swung to a loss during the same period.

Unlisted Hyundai Oilbank Co. managed to stay profitable with an operating profit of 12.8 billion won. 

The disappointing quarterly results may dampen calls for the introduction of a windfall tax on refiners’ strong earnings in 2022.

“A windfall tax is intended to target global energy companies, which make huge profits from oil extraction,” said an oil refinery company.

“South Korean refiners, which import crude oil at high prices and refine them, should not be subject to a windfall tax, even considering fourth-quarter losses.” 

Petrochemical companies were in the red as well, hit by reduced demand and declining prices due to COVID-19 lockdowns. China accounts for 30-40% of their sales. 

SKC Co., a unit of SK Group, swung to a loss in the fourth quarter with a 24.3 billion won shortfall. 

Hyosung Corp. posted a 13.8 billion won operating loss in the quarter.

Other petrochemical companies such as Lotte Chemical Co. and Korea Petrochemical Ind. Co. are forecast to post losses as well. 

STEELMAKERS

POSCO Holdings Inc. and Hyundai Steel Co. reported fourth-quarter operating losses of 370 billion won and 276 billion won, respectively. They suffered lost production after a devastating typhoon swept through the country in September, in addition to a drop in steel prices.

LX Holdings Co. chalked up an operating loss of 32.1 billion won, marking its first quarterly loss since hiving off from LG Group in May 2021.

Its quarterly results were led by LX Hausys Ltd. Fourth-quarter losses at the furniture and building materials supplier widened to 12.9 billion won. 

Write to Ik-hwan Kim and Seo-Woo Chang at lovepen@hankyung.com

Yeonhee Kim edited this article.