SK Inno and SK Hynix Performance Slump
SK Inc. Forecasts 900 Billion KRW Operating Profit in Q2
One-Quarter of Same Period Last Year
SK Group's holding company SK Inc.'s operating profit for the second quarter of this year is expected to plummet to one-quarter of the level from a year ago. This is because the group's key subsidiaries, SK Innovation and SK Hynix, have not escaped the slump in performance.
According to securities firms' earnings forecasts compiled by financial information provider FnGuide on the 11th, SK Inc.'s operating profit for the second quarter is about 900 billion KRW, a 74.7% decrease compared to the same period last year. Net profit is expected to drop 92.5% year-on-year to 177 billion KRW, and sales are forecast to decline 7.3% to 30.9013 trillion KRW.
The second-quarter performance of SK Innovation, an intermediate holding company in which SK Inc. holds a 34.9% stake, is also expected to retreat. Operating profit for the second quarter is projected at 360.4 billion KRW, down 84.5% year-on-year. This is due to the refining sector, which accounts for more than 60% of sales. The refining margin, directly linked to the profitability of refining companies, shrank due to the decline in international oil prices, and inventory valuation losses increased compared to the previous quarter. The refining margin, which rose to 13.5 dollars per barrel in January this year, fell to the 4-dollar range last month. The industry considers that the refining margin must exceed 4 to 5 dollars per barrel to generate profits.
The outlook for SK Hynix, the group's key affiliate, is also bleak due to the memory semiconductor downturn. Both operating profit and net profit for the second quarter are expected to record losses, marking the third consecutive quarter of deficits. The operating loss for the second quarter is estimated at 2.8827 trillion KRW, and the net loss at 2.7523 trillion KRW. Sales are expected to halve, dropping 55.8% to 6.1009 trillion KRW.
However, performance is expected to gradually improve in the second half of the year. SK Innovation is expected to post profits in the 600 billion KRW range in the third quarter, double that of the previous quarter. Furthermore, operating profit is forecast to rise to 762.4 billion KRW in the fourth quarter. Researcher Hwang Seong-hyun of Eugene Investment & Securities said, "Gasoline and diesel demand, which had stalled mainly in developed countries, has started to increase, and the operating rate of crude distillation units (CDU) is also rising again." He explained, "Oil prices will rise again in the second half of the year, and refining margins will also increase accordingly."
SK Hynix is expected to continue posting losses until the fourth quarter of this year. However, the scale of losses is expected to decrease. Operating losses are forecast at 1.9831 trillion KRW and 1.2856 trillion KRW for the third and fourth quarters, respectively. The impact of production cuts by global memory suppliers is expected to be fully reflected from the second half of the year. Researcher Baek Gil-hyun of Yuanta Securities said, "Due to the effects of production cuts, fixed transaction prices for memory semiconductors are expected to rebound in the second half of the year."
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