Release Date: January 24, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- S-Oil Corp (XKRX:010950, Financial) recorded KRW260.8 billion in operating income for Q4 2024, marking a turnaround from the previous quarter.
- The refining business showed significant improvement with KRW172.9 billion in Q4 operating income, driven by higher refining margins and favorable FX rates.
- The Shaheen Project is progressing smoothly, with a completion rate of 51.8% as of December 2024, slightly ahead of schedule.
- The GTG project is expected to reduce carbon emissions by 116,000 tonnes per year and has a projected internal rate of return (IRR) of 26.6%, indicating high profitability.
- S-Oil Corp (XKRX:010950) maintains a stable financial structure with a cash balance of KRW1.957 trillion and a net debt-to-equity ratio of 69.3%.
Negative Points
- The petrochemical business posted an operating loss of KRW28.1 billion in Q4 2024 due to narrowed spreads of major products.
- The lube business experienced a decline in operating income in Q4 due to seasonal factors and scheduled maintenance.
- S-Oil Corp (XKRX:010950) recorded a net FX loss of KRW415.7 billion in Q4, impacting income before tax.
- Return on equity was negative at -1.8%, and return on capital employed was -0.4%, indicating challenges in profitability.
- The company faces economic uncertainties both domestically and internationally, which could impact future performance.
Q & A Highlights
Q: How do you expect the increase in EV sales in China to affect refining product demand and regional market dynamics?
A: Unidentified Company Representative: We forecast stable demand growth in the region, supported by economic growth in emerging economies like India. China's demand is expected to grow due to economic stimulus packages. The recent export tax rebate cut by the Chinese government and sanctions against Russia and Iran are expected to affect small refineries in China, leading to restructuring. These factors are expected to favorably impact market dynamics.
Q: What is the outlook for the lube-based oil market for 2025 and 2026?
A: Unidentified Company Representative: Since the second half of 2023, the lube-based oil spread has been stable around $50, positively impacting income. We expect this stability to continue, with capacity additions mainly in India and Singapore. Demand is expected to rebound during the Lunar New Year and due to stockpiling for the spring lubricant replacement season, supported by Chinese economic stimulus.
Q: Can you provide details on the company's CapEx plans, including the Shaheen and GTG projects?
A: Unidentified Company Representative: For the Shaheen project, we plan KRW3.48 trillion in CapEx for 2025 and KRW1.5 trillion for 2026. The GTG project will have KRW100 billion in CapEx for 2025 and KRW130 billion for 2026. Additional CapEx will be allocated for maintenance, subject to refinery needs.
Q: Could you explain the GTG project's background and its advantages for the Shaheen project?
A: Unidentified Company Representative: The GTG project was initiated in 2021 through an energy optimization study with Saudi Aramco. It aims to maximize operational efficiencies. The electricity and steam generated will be used internally, improving energy efficiency for both the refinery and the Shaheen project. Once completed, self-generated electricity usage will increase from 10% to 45%.
Q: What are the plans for sourcing natural gas feedstock for the GTG project, and what are the expectations for pricing terms?
A: Unidentified Company Representative: We have signed long-term contracts to stably source gas for the GTG and Shaheen projects. We aim for stable feedstock sourcing through long-term contracts, ensuring consistent supply.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
