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SEOUL, Oct 30 (Reuters) - SK Innovation Co Ltd, owner of South Korea’s top refiner SK Energy, said on Friday refining margins in 2021 are expected to gradually improve as the COVID-19 situation gets better and demand recovers.
SK Innovation reported an operating loss of 29 billion won ($26 million) in the third quarter, due to weak refining margins and delayed demaind recovery, as well as thinner margins for aromatics in the petrochemical business, it said. It posted an operating profit of 330 billion won a year earlier.
It was the company’s third straight quarterly operating loss, although losses were down sharply from the second quarter’s 440 billion won.
Peer S-Oil Corp, whose main shareholder is Saudi Aramco, estimated earlier this week that refining margins are expected to improve in the fourth quarter, supported by increased demand for kerosene and diesel ahead of the winter season.
SK Innovation, which has a total refining capacity of 1.115 million barrels per day (bpd) at plants in Ulsan and Incheon, said it operated facilities at 72% of capacity on average in the third quarter, down from 90% a year earlier.
Reflecting the deterioration in market conditions, the company said in an earnings call that it conservatively expected the CDU utilisation rate to fall further in the current quarter from the third quarter.
SK Innovation said it expected next year’s capital expenditures to be considerably less than this year’s level of about the mid-4 trillion won mark.
The company, which is in the process of investing to expand its electric vehicle battery business, said it expects next year’s battery business to double its revenue from the current year to the mid-3 trillion won level, and targeted reaching a breakeven point in 2022.
Shares of SK Innovation were down 2.3% by 0219 GMT, while the broader market KOSPI was 1% lower. ($1 = 1,127.2200 won) (Reporting by Joyce Lee; Editing by Krishna Chandra Eluri and Richard Pullin)