(LEAD) S-Oil Q1 net tumbles nearly 70 pct on weak oil demand

(LEAD) S-Oil-Q1 earnings

(LEAD) S-Oil Q1 net tumbles nearly 70 pct on weak oil demand

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SEOUL, April 27 (Yonhap) -- S-Oil Corp. said Thursday its net profit slumped nearly 70 percent in the first quarter from a year earlier, as sluggish oil demand weighed on profitability.

Net profit reached 265.3 billion won (US$198.5 million) in the January-March period, down 69.5 percent from 870.8 billion won the previous year, the company said in a regulatory filing.

Operating income stood at 515.7 billion won for the same three months, a 62 percent drop from a year earlier. Sales fell 2.3 percent to 9.07 trillion won.

The earnings fell short of market expectations. The average estimate of net profit by analysts stood at 334.1 billion won, according to a survey by Yonhap Infomax, the financial data firm of Yonhap News Agency.

A fall in the cracking margin, a key gauge of profitability for oil refiners, is cited as the main factor that hurt the bottom line.

Refining margins are linked to international oil prices. Higher crude prices mean greater margins, or the difference between the total value of petroleum products and the cost of crude and related services.

The Singapore refining margin came to $2.5 per barrel, the lowest in the year to date. The range of $4-$5 per barrel is usually considered the break-even point.

"We expect to see the demand pick up upon the start of the summer driving season," S-Oil said in a release, referring to the summer season when demand for gasoline typically reaches its peak.

"We also expect the gasoline and jet fuel demand to recover given the first holiday season in China after its reopening," it said.

Saudi Arabia's state oil giant Aramco is currently the largest shareholder of S-Oil, with a 63.4 percent stake.

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