SK Innovation, South Korea’s biggest oil refiner in terms of market share, saw its second-quarter earnings drop by more than half on-quarter, largely due to the slump in international oil prices, according to a regulatory filing Thursday.

SK Innovation’s sales in the second quarter reached 10.5 trillion won ($9.4 billion), up 2.7 percent, but its operating profit dropped to 421 billion won, down by 62.4 percent on-year from 1.1 trillion won. 

Compared with the previous quarter, the company’s operating profit decreased 58 percent. The company’s operating profit in the first quarter surpassed the 1 trillion won mark.

The decrease in operating profit was largely due to the slump in international oil prices and inventory losses, the company explained.

SK Innovation’s refining sector in the second quarter marked sales of 7.38 trillion won, with its operating profit falling to 12.5 billion won, a 441 billion won decrease from the first quarter.

The operating profit of SK Innovation’s chemicals sector also slightly decreased to 333.7 billion won, 121 billion won down from the previous quarter.

The company’s lubricant oil unit recorded an increase in operating profit, reaching 120 billion won, the highest figure since the last quarter in 2011.

Despite the downbeat performance this quarter, Korea’s refiners are currently expecting their earnings to recover in the third quarter, as international oil prices are forecast to stabilize with better refining margins.

Stock prices for domestic oil refiners have been rising since June, as refining margins started to recover and reach an annual record high in July.

Refining margins have doubled over the past month, according to an industry source.

Meanwhile, SK Innovation decided to pay out its first interim dividends worth a total of 149 billion won at a board meeting held Wednesday.

Korea’s third-largest oil refiner, S-Oil, also said that it would decide whether to provide interim dividends at its board meeting in early August.

By Shim Woo-hyun (ws@heraldcorp.com)