SK Corporation. Investor Presentation March, 2004

Transcription

1 SK Corporation Investor Presentation March, 2004

2 Disclaimer This presentation contains forward-looking statements with respect to financial condition, results of operations and business of SK Corporation and plans and objectives of the management of SK Corporation. Statements that are not historical facts, including statements about SK Corporation s beliefs and expectations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results or performance of SK Corporation to be materially different from any future results or performance expressed or implied by such forward-looking statements. 1

3 Contents Asia-Pacific Energy Sector Company Overview 2003 Financial Results & 2004 Financial Targets Future Strategy Corporate Governance 2

4 Asia-Pacific Energy Sector 3

5 Petroleum Demand in Asia-Pacific Demand for petroleum products is continuously growing in Asia-Pacific (1000B/D) CAGR 00~ 05 00~ 05 05~ 10 05~ % 3.2% 2.8% 2.9% 0.1% 2.4% 2.4% 3.0% 2.4% 2.7% -1.6% 0.5% Source: FACTS-EWCI, Fall

6 Asia-Pacific Refinery Additions Capacity expansion in the region is limited China India Taiwan S Korea Singapore Philippines Japan Indonesia -1, ,000 2,000 3,000 4,000 5,000 6,000 7,000 (Kbpd) July 2003 Capacity Changes through 2005 Source: FACTS-EWCI, Fall

7 Korea in the Global Energy Sector Korea is one of the major oil consuming countries in the world Major Oil Consumption Countries Refinery Capacity (Kbpd) (1,000 BBL) USA ,761 Change from % China Russia 5,744 5, % 0.1% Japan 4, % Korea 2,316 - US Japan China Germany Russia Korea India Italy 2,292 - India 2, % Source: BP Amoco Statistical Review of World Energy,

8 Demand Outlook in Korea Demand for petroleum products is continuously growing in Korea Demand by Product Demand by Users (1000B/D ) (1000B/D ) Source: FACTS-EWCI, Fall 2003, KEEI 7

9 Global Outlook on Petrochemicals Ethylene capacity expansion is limited in the near future while demand is continuously growing Global Ethylene Supply & Demand Korea Capacity Position (1000T/Year) 150,000 (1000T/Year) 120,000 (1000T/Year) 18.7% 120,000 90,000 90, % 60,000 30,000 60, % 17.1% 0 30,000 '00 '01 '02 '03 '04 '05 World Capacity(LHS) World Demand(RHS) Source: Tecnon 2002, KPIA 8

10 Global Outlook on Petrochemicals (Cont d) Demand for petrochemical products in Asia is driven by strong growth in China AAGR(%/Yr) * Source: Tecnon 2002, PCI 2002, CMAI 2002 & 2004 Annual Report * Note: AAGR ( 05~ 10) figures for SM does not include the growth figures for the years 2009 &

11 Company Overview 10

12 Organization and Product Lines Energy & Marketing Petrochemicals Gasoline Kerosene Diesel B-C Coal OK Cashbag Ethylene PX SM PE/PP B/T/X Finished Lubricants Base Oil Yemen Egypt Ivory Coast Vietnam Peru Lubricants E&P 11

13 Revenue by Business Divisions Petrochemicals, Lubricants and E&P businesses have been growing steadily (Billion USD) 10 (Million USD) Petroleum(LHS) Petrochemicals(LHS) Lubricants(RHS) E&P(RHS) * The translation of Korean won amounts into US dollar amounts has been made at 1,197.8Won/USD, the base rate on December 31, 2003, for the convenience of investors outside of Korea. 12

14 Operating Profit by Business Divisions SK Corporation s operating profit by four main business divisions 1, (Unit: Million USD) % 15% 67% 21% 7% 7% 62% 23% 7% 7% % % 29% 39% 16% 10% 21% 14% % 56% 10% 10% Petroleum Petrochemicals Lubricants E&P * The translation of Korean won amounts into US dollar amounts has been made at 1,197.8Won/USD, the base rate on December 31, 2003, for the convenience of investors outside of Korea. 13

15 SK Corporation s Position in Korea No. 1 refiner with largest refining capacity, market share, and marketing network in Korea Competitive refining facility with integrated petrochemical facility SK service stations ranked No. 1 by NCSI(National Customer Satisfaction Index) for 3 consecutive years and by K-BPI(Korea s Brand Power Index) for 4 consecutive years Product Domestic Market Share Rank Competitor Petroleum 33% 1 LG-Caltex, Oil bank, S-Oil LPG 25% 1 Daesung, Samcheoli, LG-Caltex Lubricant 16% 1 LG-Caltex, S-Oil, Exxon-Mobil Asphalt 37% 1 LG-Caltex, Oilbank, S-Oil Ethylene 19% 3 Yeochun NCC, Hyundai, LG Petro B.T.X 29% 2 LG-Caltex, Yechun NCC Solvent 48% 1 Hosung Chemax, Yisoo, LG-Caltex Source: Company data 14

16 Petroleum Business Refining margin stays at high level with crude oil price hike SK Corporation maintains No. 1 position with 33% market share Refining Margin & Crude Oil Price Market Share Trend (USD/BBL) (USD/BBL) (%) SK LG S-Oil HD INC Importers Source: Company data 15

17 Petrochemicals Business Prices of Ethylene, PX and SM continues to be strong Petrochemicals industry is at the early stage of a cyclical upturn Petrochemical Product Price Trend Product Volume and Unit Price (USD/Ton) (1,000Ton) (USD/Ton) Unit Price(RHS) Source: Company data 16

18 Lubricants Business No. 2 base oil plant will start the production from 2H this year, which will double the production volume of base oil (Group III) Group III base oil maintains stable overseas sales network : Exxon-Mobil, Castrol, Valvoline, etc. ZIC ranked No. 1 by K-BPI(Korea s brand power Index) for 4 consecutive years Overseas Sales Status / Lube Agent/Customer Base Oil Customer 17

19 E&P Business (B/D) SK Corporation is the most active E&P player among Korean companies Production SK Corporation s proven reserves are 300 million barrels of oil equivalent Forecast North Zaafarana. Egypt NC 174. Libya Marib. Yemen CI-11. Cote d'voire Block Vietnam Block8. Peru Cl-01&02. Cote d'voire Bangko. Indonesia Camisea (Block88). Peru Area C&D. Epuatorial Guinea LNG Investments in Oman, Quatar and Yemen WA278P. WA 338P. Australia BM-C-8. Brazil Producing/Developing Exploring LNG investment 18

20 2003 Financial Results & 2004 Financial Targets 19

21 2003 Sales/Profit & 2004 Targets (Unit : Million USD) E Change Sales 11, , , Operating Profit Pretax Income , ,062.3 CAPEX * Major assumptions - Dubai : U$24.8/BBL (annual average), Naphtha : U$261/MT - F/X Rate : 1,200/U$, Interest : 5.2% (annual average) * The translation of Korean won amounts into US dollar amounts has been made at 1,197.8Won/USD, the base rate on December 31, 2003, for the convenience of investors outside of Korea. 20

22 2003 Divisional Operating Profit & 2004 Targets (Unit : Million USD) E Change Petroleum Petrochemicals Lubricants E&P Others Total * The translation of Korean won amounts into US dollar amounts has been made at 1,197.8Won/USD, the base rate on December 31, 2003, for the convenience of investors outside of Korea. 21

23 Future Strategy 22

24 Business Strategy 04 Business Strategy Strategy Strengthen balance sheet Strengthen competitive edge of core businesses Restore trust from stakeholders Action Plan Achieve positive EVA and reduce net debt to less than 5 trillion KRW Debt reduction will have priority over CAPEX Improve operational efficiency of core businesses Expand into regional market, focusing on China Transparent and independent BoD 23

25 Divisional Strategy 04 Divisional Outlook Petroleum - Increase profit by optimizing the marketing network - Continue to implement OPI (Optimal Process Improvement) program Petrochemicals - Successful entry into China - Create additional profit from reformer plant (Start production in 2006) Lubricants - Finished product: Establish foundation to become regional player - Base oil : Strengthen global leadership E&P - Daily production target: 21,000 B/D 24

26 Balance 04 Financial Sheet Strategy Structure 04 Financial Strategy Balance Sheet Strategy Improve balance sheet by reducing debt Restore BBB rating from international credit rating agencies End of 2003 End of 2004 (E) Credit Rating (S&P) BB+ BBB Actual Net Debt 5.8 Trn. KRW 5.0 Trn. KRW EBITDA / Interest <Debt Reduction Plan> Maximization of dividend income Disposal of investment securities and low-performing assets, such as land in Inchon Set strict guidelines on CAPEX - Limit CAPEX within operating cash flow - Investment will be focused on strengthening core businesses 25

27 Corporate Governance 26

28 Resolution of AGM Six new directors, who have competent managerial capacity (professional knowledge, commitment, and business mind) and social acceptability (independence and sound social reputation), have been elected at AGM Outside directors represent 70% of the board members New BoD Members Name Role Profile Mr. Heon-Cheol SHIN Executive Director Vice President and CEO, SK Gas Mr. Dae-Woo NAM Outside Director/Audit Committee Outside Director of Korea Gas Corporation Dr.Yoon-Suk SUH Outside Director/Audit Committee Vice Chairman of Korea Accounting Association Dr. Soon CHO Outside Director Minister of MOFE and Deputy Prime Minister Dr. Tai-Yoo KIM Outside Director Chairman of Korea Resource Economics Association Mr. Sei-Jong OH Outside Director Chairman of BoD at Kookmin Bank 27

29 Corporate Governance Blueprint We are strongly committed to enhance the role of the Board and returning the Board the final decision making authority with transparency and efficiency Independent Board of Directors The board will lead the senior management The authority and responsibility of the board will be strengthened with more sub-committee activities* Competent Management Team The board will appoint competent management team and will evaluate its performance Ethics Management Enact global standard code of ethics and ensure transparent accounting * Auditing committee, Strategy committee, Outside director nominating committee, Personnel committee, Transparent management committee, System improvement committee 28

30 SK Corporation Thank you