Foundation Deployed for Growth into “Global Specialty MARKETER” through Business Restructuring and Intensive Efficiency Enhancement in 2016

(Company posts 2.3593 trillion won in sales, 149.5 billion won in operating income)

2016 business performance figures indicated in this press release may vary in the audit and review processes by the outside auditors as their audit or review has not yet been completed. These figures are _ base_d on K-IFRS consolidated financial statements. Your understanding is solicited as they are different from the operating income amount previously disclosed as they are now _ base_d on the operating income reflecting amendments concerning. K-IFRS No. 1001 ‘Presentation of Financial Statements’.


● A special foundation has been established to bring about deep changes and help the company transform itself into a high value-added, highly functional specialty raw materials business, despite a fall in the company’s business performance compared with the preceding year (2.3593 trillion won in sales, 149.5 billion won in operating income) due to expenses incurred in enhancing management efficiency while SKC and its subsidiaries underwent restructuring in 2015.

● The company’s financial stability indicators were improved by efforts to improve its financial soundness, including debt ratio, EBITDA, and reliance on borrowing, although its sales and operating income in 2015 decreased by 4.3% and 31.4%, respectively, from the preceding year, due to temporary expenses incurred by the business restructuring of its subsidiaries[1] and the enhancement of its film business’s efficiency, while its polyol business was transferred as MCNs were founded in the latter half of 2015.

● Declaring 2017 as the starting year for reform and innovation to make the leap forward to becoming a “Global Specialty MARKETER”, SKC plans to further accelerate its growth while maximizing its business value by 1) making a big jump forward with the focus on new business, 2) converting its core business lines into specialties, and 3) implementing its globalization around China more actively.


[Chemical business]

ㅁ Sales of 728.0 billion won, operating income of 104.8 billion won, operating income ratio of 14.4% in 2016

⊙ The company’s sales and operating income decreased from the preceding year after the transfer of the polyol business with the foundation of MCNs in 2015. Sales also decreased due to periodic repairs and maintenance in the 4th quarter (one month every four years), the prices of raw material rose due to a hike in the price of oil, and weaker selling prices.

⊙ Solid operating income of 104.8 billion won (14.4% operating income ratio) was posed for 728.0 billion won sales thanks to an increase in sales of high value-added polypropylene glycol (PG) to major global customers.

⊙ The company is pursuing steady growth by establishing a foundation for stable profitability and enhancing the business capabilities of the PO downstream business, including high value-added PF, while a stable PO demand and supply situation is expected along with a steadily improving product portfolio due to the development of specialty PU products.

[Film business]

ㅁ Sales of 652.8 billion won, operating income of △7 billion won in 2016

⊙ The film business saw a drop in sales from the preceding year and posted an operating loss (△7 billion won) due to the expenses incurred as a result of efforts to streamline the business and enhance its product competitiveness, while costs increased due to poor external conditions, including the slow business of downstream industries and rising raw material prices.

⊙ An operating loss of △7 billion won was posted as 31.3 billion won in expenses were incurred by the program to enhance business efficiency carried out in the 2nd and 3rd quarters. Profitability is likely to improve as the cost structure has been optimized and the product portfolio has been diversified, while the restructuring of the film business has been completed.

⊙ SKC’s film business line plans to steadily enhance its R&D and production capabilities in order to upgrading its competitiveness, while high value-added, highly functional growth products (transparent PI film, TAC substitute film, PVB etc.) are being commercialized early on to increase stable sales and enhance profitability.


[Subsidiaries]

ㅁ Sales of 978.5 billion won, operating income of 51.7 billion won in 2016

⊙ The company’s subsidiaries achieved aggregate annual sales of 978.5 billion won and operating income of 51.7 billion won as their performance continued to improve as a result of their efforts to enhance competitiveness and normalize business since 2015.

⊙ Sales increased by 15.2% over 2015 (849.5 billion won) while operating income increased by as much as 330% over 2015 (15.6 billion won).

⊙ The subsidiaries have started to see higher sales growth and improved earnings by securing a foundation for financial stability and growth potential through rights issuance after selling off SKC Solmics’ photovoltaic line in the latter half of 2016. SK Telesys enjoyed increased sales and profits as its semiconductor materials line entered full-scale business, while SK Bioland achieved a record increase in annual sales following an increase in demand for health supplements increased and the addition of new production capacities.

⊙ The subsidiaries plan to concentrate on profit-oriented growth in the semiconductor and BHC materials market.

Note 1. Current annual performance and fluctuations (Unit: 0.1 billion won) 

* Sales in 2015: Inclusive of consolidated sales of Polyol and S/H in the first half (consolidated sales decreased as MCNs were founded in July 2015). 

** Operating income in 2016: Inclusive of expenses for efficiency enhancement and periodic repairs (Ulsan). 

Note 2. Performance by business line in 2015-16 (Unit: 0.1 billion won) 

* 2016 sales decreased since the Polyol business was transferred as MCNs were founded in 2015 latter half. 

Note 3. Key SKC tasks in 2017 

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Business restructuring of subsidiaries (sale of SKC Air Gas, SKC Solmics photovoltaic business)