February 9, 2022
SKC: 4Q21 Results Solid Excluding One-offs
- By Lee Jin-myung & Choi Gyu-heon
- February 9, 2022, 17:49
4Q21 OP falls short at KRW99.4bn (-32% QoQ) due to one-offs
SKC posted operating profit of KRW99.4bn (-32% QoQ) for 4Q21, missing the consensus estimate of KRW117.9bn. Factoring out one-off expenses of KRW25bn incurred from employee bonuses, ramp-up of a new plant and commercialization of transparent PI films, actual earnings were solid.
The mobility materials division reported top-line growth on increased volume, but saw operating profit fall 13% QoQ due to employee bonuses and costs related to the sixth new plant. Chemicals delivered solid results with operating profit coming in at KRW89.3bn (-5% QoQ) and operating margin remaining high at 29.6% despite one-off expenses, thanks to the continued uptrend in propylene glycol (PG) and propylene oxide (PO) spreads. Operating earnings from industrial materials turned to a loss due to costs incurred for the commercialization of transparent PI films, but sales of semiconductor materials reached a new quarterly high on shipment growth.
1Q22 OP forecast at KRW125.4bn (+26% QoQ)
For 1Q22, we forecast operating profit at KRW125.4bn (+26% QoQ). The mobility materials division will likely report sales of KRW202.2bn (+7% QoQ) and operating profit of KRW26.7bn (+30% QoQ). Earnings growth should be driven by increasing shipments from the ramp-up of the sixth plant (slated for March) and rising copper foil ASP. With chip shortages causing disruptions in production at EV clients, we expect SKC to focus on diversifying its clientele to minimize negative impact on overall earnings.
Operating profit from chemicals is projected at KRW86.1bn (-4% QoQ) for 1Q22. PO spreads will likely decline amid weakening market conditions. In contrast, demand for high value-added PG is expected to remain strong, helping to limit the decline in overall operating profit from chemicals. Industrial and semiconductor materials should post growth in both sales and profits, backed by brisk downstream demand in 1Q22.