GS Caltex,’box-box’ in the corporate bond market despite the largest loss in history… Why?

▲ GS Caltex. ⒸReporter Sangyoon Jeong

GS Caltex, which recorded the largest operating loss in history, succeeded in forecasting the demand for issuance of corporate bonds. Based on a solid financial structure, the company not only defended its ratings amid the decline in credit ratings of rivals, but also succeeded as new growth engines in the petrochemical and refining sectors became visible.

According to the industry on the 22nd, GS Caltex succeeded in box office success by collecting 200 billion won in recruitment and 940 billion won in the latest demand forecast.

GS Caltex, which is scheduled to issue corporate bonds on March 3, is considering an increase in the issuance amount up to 400 billion won in line with the demand forecast. GS Caltex’s corporate bond maturity of 400 billion won will arrive in April.

An official from the IB (investment bank) industry explained, “It seems that investors are interested in the fact that it is the only one maintaining a stable financial structure without a credit rating decline despite the decline in the oil refinery industry’s performance last year due to Corona 19.”

In fact, as the corona19 pandemic continued last year, all four refineries recorded operating losses of over 5 trillion won due to weak refining margins below the break-even point and inventory valuation losses linked to a decline in international oil prices. Accordingly, the three major domestic credit rating agencies also adjusted the credit ratings of refiners.

In December of last year, the three credit rating companies lowered the credit ratings of SK Innovation and S-Oil from’AA+ (negative)’ to’AA (stable)’. Prior to this, Korea Credit Rating lowered Hyundai Oilbank’s credit rating outlook from’positive (AA-)’ to’negative’.

On the other hand, Shinpyeong 3 has maintained GS Caltex’s credit rating as’AA+ (stable)’ since November 2016.

Kwon Ki-hyuk, head of Han Shin-pyeong, said, “We are securing a stable financial structure compared to other domestic refineries through a conservative business stance despite large operating losses. As the foundation for profit generation is expected to expand after commercial operation of MFC facilities in the second half of the year, the negative impact of Corona 19 If this is eased, profit generation output and financial stability indicators are expected to improve rapidly.”

In addition to the oil refining industry, the petrochemical division produces aromatics (1.35 million tons per year of paraxylene, 900,000 tons per year of benzene), synthetic resins (500,000 tons per year of propylene), and lube base oil (25,000 barrels per day) and lubricant products. The overall business stability is very good, such as diversifying the business into the lubricants sector.

In the fourth quarter of last year, the lubricants division showed improved results compared to the previous quarter, but the deficit expanded again due to weak refining margins, inventory valuation losses, and worsening PX spreads. The consolidated annual operating loss amounted to 9192 billion won, which recorded another operating loss six years after 2014.

This year, oil prices have recovered to pre-Corona 19 levels, and the demand for petroleum products is gradually increasing based on the expansion of vaccines and the base effect in 2020, but the overall petroleum products are still growing due to concerns about re-proliferation of Corona 19 and limited economic recovery. Sluggish supply and demand and sluggish refining margins continue.

▲ Drones are taking off at a drone delivery demonstration event at GS Caltex’s Musocheon gas station in Jeju. Ⓒ GS Caltex

However, if the negative effects of Corona 19 are gradually resolved in the future and the global economy gradually recovers due to the resumption of economic activities in major countries, there is a possibility that the profit structure will stabilize somewhat as oil prices and demand for petroleum products improve.

The spread of PX, a major chemical product, continues to weaken due to large-scale capacity expansions in China, but the trend of PTA expansion ahead of PX products, planned diversification of petrochemical products, and falling raw material prices will contribute to the recovery of profits in the non-refining sector. It is expected to be.