SK Inno Reports Q1 Operating Loss of 1.7752 Trillion KRW... Chemical Business Also Posts Deficit (Comprehensive)

Refining Business Deficit Reaches 1.636 Trillion KRW
Chemical Business Posts 89.8 Billion KRW Loss... First Quarterly Deficit Since Q4 2015

[Asia Economy Reporter Yoonju Hwang] SK Innovation has been hit hard by the novel coronavirus infection (COVID-19). It recorded a loss in the first quarter of this year. The refining business alone posted a loss of 1.636 trillion KRW, and the chemical business recorded its first loss in 17 quarters.

SK Innovation announced on the 6th that it recorded an operating loss of 1.7752 trillion KRW in the first quarter of this year, turning to a deficit. Sales during the same period were 11.163 trillion KRW, down 12.6% compared to the same period last year.

SK Innovation explained, "Due to the sharp drop in oil prices, large-scale inventory-related losses occurred, and the refining business recorded a significant loss due to weak refining margins caused by sluggish domestic and international demand for petroleum products amid COVID-19." Since last year, the worsening market conditions have been severe, and the company was hit by the so-called triple whammy of COVID-19 impact and the sharp decline in international oil prices.

The inventory-related loss caused by the sharp drop in oil prices amounted to 941.8 billion KRW, and due to negative margins where product prices such as jet fuel and gasoline were lower than crude oil prices, the petroleum business alone recorded a loss of 1.636 trillion KRW.

Sales also recorded the lowest quarterly figure since the second quarter of 2017 at 10.5413 trillion KRW, due to a decline in petroleum product selling prices caused by the drop in oil prices and a decrease in sales volume due to demand contraction.

Additionally, non-operating losses of 272 billion KRW were added due to foreign exchange losses caused by the strong won, resulting in a pre-tax loss of 2.0472 trillion KRW. Including foreign exchange losses, this operating performance came out during the worst period facing a quadruple crisis. This is the worst management environment since the company started its refining business in 1962.

In the chemical business, despite improved product margins compared to the previous quarter, operating profit decreased by 97.1 billion KRW due to inventory losses caused by the drop in naphtha prices, resulting in a loss of 89.8 billion KRW. This is the first quarterly loss in the chemical business since the fourth quarter of 2015.

The lubricants business recorded an operating profit of 28.9 billion KRW, down 58 billion KRW from the previous quarter due to decreased sales volume caused by COVID-19 and inventory losses from cost declines.

The petroleum development business posted an operating profit of 45.3 billion KRW, up 4.1 billion KRW from the previous quarter, despite decreased sales, due to reduced operating costs in Peru blocks 88 and 56 and depreciation expenses of US assets.

The battery business began mass production in the first half of this year at the production plants completed at the end of last year in China and Hungary. Although initial operating costs occurred, operating losses improved by 7.5 billion KRW from the previous quarter to 104.9 billion KRW through operational efficiency.

The materials business recorded an operating profit of 27 billion KRW, up 3.6 billion KRW from the previous quarter, as sales of lithium-ion battery separators (LiBS) for electric vehicles increased.

Kim Jun, SK Innovation’s CEO, said, "Although we are facing the worst management environment ever due to the impact of COVID-19, we are overcoming the crisis by improving our business structure and innovating our business model."

This content was produced with the assistance of AI translation services.