SK Innovation Reports 439.7 Billion KRW Operating Loss in 2Q (Supplement)

[Asia Economy Reporter Park So-yeon] SK Innovation recorded an operating loss of 439.7 billion KRW on a consolidated basis in the second quarter. Although the scale of the loss was significantly reduced compared to the nearly 2 trillion KRW record loss in the first quarter, the company still failed to turn a profit.

On the 29th, SK Innovation announced that its consolidated sales for the second quarter of this year amounted to 7.1996 trillion KRW, down 44.7% from the same period last year, and it posted an operating loss of 439.7 billion KRW. The operating loss narrowed compared to the first quarter (operating loss of 1.7752 trillion KRW), escaping the worst situation. However, compared to the same period last year (operating profit of 497.5 billion KRW), performance remains sluggish.

The company explained that sales decreased by 3.9634 trillion KRW (-35.5%) from the first quarter due to the drop in oil prices caused by the COVID-19 pandemic and the resulting decline in petroleum product selling prices and sales volume.

Operating profit was affected by continued sluggish market conditions across all business sectors including petroleum and chemicals. However, inventory-related losses decreased due to the stabilization of international oil prices, and the effect of the decline in the official selling price (OSP) of Middle Eastern crude oil contributed to significantly reducing the loss compared to the previous quarter.

In the second half of the year, petroleum demand is expected to increase and refining margins improve due to economic stimulus measures by various countries and the gradual recovery of the global economy.

The petroleum business recorded an operating loss of 432.9 billion KRW. Margins improved due to the decline in Middle Eastern crude oil prices (OSP) and the lagging effect* from rising oil prices, and inventory-related losses decreased, resulting in a significant improvement of 1.2031 trillion KRW compared to the previous quarter.

The chemical business turned to an operating profit of 68.2 billion KRW, improving by 158 billion KRW from the previous quarter as inventory-related losses decreased and variable costs declined due to lower fuel prices.

The lubricant business recorded an operating profit of 37.4 billion KRW, an increase of 8.5 billion KRW from the previous quarter, despite a significant drop in base oil sales volume in the US and European markets due to COVID-19, thanks to margin improvement from cost reductions.

The petroleum development business posted an operating profit of 11.8 billion KRW, down 33.5 billion KRW from the previous quarter, as sales volume decreased and composite selling prices fell due to the sharp decline in demand caused by the spread of COVID-19.

The battery business recorded an operating loss of 113.8 billion KRW, an increase of 8.9 billion KRW from the previous quarter, despite increased sales volume due to early stabilization of newly operated overseas plants, because of increased one-time costs to establish a global management system.

The materials business achieved an operating profit of 43.7 billion KRW, up 16.7 billion KRW from the previous quarter, due to increased sales of separators for electric vehicles. This is interpreted as a result of growing demand for separators amid the continued growth of the electric vehicle battery market despite COVID-19.

Lee Myung-young, Chief Financial Officer of SK Innovation, said, “Although operating losses have narrowed compared to the previous quarter due to margin improvements, the difficult environment continues. We will overcome the crisis through intense structural reforms and relentless innovation in line with SK Innovation’s deep change direction.”

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