SK Innovation Achieves First Trillion-Won Battery Sales Last Year... Operating Loss of 2.5688 Trillion Won

Battery Business Achieved KRW 1.6 Trillion in Sales Last Year
First Year of Growth Driven by Financial Story

[Asia Economy Reporter Hwang Yoon-joo] SK Innovation achieved trillion-won sales in its battery business for the first time last year despite the stagnation of its main businesses due to the impact of COVID-19. However, due to losses in the refining business, the company recorded an operating loss of around 2.5 trillion won last year.

SK Innovation announced on the 29th that it posted an operating loss of 243.4 billion won on a consolidated basis in the fourth quarter of last year, turning to a deficit. Sales during the same period decreased by 34.1% to 7.6776 trillion won, and net loss narrowed to 246.8 billion won.

◆ Refining Business Posts Mid-2 Trillion Won Loss... Battery Sales Hit Record High

The battery business stands out amid the losses. Quarterly sales reached 479.2 billion won, marking the highest quarterly sales. Annual sales were 3.41645 trillion won, with an operating loss of 2.5688 trillion won. SK Innovation’s battery business is expected to continue its sales growth as overseas plants in Yancheng and Huizhou, China, with an additional production capacity of 20GWh, will start full-scale operations this year, increasing total production capacity to 40GWh, about four times that of the end of 2019.

By business segment, the oil business recorded sales of 4.7692 trillion won and an operating loss of 192.5 billion won in the fourth quarter of last year. The chemical business posted sales of 1.6194 trillion won and an operating loss of 46.2 billion won, while the lubricants business recorded sales of 652 billion won and an operating profit of 125.3 billion won. The oil development business achieved sales of 14 billion won and an operating profit of 1.6 billion won.

The battery business recorded sales of 497.2 billion won, an increase of 2.2 times compared to 225 billion won in the same period last year. However, despite continuous improvement in profitability, it posted an operating loss of 108.9 billion won due to initial costs of overseas plants.

The materials business saw operating profit decline by 4.6 billion won from the previous quarter to 25.3 billion won, due to exchange rate depreciation and initial fixed cost burdens from new Chinese facilities, despite increased sales volume of lithium-ion battery separators (LiBS).

The operating loss for 2020 was 2.5688 trillion won, turning to a deficit. Sales during the same period decreased by 30.7% to 34.1645 trillion won, and net loss turned to a deficit of 2.1875 trillion won.

By business segment, last year’s performance showed the oil business with sales of 22.6379 trillion won and an operating loss of 2.2228 trillion won. The chemical business posted sales of 7.0541 trillion won and an operating loss of 121.2 billion won, while the lubricants business recorded sales of 2.3713 trillion won and an operating profit of 262.2 billion won. The oil development business had sales of 59.3 billion won and an operating loss of 4.8 billion won. The battery business posted sales of 1.6102 trillion won and an operating loss of 426.5 billion won.

◆ Battery Business Settles on Growth Trajectory... Full-Scale Production in Europe and the U.S. from 2022

SK Innovation’s battery business, the driving force behind its eco-friendly growth, recorded annual sales of 1.6102 trillion won, an increase of 919.9 billion won compared to 690.3 billion won in the previous year, entering a full-fledged growth trajectory.

Stable operations of the Hungary Plant 1 and China Changzhou Plant, which began mass production in 2020, increased sales volume significantly, boosting sales and improving profitability through early stabilization of overseas plants.

The Yancheng and Huizhou plants in China are scheduled to begin full-scale mass production from the first quarter of 2021, with further significant performance improvements expected. Additionally, the 9.8GWh Hungary Plant 2 is planned to start mass production in the first quarter of 2022, and Plant 3 in the first quarter of 2024. The 9.8GWh first plant under construction in Georgia, USA, is set to begin mass production in the first quarter of 2022, followed by the 11.7GWh second plant in the first quarter of 2023.

SK Innovation aims to establish a global battery production capacity of 85GWh by 2023 and over 125GWh by 2025. It has decided to expand capacity by more than 25GWh beyond the previous 2025 target of 100GWh, continuing aggressive investment in response to the rapid growth of electric vehicles.

The materials business has been continuously expanding overseas separator facilities recently. Currently, the plants in Cheongju and Jeungpyeong, Chungcheongbuk-do, with a capacity of 530 million m2, and the China plant with 340 million m2 capacity, started operations at the end of last year, achieving an annual production capacity of 870 million m2. With the sequential operation of overseas plants in China, Poland, and others, production capacity is expected to reach 1.37 billion m2 by the end of this year and 1.87 billion m2 in 2023.

Meanwhile, SK Innovation decided not to pay dividends in 2020 to improve its financial structure amid deteriorating performance due to COVID-19 and increased investment in new growth businesses. However, it stated that shareholder-oriented management remains an important value for SK Innovation, and it is establishing a mid- to long-term shareholder return plan considering management performance and corporate value through new businesses.

Kim Jun, CEO of SK Innovation, said, "Despite the worst management environment we have never experienced before due to COVID-19, visible results in the company’s new growth businesses are being realized. This year, the first year of full-scale implementation of our Financial Story, we will promote comprehensive and fundamental innovation centered on green initiatives not only in new businesses but also in existing businesses."

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