SK Inno Shows Balanced Performance Improvement in Refining and Others... Battery Sales Expected to Reach 7 Trillion Won

"Export Growth" Petroleum Business Operating Profit 1.5067 Trillion Won
Battery Annual Sales Expected to Double Year-on-Year
"Building a Circular Economy Including Net Zero and Plastic Waste Recycling"

[Asia Economy Reporter Oh Hyung-gil] SK Innovation's operating profit more than tripled due to rising petroleum product prices following the increase in international oil prices. The full-scale sales of electric vehicle batteries also drove revenue growth.

SK Innovation announced on the 29th that its first-quarter sales reached KRW 16.2615 trillion, a 72.9% increase compared to the same period last year. Operating profit also rose 182.2% to KRW 1.6491 trillion.

An SK Innovation official explained, "Compared to the operating loss of around KRW 1.7 trillion recorded in the first quarter of 2020 due to the COVID-19 pandemic, this is a temporary but dramatic rebound," adding, "This reflects the impact of soaring refining margins, inventory gains from the petroleum business due to rising oil prices, and increased profits from petroleum development projects."

By business segment, the petroleum business achieved sales of KRW 10.6427 trillion and operating profit of KRW 1.5067 trillion. This was influenced by strong refining margins, market improvements due to exchange rate increases, and increased inventory-related profits from rising oil prices. In particular, petroleum product export volumes increased by 57% compared to the same period last year, leading the profit improvement.

The battery business recorded sales of KRW 1.2599 trillion, 2.4 times higher than the same period last year, but incurred an operating loss of KRW 273.4 billion. Although initial operating costs were incurred for the second plant in Hungary, which began mass production, a reduction in one-time expenses led to a KRW 37 billion improvement compared to the previous quarter.

The petroleum development business saw operating profit rise by KRW 86.5 billion from the previous quarter to KRW 198.2 billion due to increased selling prices, while the chemical business achieved an operating profit of KRW 31.2 billion, turning profitable thanks to improved paraxylene spreads and inventory-related profit effects from rising naphtha prices.

On the other hand, the lubricants business saw operating profit decrease by KRW 56.1 billion compared to the previous quarter due to margin declines caused by soaring costs and reduced sales volume, and the materials business recorded an operating loss of KRW 3.1 billion due to decreased sales of lithium-ion battery separators (LiBS).

SK Innovation forecasted that its annual battery sales this year will reach the mid-KRW 7 trillion range, more than doubling last year's KRW 3.0398 trillion. In the first quarter, 9.8 GWh in the U.S. and 10 GWh in Hungary are in commercial operation, and production capacity is expected to increase to 77 GWh by the end of the year when the Yancheng plant in China begins commercial operation.

The second plant in Georgia, U.S., will start commercial operation in the first quarter of next year, the second plant in Yancheng, China, and the third plant in Hungary will begin in 2024, and the BlueOvalSK plant will start sequentially in 2025. The company plans to secure production capacity of 88 GWh in 2023 and over 220 GWh in 2025.

Kim Yang-seop, SK Innovation's Chief Financial Officer, stated, "Due to energy supply instability, oil prices have risen and refining margins have improved, leading to balanced performance improvements across all businesses including refining. However, the management environment remains more unstable than ever, and high market volatility continues."

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