SK Inno Improves Energy and Chemical Operating Profit... Battery Losses Continue (Update)

1Q Sales 18 Trillion Won, Operating Profit 624.7 Billion Won
'Refining Margin Improvement' Ends Operating Loss in Petroleum Business
SK On Secures Additional Orders of 180 Trillion Won... Total Surpasses 400 Trillion Won

SK Innovation's operating profit improved thanks to solid performance in its energy and chemical businesses. However, its growth engine, the battery business, failed to turn a profit.

On the 29th, SK Innovation announced its first-quarter earnings, reporting sales of KRW 18.8551 trillion and operating profit of KRW 624.7 billion. Compared to the same period last year, sales decreased by 1.5%, but operating profit increased by 66.6%. Compared to the previous quarter, sales fell by 3.45%, while operating profit surged by 760.2%.

SK Innovation stated, "Operating profit in the energy and chemical sectors increased compared to the previous quarter due to inventory-related gains from rising oil prices and improved refining margins, driving first-quarter results. Although the battery business showed somewhat weak profitability in the first quarter due to a sales volume decline and price drops caused by the chasm (temporary demand stagnation), mid- to long-term profitability is expected to improve thanks to increased utilization rates of global production facilities from large-scale orders and the expansion of Advanced Manufacturing Production Tax Credits (AMPC)."

The petroleum business turned profitable with an operating profit of KRW 591.1 billion, up KRW 756.3 billion from the previous quarter, driven by strong refining margins and inventory-related gains from rising oil prices. The chemical business achieved an operating profit of KRW 124.5 billion, up KRW 124.1 billion from the previous quarter, due to margin increases from improved benzene spreads and inventory-related gains from rising naphtha prices.

The lubricants business recorded an operating profit of KRW 220.4 billion, up KRW 3.4 billion from the previous quarter, supported by increased sales volume from steady demand and reduced fixed costs. The oil development business achieved an operating profit of KRW 154.4 billion, up KRW 47.3 billion from the previous quarter, due to increased sales volume from continued production expansion at the China 17/03 block.

The battery business posted sales of KRW 1.6836 trillion, down KRW 1.0395 trillion from the previous quarter due to decreased sales volume and price declines. Operating loss was KRW 331.5 billion. Despite productivity improvements at overseas subsidiaries, negative factors such as reduced operating rates due to customer inventory adjustments and AMPC reductions impacted results. The materials business recorded an operating loss of KRW 64.4 billion due to decreased sales volume to customers and lower operating rates, which increased fixed cost burdens.

[Image source=Yonhap News]

SK Innovation expects the petroleum business in the second quarter to maintain strong refining margins due to continued production cuts by the major oil-producing countries group 'OPEC+' and improved mobility demand. The chemical business is expected to see gradual improvement in paraxylene (PX) spreads due to increased gasoline blending demand in the second half of the year, while polyethylene (PE) and polypropylene (PP) spreads are expected to remain stable amid China's domestic demand stimulation policies.

The lubricants business is also expected to maintain positive profitability due to increased demand entering the seasonal peak. The oil development business anticipates growth in scale and profits as the China 17/03 block aims to reach maximum production in the third quarter of this year.

Regarding the battery business, SK Innovation explained that since the launch of SK On, it has secured additional orders worth KRW 180 trillion in just two years, pushing the cumulative order backlog beyond KRW 400 trillion. They expect shipments to gradually increase through customer inventory replenishment demand and ongoing line operation optimization. In particular, they are flexibly managing the timing of global production facility expansions, which is expected to improve profitability.

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