SK Innovation Posts 2.16 Trillion Won Operating Profit in Q1 on Inventory Effects and Export Gains

Return to Profit on Soaring Oil Prices and Inventory Gains

Refining Earnings Surge Thanks to Lagging Effect

Inventory-Related Gains Alone Reach 780 Billion Won

SK Innovation reported a significant improvement in its first-quarter performance, driven by a sharp increase in oil prices due to the Middle East conflict and higher inventory-related profits.

On May 13, SK Innovation announced that its sales for the first quarter of this year reached 24.2121 trillion won, with operating profit at 2.1622 trillion won. Compared to the previous quarter, sales increased by 4.5408 trillion won and operating profit rose by 1.8669 trillion won. On a year-on-year basis, the company returned to profit in terms of operating profit.

The improvement in performance was mainly attributable to the lagging effect of rising oil prices and increased inventory-related profits. In the refining industry, a time lag exists between crude oil procurement and product sales, so when oil prices rise, crude oil secured at lower prices is reflected in costs, leading to improved profitability.

In fact, after the Iran war, the average price of Dubai crude oil in March soared to 128.5 dollars per barrel, a significant increase compared to the average of the previous three months. As a result, the selling prices of products such as diesel and jet fuel rose, while existing low-priced crude oil inventories were reflected in costs, expanding profitability.

SK Innovation explained, "SK Energy's operating profit increased significantly compared to the previous quarter due to the lagging effect of rising oil prices and increased inventory-related profits," adding, "However, inventory-related profits are temporary gains that could diminish or disappear if oil prices fall in the future."

SK Energy reported first-quarter sales of 11.9786 trillion won and operating profit of 1.2832 trillion won. Of this, inventory-related profit accounted for about 780 billion won.

SK Geocentric, which manages the chemical business, returned to profit due to inventory effects from higher naphtha prices and an improved spread for aromatic products. SK On reduced its operating loss, supported by a recovery in sales in North America and Europe.

SK Innovation also highlighted, as major achievements in the first quarter, the introduction of the first LNG cargo from Australia's Barossa gas field and being selected as the operator for the Quang Lap LNG project in Vietnam. In addition, SK On secured a market share of over 50% in the domestic ESS central contract market bid, establishing a foundation for future expansion of its energy storage system (ESS) business.

Seo Keonki, Chief Financial Officer of SK Innovation, stated, "Volatility in the energy market is increasing due to expanding global geopolitical risks," and added, "We will secure stable profitability based on operational optimization and the competitiveness of our business portfolio."