SK Innovation reported an operating loss in the first quarter of this year. After merging with its high-quality affiliate SK E&S in November of last year, it posted a profit in the fourth quarter of last year, but due to falling oil prices and declining refining margins, it turned back to a deficit in just one quarter.
SK Innovation announced on the 30th that it recorded sales of 21.1466 trillion won and an operating loss of 446 billion won in the first quarter. Sales increased by 12.2% year-on-year as the business performance of SK E&S was aggregated, marking the highest quarterly figure in ten quarters since the third quarter of 2022.
By institutional sector, the oil business saw a decrease of 306.1 billion won in operating profit compared to the previous quarter. SK Innovation noted that it will maintain a conservative operational stance due to the worsening refining margins and plans to continue responding through efforts like operational and supply chain optimization and expense reduction.
The chemical business continued to incur operating losses due to weak market conditions for paraxylene (hereinafter PX) and olefin, with operating profit decreasing by 30.1 billion won compared to the previous quarter. The lubricants business faced a drop in operating profit of 18.1 billion won compared to the previous quarter due to margin and sales volume reductions following economic slowdowns in major countries. The oil development sector also saw a decline of 25.4 billion won in operating profit compared to the previous quarter due to decreased sales volume from Peru.
In contrast, the battery business increased its operating profit by 60.1 billion won compared to the previous quarter. This was due to major customers expanding electric vehicle production, particularly increasing battery sales in North America. The benefit of the Advanced Manufacturing Production Tax Credit (AMPC) under the U.S. Inflation Reduction Act (IRA) was 170.8 billion won for the first quarter, compared to 81.3 billion won in the previous quarter, an increase of about 110%.
SK Innovation projected regarding this year’s battery business that "the operating rate and sales volume of U.S. batteries will improve significantly this year." SK Innovation signed a battery supply contract with Nissan of Japan in March for 99.4 gigawatt-hours (GWh) for 1 million units of mid-size electric vehicles. This month, it successfully secured new orders for 20 GWh from U.S. electric vehicle startup Slate.
The oil business is also expected to see increased demand due to rising outings and expanding cooling demand in the second quarter, with refining margins gradually improving.
Seo Geon-ki, head of the finance division at SK Innovation, said, "We plan to strengthen financial soundness by improving the operating rate and sales volume of the North American battery plants and through the development of the Vietnam fields and operational optimization."