SK Innovation reports strong performance in 2022 thanks to crude prices

An SK On battery displayed at the CES 2023 tech fair [SK ON]

SK Innovation reported a strong performance for 2022 propelled by high crude prices in the first half of last year, despite a fourth-quarter operating loss.

SK On, its battery-making subsidiary, failed to turn a profit.

SK Innovation reported a net profit of 1.99 trillion won ($1.6 billion) for 2022, up 307.4 percent on year, according to its regulatory filing Tuesday. But the figure was below the market forecast of 2.74 trillion won compiled by FnGuide.

Its annual operating profit came in at a record of 4.0 trillion won for the January-December period, up 129.6 on year. Sales rose 66.6 percent to 78.1 trillion won, also a record. Both figures missed the analyst forecast.

The record operating profit and sales came despite an operating loss in the Oct.-Dec. period weighed down by inventory losses, which occur when the price of crude purchased in advance declines by the time the oil is sold by the refiners.

“We achieved a record yearly operating figure despite the inventory loss caused by the crude price decline in the fourth quarter and shrinking refining margins,” said an SK Innovation spokesperson.

For the fourth quarter, SK Innovation logged a net loss of 386.8 billion won, down 355.5 percent from the same period in the previous year, and an operating loss of 683.3 billion won, down 997.7 percent on year.

In 2022, the oil refining business generated 3.4 trillion won of operating profit, which accounts for 85 percent of the total. The lubricants segment reported an operating profit of 1.1 trillion won, and petrochemicals 127.1 billion won. Oil development logged 641.5 trillion won.

Meanwhile, SK On — SK Innovation’s wholly-owned battery subsidiary — posted operating loss of 991.2 billion won. The battery maker hopes to swing to black by next year.

“There was an increase in ramp-up costs following new plants starting operation” in the United States and Hungary, said Kim Kyung-hun, SK On chief finance officer, during an earnings call Tuesday.

Yet SK On reached a record sales of 7.62 trillion won last year thanks to production expansion.

“While the sales volume and revenue are on a steep rise, we failed to realize profitability,” acknowledged Kim, yet emphasized that SK On will “focus on both growth and profitability this year,” through improving global production and price adjustments.

SK Innovation is planning a 10 trillion won investment this year, 7 trillion of which will “be poured into battery businesses, which include production capacity expansion,” according to Kim Yang-sup, head of finance division at SK Innovation.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]