SK Innovation turns to profit on crude cuts, SK On remains in red in Q3

Industry

Published: 03 Nov. 2023, 10:19 Updated: 03 Nov. 2023, 16:07

SK Innovation turns to profit on crude cuts, SK On remains in red in Q3

SK logo shown at SK office building in Jongno District, central Seoul, where SK Innovation is headquartered [NEWS1]

SK Innovation swung back into black in the third quarter on the back of rising crude prices and refining margins, while its battery-making subsidiary, SK On, again failed to turn a profit.

However, as SK On’s quarterly operating loss has narrowed to the smallest ever, SK Innovation expects its money-losing battery maker to turn to profit in the fourth quarter.

According to a regulatory filing Friday, SK Innovation posted 1.56 trillion won ($1.16 billion) in operating profit for the July to September period, up 122 percent from the same period last year and a turnaround from the previous quarter’s operating loss of 106.8 billion won.

The figure beat the market expectation of 1.05 trillion won compiled by FnGuide.

Net profit jumped 316.6 percent to 729.6 billion won, above the expectation of 613.4 billion won.

Revenue declined 12.59 percent on-year to 19.89 trillion won, falling short of the forecast of 20.04 trillion won.

SK On logged an operating loss of 86.1 billion won in the third quarter, the smallest quarterly loss for the battery maker and revenue of 3.17 trillion won, up 45 percent on year.

“In the third quarter, we realized a consolidated operating margin of 7.9 percent, up 8.4 percentage points from the previous quarter,” SK Innovation said in a release.

The company cited the profitability increase in the oil refining business driven by OPEC+’s crude production cuts and the enhanced productivity in the battery business, as well as added tax benefits from the U.S. Advanced Manufacturing Production Credit (AMPC).

“With the battery business, we are aiming to turn to profit in the fourth quarter through the continued productivity enhancement at new production operations overseas, the tax benefit increases from the AMPC and cost reduction,” the company added.

During the July to September period, SK On received AMPC benefits worth 209.9 billion won under the U.S. Inflation Reduction Act program. That surpasses the combined total of the preceding two quarters by far, which amounted to 47.2 billion won in the first quarter and 119.8 billion won in the second.

SK Innovation’s petroleum business logged an operating profit of 1.11 trillion won in the third quarter, a turnaround from the previous quarter’s loss of 411.2 billion won, as OPEC+ members have continued to limit the global crude oil production.

Petrochemical and chemical businesses saw a 39.2 percent quarter-on-quarter increase in operating profit to 237 billion won due to the naphtha price increase.

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