[Asia Economy Reporter Park So-yeon] Although SK Innovation did not succeed in turning a profit in the third quarter of this year, it significantly reduced its deficit compared to the first half of the year. The recovery in oil prices led to an increase in petroleum product prices, and the full-scale operation of overseas battery plants boosted battery sales volume, driving up revenue.
SK Innovation announced on the 30th that it recorded consolidated sales of KRW 8.4192 trillion and an operating loss of KRW 28.9 billion for the third quarter of this year. The operating loss improved by about KRW 410.8 billion (93.42%) compared to the previous quarter, and sales increased by KRW 1.2196 trillion (16.94%) compared to the previous quarter.
The demand, which had contracted after the COVID-19 pandemic, somewhat recovered in the third quarter, leading to increased sales volumes of petroleum products and lubricating base oils. Operating profit significantly improved compared to the previous quarter’s operating loss, bringing the company close to turning a profit. Overall, despite the still sluggish conditions in the petroleum and chemical businesses, the rise in oil prices compared to the previous quarter increased inventory-related gains.
The petroleum business recorded an operating profit of KRW 38.6 billion, turning profitable with an increase of KRW 471.5 billion compared to the previous quarter. Despite weak overall market conditions due to delayed demand recovery, inventory-related gains of about KRW 296.7 billion were generated due to rising oil prices.
In the chemical business, despite inventory-related gains from rising naphtha prices, the aromatic segment’s poor market conditions narrowed the spread (the difference between raw material prices and product prices). Additionally, increased variable costs due to rising fuel prices caused operating profit to decrease by KRW 121.6 billion compared to the previous quarter, resulting in an operating loss of KRW 53.4 billion.
In the lubricants business, despite margin reductions due to rising costs, sales volume increased mainly in North America and Europe due to demand recovery, resulting in an operating profit of KRW 70.6 billion, up KRW 33.2 billion from the previous quarter.
The petroleum development business recorded an operating profit of KRW 18 billion, up KRW 6.2 billion from the previous quarter. Sales significantly recovered from KRW 78.3 billion in the previous quarter to KRW 127.6 billion in the third quarter as the impact of COVID-19 subsided, but the improvement in operating profit was limited due to rising variable costs.
Battery business sales amounted to KRW 486 billion, an increase of KRW 147.8 billion (43.7%) from KRW 338.2 billion in the previous quarter. Compared to KRW 189.9 billion in the same period last year, sales increased by 2.5 times. The full-scale operation of newly established overseas plants in Changzhou, China, and Komarom, Hungary, increased sales volume, significantly boosting revenue. Operating loss improved by KRW 14.9 billion compared to the previous quarter, recording KRW 98.9 billion.
The second plant in Yancheng, China, currently under construction, is expected to begin sequential mass production from the first quarter of next year through 2022, leading to even greater performance improvements. Additionally, SK Innovation plans to start mass production of the 9.8GWh-scale second plant in Hungary in the first quarter of 2022, and the 9.8GWh-scale first plant and 11.7GWh-scale second plant in Georgia, USA, from the first quarter of 2022 and the first quarter of 2023, respectively.
The materials business recorded an operating profit of KRW 29.9 billion, down KRW 13.8 billion from the previous quarter due to a temporary decrease in sales volume caused by adjustments in customer production schedules and the impact of a weaker exchange rate.
In the separator business, overseas facility expansion is progressing aggressively. The plant located in Jeungpyeong, Chungcheongbuk-do, already has an annual production capacity of 530 million square meters. Plants under construction overseas in China and Poland are expected to begin sequential operations, with production capacity reaching 870 million square meters by the end of this year and 1.87 billion square meters in 2023.
Lee Myung-young, Chief Financial Officer of SK Innovation, said, "To effectively respond to uncertainties in the business environment, we will firmly establish new businesses such as batteries and materials, while continuously improving and innovating the existing businesses."
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