SK Inno Posts Operating Profit of 1.7656 Trillion KRW Last Year 'Turned Positive'... Lubricants Hit Record High 960.9 Billion KRW (Update)

2021 Q4 Consolidated Preliminary Earnings Announcement

Battery Reports 683.1 Billion KRW Operating Loss
"One-time Initial Operating Costs Impact at US and Hungary Plants"

Kim Jun, Vice Chairman of SK Innovation. (Photo by SK Inno)

[Asia Economy Reporter Moon Chaeseok] SK Innovation posted an operating profit of 1.7656 trillion KRW last year, driven by strong performance in its lubricants business, which recorded the highest operating profit ever. This marks a turnaround from an operating loss of 2.4203 trillion KRW the previous year.

On the 28th, SK Innovation announced that its consolidated sales for last year were tentatively estimated at 46.8429 trillion KRW, with an operating profit of 1.7656 trillion KRW. Sales increased by 35.6% year-on-year, and operating profit turned positive. Performance by business segment was as follows: ▲Petroleum sales 29.5971 trillion KRW, operating profit 1.1616 trillion KRW ▲Chemicals 9.5433 trillion KRW, 161.6 billion KRW ▲Lubricants 3.3509 trillion KRW, 960.9 billion KRW ▲Oil development 881.7 billion KRW, 328.6 billion KRW ▲Battery 3.0398 trillion KRW, -683.1 billion KRW ▲Materials 343.8 billion KRW, 81 billion KRW.

In the core battery business, sales reached 3.0398 trillion KRW, approximately a 90% increase from the previous year's annual sales of 1.6102 trillion KRW. The company explained that this was largely due to increased sales volume from overseas battery plants such as the Chinese Yancheng and Huizhou factories, which began commercial operations in the first half of last year. They also noted that with the U.S. Plant 1 and Hungary Plant 2 starting operations from the first quarter, sales volumes to customers such as Ford and Volkswagen are expected to increase significantly.

Kim Jun, Vice Chairman of SK Innovation, plans to accelerate efforts to expand profitability in key businesses this year. The company aims to nearly double its global battery production capacity from around 40GWh to 77GWh by the end of the year. This target is considered achievable by combining the production capacities of the U.S. plant (9.8GWh), Hungary plant (10GWh), and the Chinese Yancheng Plant 2, which began construction early last year. The U.S. Georgia Plant 2 is scheduled to start commercial operations in the first quarter of next year, while the Chinese Yancheng Plant 3 and Hungary Plant 3 are expected to begin commercial operations in 2024. The BlueOvalSK plant, a joint venture (JV) with Ford, is planned to break ground in the second quarter with a goal of commercial operation in 2025. A company official forecasted, "Battery sales this year are expected to reach the 6 trillion KRW range." However, due to temporary initial costs at overseas plants in the fourth quarter, the battery segment recorded a loss of 309.8 billion KRW, resulting in an annual operating loss of 683.1 billion KRW. The fourth-quarter operating loss was 47.3 billion KRW, a reduction compared to 198.7 billion KRW in the same period last year. Sales and net profit for the quarter were 13.7213 trillion KRW and 163.4 billion KRW, respectively.

Vice Chairman Kim Jun stated, "Although last year's performance was somewhat below market expectations due to volatility in the business environment and market conditions, SK Innovation will more strongly pursue its 'Carbon to Green' (eco-friendly transition) strategy to achieve 'Net Zero' (carbon neutrality) without fail," adding, "We will continue to draw the 'Big Picture' for a 'Big Leap'."

Meanwhile, major domestic refiners are expected to turn profitable together, posting operating profits totaling around 7 trillion KRW. The estimated operating profits for last year for the four refiners?S-Oil, SK Innovation, GS Caltex, and Hyundai Oilbank?total approximately 7 trillion KRW. A year ago, all four companies recorded operating losses totaling about 5 trillion KRW due to the COVID-19 pandemic, marking a successful turnaround. The combined operating profit of 7 trillion KRW for the four companies surpasses the 7.7226 trillion KRW recorded in 2017, marking the first time in four years.