SK Innovation, Surge in Petroleum Product Exports... Records Highest Quarterly Performance

Refining Margin Surges... Increased Profit from Oil Business Inventory
Battery Business Sales Reach 1.288 Trillion Won Due to Price Rise

SK Innovation Petroleum Business Export Status

[Asia Economy Reporter Oh Hyung-gil] SK Innovation has once again set a record for the highest quarterly performance as exports of petroleum products surged significantly.

SK Innovation announced that in the second quarter, it achieved sales of KRW 19.9053 trillion and an operating profit of KRW 2.3292 trillion, marking increases of 76.8% and 318.9% respectively compared to the same period last year. These figures far surpassed the previous record set in the first quarter, with sales of KRW 16.2615 trillion and operating profit of KRW 1.6491 trillion.

SK Innovation explained, "The improvement in refining margins due to global energy supply instability caused by geopolitical issues and increased demand for petroleum products following the COVID-19 endemic, along with increased inventory-related profits from the petroleum business due to rising oil prices and optimization of facility operations, contributed to the profit improvement. The significant increase in petroleum product export volumes since the beginning of this year was a major factor in the performance improvement."

SK Innovation's petroleum product export volume in the first half reached 65 million barrels, a 41.4% increase compared to the previous year. The export performance in the second quarter, including overseas subsidiary sales, of the petroleum business as well as chemical, lubricant, battery, and battery materials businesses accounted for 71% of total sales.

By business segment, the petroleum business achieved an operating profit of KRW 2.2291 trillion, an increase of KRW 722.4 billion compared to the previous quarter, as refining margins improved amid concerns over supply disruptions due to the prolonged Russia-Ukraine war and expectations of demand recovery after COVID-19.

The chemical business recorded an operating profit of KRW 76 billion, up KRW 44.8 billion from the previous quarter, as product spreads centered on aromatics such as paraxylene improved. The lubricant business achieved an operating profit of KRW 255.2 billion, an increase of KRW 43.6 billion from the previous quarter, due to price increases and inventory-related profit effects. The petroleum development business recorded an operating profit of KRW 166.2 billion, down KRW 32 billion from the previous quarter due to decreased sales volume and increased block operation costs.

The battery business achieved sales of KRW 1.288 trillion, an increase of KRW 28.1 billion from the previous quarter, surpassing KRW 1 trillion for the third consecutive quarter due to new plant operations and rising selling prices. However, it posted an operating loss of KRW 326.6 billion due to decreased sales volume. It is expected that profitability will improve as external growth continues through yield stabilization of new plants such as the Georgia Plant 1 in the U.S. and Hungary Plant 2 in the second half of the year, as well as the operation of the Yancheng Plant 2 in China.

Additionally, SK Innovation plans to invest nearly KRW 8 trillion in the battery materials sector from 2018 through the first quarter of this year, with a total investment plan of KRW 20 trillion going forward. The company is also set to actively promote the Battery Material Recycling (BMR) business, aiming for commercial operation starting in 2025.

Investments in green energy such as hydrogen, small modular reactors (SMR), and plastic recycling are also becoming visible. In May, SK Innovation signed a comprehensive business cooperation agreement with U.S. SMR company TerraPower, and last month invested USD 30 million (approximately KRW 38 billion) in Amogy, a company specializing in ammonia-based fuel cell systems.

Kim Yang-seop, Head of Finance at SK Innovation, stated, "Despite the rapidly changing business environment, we are actively pursuing the development of an eco-friendly portfolio centered on low-carbon and carbon-free energy and a circular economy to secure growth engines related to future energy. We will strive to become an eco-friendly energy materials company aiming for net-zero achievement."