SK On Q3 Sales 1.4 Trillion, Operating Profit 24 Billion
Impact of High-Price Inventory Depletion and Reduced Costs at Hungary Plant
'Oil Price Decline Impact' SK Innovation Operating Loss 423.3 Billion
SK Group's battery business company SK On has posted a quarterly profit for the first time since its establishment. With the launch of the merged corporation, financial stability and profitability are expected to strengthen going forward.
According to SK Innovation on the 4th, its battery subsidiary SK On recorded sales of 1.4308 trillion KRW and an operating profit of 24 billion KRW in the third quarter of this year. This is the first quarterly profit since SK On was established as an independent corporation in October 2021. Compared to last year, sales decreased by 54.9%, but operating profit turned positive from a loss of 86.1 billion KRW.
The company stated, "The third-quarter operating profit improved by 484.1 billion KRW compared to the second quarter, based on profitability improvements through company-wide cost reduction activities such as the depletion of high-priced inventory and reduced initial ramp-up costs at the new plant in Hungary."
SK On was launched as a spin-off from SK Innovation's battery business division. Although its status and market share in the battery industry increased by consecutively building large-scale plants in the U.S. and Europe, it posted losses for 11 consecutive quarters until the second quarter of this year.
This was because, as a latecomer in the battery industry, it continued aggressive investments in a short period in line with the electric vehicle market's growth. The financial instability of SK On, which invested huge amounts, led to rebalancing (restructuring) at the group level.
Accordingly, SK Innovation merged with SK E&S, and SK On completed its merger with SK Trading International on the 1st of this month, followed by a planned merger with SK Entum in February next year. Once the scheduled mergers are finalized, it is expected to generate an additional annual EBITDA of about 500 billion KRW compared to before the mergers, significantly improving its profit structure.
As facility investments for plant expansion peak this year and then decline, the third-quarter profit turnaround is expected to be a signal of full-scale profitability improvement. From next year, the easing of the electric vehicle chasm (temporary demand stagnation in growth industries) and the full-scale operation of new plants are anticipated.
SK On currently operates Plants 1 and 2 in Georgia, USA. Starting next year, battery plants in Tennessee and Kentucky, USA, jointly developed with Ford, will begin operations sequentially. Once these production lines are completed and fully operational, local battery production capacity will increase to 184 GWh, enough for batteries for more than 2.2 million electric vehicles.
On the same day, SK Innovation announced its third-quarter results, reporting sales of 17.657 trillion KRW and an operating loss of 423.3 billion KRW. Compared to the previous quarter, sales decreased by 1.1422 trillion KRW, and operating profit decreased by 377.5 billion KRW. SK Innovation explained, "Despite profitability improvements in the battery business, operating profit decreased compared to the previous quarter due to inventory-related losses from falling oil prices and reduced spreads (margins) of major chemical products. In the fourth quarter, refining margins are expected to recover amid easing concerns over the global economic downturn, and battery shipments are expected to increase due to the operation of customers' North American plants and new car launch plans."
On the 1st, SK Innovation completed its merger with SK E&S. Reborn as the largest private energy company in the Asia-Pacific region, SK Innovation plans to maintain future growth engines by securing financial stability and profitability based on an enhanced energy business portfolio.
Kim Jin-won, Head of Finance at SK Innovation, said, "Through the merger with SK E&S, we have laid the foundation to build a stable financial structure. We will continue to expand shareholder returns through accelerated synergy creation in the future."
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