SK On Achieves Record-High AMPC
SK On and Enmove Merger, Rebalancing Continues
"Securing Financial Stability and Electrification Synergy"
On July 31, SK Innovation announced its consolidated results for the second quarter of 2025, reporting sales of KRW 19.3066 trillion and an operating loss of KRW 417.6 billion. Compared to the same period last year, sales increased by 7.4%, while the deficit expanded more than eightfold both year-on-year and quarter-on-quarter.
SK Innovation explained, "Although sales and operating profit decreased quarter-on-quarter due to challenging external factors such as global economic uncertainty, tariff impacts, and declining oil prices, the battery business segment saw a significant improvement in operating profit compared to the previous quarter, driven by increased operating rates at North American plants and achieving the largest-ever Advanced Manufacturing Production Credit (AMPC)."
The company added, "In the third quarter, further improvement in refining margins is expected, and the easing of tariff risks as well as increased battery sales volume in Europe are anticipated to have a positive impact on performance."
Breaking down the second quarter results by business segment: ▲Petroleum business recorded sales of KRW 11.1187 trillion and an operating loss of KRW 466.3 billion ▲Chemical business posted sales of KRW 2.2686 trillion and an operating loss of KRW 118.6 billion ▲Lubricants business reported sales of KRW 893.8 billion and an operating profit of KRW 134.6 billion ▲Petroleum development business posted sales of KRW 341.7 billion and an operating profit of KRW 109 billion ▲Battery business recorded sales of KRW 2.1077 trillion and an operating loss of KRW 66.4 billion ▲Materials business posted sales of KRW 19.5 billion and an operating loss of KRW 53.7 billion ▲SK Innovation E&S business recorded sales of KRW 2.5453 trillion and an operating profit of KRW 115 billion.
The petroleum business experienced increased market volatility due to U.S. tariff policies and the shift to production expansion by the Organization of the Petroleum Exporting Countries Plus (OPEC+), but refining margins showed signs of recovery. However, operating profit decreased by KRW 502.6 billion quarter-on-quarter, mainly due to inventory valuation losses resulting from falling oil prices and exchange rates. Going forward, the company expects refining margins to improve as supply contracts both domestically and internationally, and plans to gradually increase operating rates in response.
In the chemical business, the olefin spread improved due to lower naphtha prices, but the operating loss continued due to a decline in the benzene spread and regular maintenance at the paraxylene plant. Operating profit decreased by KRW 4.3 billion compared to the previous quarter.
The lubricants business saw a KRW 13.2 billion increase in operating profit quarter-on-quarter, driven by stable sales prices and cost reductions resulting from lower oil prices.
The petroleum development business posted a KRW 11.4 billion decrease in operating profit quarter-on-quarter, affected by falling oil and gas prices.
Battery business sales reached KRW 2.1077 trillion, marking a 31% increase from the previous quarter thanks to improved operating rates and increased sales volume at plants in the U.S. and Europe. Operating profit improved by KRW 233 billion quarter-on-quarter, resulting in an operating loss of KRW 66.4 billion. As the integrated SK On entity, the company achieved its first post-merger quarterly operating profit of KRW 60.9 billion.
The second quarter AMPC under the U.S. Inflation Reduction Act (IRA) reached KRW 273.4 billion, a 60% increase from the previous quarter and the highest quarterly figure to date.
The materials business saw an KRW 1.1 billion improvement in operating profit quarter-on-quarter, driven by expanded sales of products for electric vehicles (EV) and energy storage systems (ESS) to major customers.
SK Innovation E&S business posted a KRW 78.1 billion decrease in operating profit quarter-on-quarter, due to lower sales volume during the city gas off-season and power plant maintenance in May.
Third Quarter Market Outlook
In the third quarter, the petroleum business is expected to see continued recovery in refining margins, driven by increased seasonal demand for petroleum products and regional supply shortages.
For the chemical business, the improvement in spreads is expected to be limited due to the off-season for polyester and increased benzene supply. The olefin segment is also projected to experience weak spreads due to decreased downstream demand in the region, but the company plans to focus on improving profitability through optimal facility operation and efficiency enhancements.
In the lubricants business, supply is expected to increase as major suppliers complete regular maintenance, but demand is also anticipated to rise due to the summer driving season and inventory buildup in preparation for hurricanes, supporting stable profitability.
The petroleum development business confirmed additional oil reserves in Block 15-1/05 in Vietnam in May 2025. In Block 15-2/17, the company plans to continue assessing commercial viability through the drilling of the third appraisal well starting in the third quarter.
In the second half, the battery business expects customers in the U.S. market to adopt conservative inventory management due to tariff and policy uncertainties. In response, SK On plans to focus on defending profitability by enhancing operational efficiency based on its manufacturing capabilities in the U.S. In the European market, the company will actively respond to rapidly growing demand from major customers by increasing plant operating rates, aiming to further improve profitability.
The materials business expects gradual performance improvement as the proportion of sales in North America increases and efforts to expand the ESS customer base continue.
On the 30th, at the SK Seorin Building in Jongno-gu, Seoul, Lee Seokhee, President of SK On, explained the corporate strategy at the 'SK Innovation Corporate Value Enhancement Strategy Briefing'. SK Innovation
The previous day, SK Innovation's board of directors approved the merger of SK On and SK Enmove and a large-scale capital increase, after which it announced the 'SK Innovation Corporate Value Enhancement Strategy.' Following the merger, the company plans to secure future growth engines focused on electrification by expanding its product portfolio. The merged entity expects to generate more than KRW 200 billion in additional EBITDA by 2030.
SK Innovation also announced plans to reduce net debt through proactive financial restructuring, including the securitization of non-core assets, and set a goal of raising a total of KRW 8 trillion in capital in 2025 and achieving KRW 20 trillion in EBITDA by 2030.
SK Innovation E&S business plans to improve operating profit by maximizing power plant operating rates, taking into account the trend of high SMP during the summer season.
Seo Geonki, Chief Financial Officer of SK Innovation, stated, "SK Innovation is proactively pursuing a business structure transformation centered on electrification and financial stability, and through these efforts, we aim to further strengthen our competitiveness in the global market. We will enhance our portfolio rebalancing execution capabilities to respond swiftly to external uncertainties, continuously secure profitability and growth, and strive to enhance corporate value."
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