SK Innovation has successfully achieved a turnaround to profitability within just one quarter, driven by the growth in its overall business profits. The battery division has improved its chances of turning a profit in the fourth quarter, recording its historically lowest operating losses. Meanwhile, the materials division has achieved its highest-ever sales volume in a single quarter, resulting in record-breaking revenue.
SK Innovation announced on Nov. 3 that it has turned a profit in the third quarter of this year, reporting a consolidated operating profit of 1.56 trillion won (US$1.18 billion). The revenue also saw an increase of 1.16 trillion won from the previous quarter, reaching 19.89 trillion won.
In the third quarter, the oil business saw a significant improvement in operating profits, leading to the achievement of the highest quarterly revenue and operating profit of the year. This expansion in profits was driven by the simultaneous increase in oil prices and refining margins, which were influenced by the production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries, collectively known as OPEC+, which includes Russia. OPEC+ is an alliance of over 20 oil-producing nations that collaborate to stabilize global oil markets by adjusting production levels.
An SK Innovation representative said, “We have achieved an operating profit margin of 7.9 percent, thanks to the expansion of profits in our existing businesses such as refining, chemicals, and lubricants, as well as improved productivity in the battery business and the inclusion of the U.S. Advanced Manufacturing Production Credit (AMPC) deduction.”
Breaking it down by business segment, the petroleum business recorded an operating profit of 1.11 trillion won, showing a significant growth of 1.52 trillion won compared to the previous quarter. Despite a decrease in product spreads (margins), the chemical business achieved an operating profit of 237 billion won, which increased by 66.8 billion won from the previous quarter, thanks to the rise in naphtha prices and related inventory benefits.
The lubricant business showcased an operating profit of 261.7 billion won, which improved by 1.8 billion won compared to the previous quarter. Despite a decrease in base oil sales volume, this improvement can be attributed to the inventory effects resulting from the rise in raw material prices. The petroleum development business recorded an operating profit of 79.4 billion won, which marked an increase of 11.2 billion won compared to the previous quarter. This improvement was attributed to reduced variable costs due to a decrease in production volume.
In the third quarter, the battery business continued to grow, with sales reaching 3.17 trillion won, a 45 percent increase compared to the same period last year. Operating losses in the third quarter were at their historic lowest, amounting to 86.1 billion won, significantly reduced by 255.4 billion won and 45.4 billion won in the first and second quarters, respectively. The battery business also saw its AMPC amount resulting from the U.S. Inflation Reduction Act (IRA) in the third quarter reach 209.9 billion won, far exceeding the cumulative 167 billion won in the first half of the year.
The materials business recorded an operating profit of 3.5 billion won, an improvement of 3.6 billion won compared to the previous quarter, influenced by increased sales due to higher sales volumes of major customers. Including internal transactions within the SK Innovation group, SK IE Technology’s performance in the third quarter included revenue of 182.3 billion won and an operating profit of 7.8 billion won. This quarter marked the highest sales and revenue on a quarterly basis as the quantities from two long-term supply contracts signed earlier this year for lithium-ion battery separator (LiBS) began shipping in earnest, leading to an increase in sales.