Plans 7.5 Trillion Won Investment This Year
SK innovation reported on Feb. 6 that its revenue for the last year amounted to 77.2885 trillion won (US$58.2400 billion) with an operating profit of 1.9039 trillion won. Compared to the previous year, revenue and operating profit decreased by 0.98% and 51%, respectively.
In the fourth quarter of last year, the company achieved 19.5293 trillion won in revenue and 726 billion won in operating profit, turning a profit compared to the same period last year. However, compared to the previous quarter, revenue decreased by 1.8% and operating profit by 95%, affected by the global oil price drop, refining margin reduction, and decreased demand for electric vehicles.
Although SK on, a subsidiary, recorded its highest-ever sales, showing an improvement in profitability, the performance of the oil business sector significantly declined due to the global oil price drop. The company announced plans to invest a total of 9 trillion won this year, including 7.5 trillion won in the battery business and 1.5 trillion won in other business sectors.
By business sector, the oil business recorded an operating loss of 165.2 billion won due to weak refining margins and inventory-related losses caused by the decline in oil prices. The company explained that there is geopolitical uncertainty in the Middle East this year, but the demand is expected to improve due to China’s stimulus measures and the Lunar New Year holidays, predicting a strong refining margin.
The chemical business’s operating profit was 400 million won, a decrease of 236.6 billion won compared to the previous quarter, due to inventory-related losses caused by the decline in naphtha prices. The lubricants business recorded an operating profit of 217 billion won, influenced by the inventory effect due to the decrease in oil prices.
During the conference call following the earnings announcement, concerns were raised about the decrease in demand for lubricants due to the expansion of the electric vehicle market. However, the company stated, “Our main products are high-quality product groups in line with environmental regulations and their demand is continuously increasing.”
The oil development business saw a 34% increase in operating profit from the previous quarter to 107.1 billion won, following the commencement of operations at the new China 1703 field. The China 1703 field began production in September last year, with 13 wells planned for drilling by July this year. Upon completion, the production is expected to increase from the current 20,000 barrels to 30,000 barrels.
The battery business recorded an operating loss of 18.6 billion won, a 67.5 billion won improvement from the previous quarter's operating loss of 86.1 billion won. The reduction in losses was attributed to productivity improvements and an increase in AMPC in the North American region.
SK innovation announced plans to invest 7.5 trillion won out of the approximate 9 trillion won investment this year into its battery business. The investment related to the joint venture with Ford and Hyundai Motor in North America is expected to proceed as planned, with the construction of the plant in Yancheng, China, to be completed within the year.
The materials business saw an increase in operating profit by 8.1 billion won from the previous quarter due to incentives for the Chinese subsidiary. The company plans to continue strengthening its mid- to long-term competitiveness through diversification of its customer portfolio in the materials business.