▲ SK Innovation’s battery plant in Georgia, USA
Provided by SK innovation
‘The geopolitical issue is close, and carbon neutrality is still a long way off.’
If you can evaluate SK Innovation’s first quarter performance in one sentence, it is as follows. While the oil refining business performed well in the face of geopolitical issues, the sluggishness of the electric vehicle battery business, which is related to carbon neutrality and electrification, was greater than expected.
SK Innovation’s first-quarter performance, released on the 29th, was at a very satisfactory level with sales of 16.26 trillion won and operating profit of 1.64 trillion won. Compared with the same period of the previous year, sales increased by KRW 6.85 trillion and operating profit by KRW 1.647 trillion. The company described itself as a “dramatic reversal”.
This is the impact of the oil refining business. As oil demand exploded, refining margins, an indicator of profits for refiners, surged. A margin of about $4 is usually considered the break-even point, but it remained at $6-7 throughout the first quarter, and soared to $13.87 in the last week of March. It is expected that the refining margin of more than US$10 will continue to be maintained in April, and if this trend continues, the oil refining business’s profits are expected to be good in 2Q. It achieved operating profit of 1.5 trillion won in the oil business alone.
The battery business, which is also the performance of subsidiary SK On, suffered sluggishness. It was greatly affected by mineral shortages and battery price increases due to the crisis in Russia and Ukraine. Sales increased by 193.4 billion won from the previous quarter to record 1.25 trillion won (SK Innovation consolidated basis), but suffered an operating loss of 273.4 billion won. The loss was larger than the market’s expectation that there would be a loss of 180 billion won. In addition to the increase in raw material prices, the company explained that there was an initial operation cost of the second plant in Hungary. SKIET-related materials (separator) division also suffered a loss of 3.1 billion won. There are also evaluations in the industry that it was a difference depending on the type of battery. LG Energy Solution and Samsung SDI’s performance was strong thanks to strong demand for ‘cylindrical batteries’, while SK On, which focuses on ‘pouch-type batteries’, failed to ride this trend.
This shows that the carbon-neutral policies that countries around the world have just begun are not yet fully ripe. Nevertheless, SK Innovation emphasized that it will continue to transform its business structure from carbon to green and from carbon to eco-friendliness. It plans to secure a battery production capacity of 220 GWh or more by 2025 by securing a global production base.
Yang-seop Kim, head of SK Innovation’s finance division, said, “The performance of all businesses, including the oil refining business, has improved evenly due to rising oil prices and improving refining margins due to unstable global energy supply and demand due to geopolitical issues. “Nevertheless, the company will strive to achieve net zero and accelerate the establishment of a circular economy such as waste plastic recycling business.”
By Oh Kyung-jin
