SK innovation Co.’s earnings growth was solid as its reliable sectors, including energy and chemicals, thrived on higher oil prices and better refining margins. But its battery subsidiary SK on Co. saw a setback due to the temporary stagnation in electric vehicle demand, resulting in a loss of 300 billion won or more.

In its financial report released on Monday, SK innovation recorded an operating profit totaling 624.7 billion won ($452 million) for the first quarter of 2024, a 66.6 percent increase in compared to the same period in 2023. Sales dipped slightly by 1.5 percent year-on-year to 18.8 trillion won, and the net loss widened to 97.6 billion won. Pre-tax profit amounted to 18.2 billion won, while 606 billion won in non-operating losses stemmed from foreign exchange fluctuations and commodity derivative losses due to rising exchange rates and oil prices.

Net borrowings surged by 3 trillion won from the end of the previous year to 18.5 trillion won because of increases in investment in the battery business.

SK innovation attributed the quarter-on-quarter increase in operating profit in the energy and chemicals segments to inventory-related gains and improved refining margins driven by increases in oil prices. Its petroleum segment turned profitable with an operating profit of 591.1 billion won, a significant improvement from the previous quarter. The chemicals segment also saw a sequential increase in operating profit to 124.5 billion won thanks to enhanced benzene spreads and inventory-related gains from higher lead acid prices.

While looking ahead to the second quarter of 2024, SK innovation expects solid refining margins from the petroleum business, citing sustained production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, or OPEC+. In the chemicals sector, paraxylene spreads are expected to go up in the second half, while polyethylene and polypropylene spreads are likely to remain stable as the Chinese government unveils initiatives to stimulate domestic demand.

In the battery business, identified as a key growth engine, SK innovation reported additional orders totaling 180 trillion won since SK on was founded two years ago, with a backlog worth 400 trillion won. Shipments will likely rise gradually, buoyed by customer demand for inventory buildup and other operational efforts.

By Pulse

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