SK Innovation turned a profit, posting more than 3 trillion won in operating income in the second quarter this year. While the main institutional sector saw continued improvement in the refining results, profits at SK Enmove, which makes lubricants, and SK On, which runs the battery business, surged.
SK Innovation said on the 30th that second-quarter revenue came to 29.1572 trillion won and operating income reached 3.4873 trillion won. Revenue jumped 49.9% from a year earlier, and operating income swung to a profit. SK Innovation had posted an operating loss of 401.6 billion won in the second quarter last year.
Results in the lubricants and battery businesses improved markedly. SK Enmove's operating income was tallied at 691.9 billion won, up 503.4 billion won from the previous quarter. This was due to a sharp rise in business margins for base oils as product supplies from competitors in the Middle East were disrupted by the war between the United States and Iran.
Operating income from SK On's battery business came to 821.8 billion won. SK Innovation said profits increased as battery sales rose in Asia, customers paid compensation, and the amount of the U.S. Inflation Reduction Act (IRA) tax credit grew. Customer compensation refers to money paid to SK On because automakers failed to purchase the contracted volume of batteries amid a slump in the electric vehicle market.
SK Energy, which runs the refining business, also posted 651.2 billion won in operating income in the second quarter thanks to the "lagging effect" from higher oil prices and recognition of gains from inventories. The lagging effect refers to margin fluctuations caused by the time gap between purchasing crude and selling petroleum products. The company refined crude bought cheaply before the war and sold the resulting petroleum products at higher prices, reaping large profits.
However, as a prewar mood took hold in the second quarter and oil prices weakened compared with the first quarter, SK Energy's operating income fell 632 billion won from the previous quarter. The price of Dubai crude averaged $128.5 per barrel in March but fell to $79.5 in June.
An SK Innovation official said, "In April and May, the lagging effect from rising oil prices and inventory-related gains worked positively for SK Energy's results, but as oil prices fell afterward, losses emerged in June." The official added, "When oil prices decline, the higher-priced crude introduced earlier is reflected in costs with a time lag, which can lead to reverse lagging and year-end inventory valuation losses."
SK Innovation projected that in the third quarter, as the Organization of the Petroleum Exporting Countries Plus (OPEC+) increases output and Asian regional utilization rates rise, the uptrend in oil prices and refining margins could stall, weakening refining market conditions. Still, it said that given the high volatility expected from potential changes in traffic through the Strait of Hormuz and shifts in the supply and demand of crude and petroleum products, it plans to respond nimbly to market movements.
For the battery business, it expected profitability to improve on fixed-cost savings from portfolio rebalancing in the second half and continued efforts to enhance operational efficiency. It also said it will focus on expanding orders from customers including batteries for electric vehicles, energy storage systems (ESS), artificial intelligence (AI) hyperscalers, and power companies to bolster profitability.