SK Innovation swings back to black in 2021, battery sales doubled

[Source: SK Innovation Co.]

South Korea’s top refiner SK Innovation Co. has turned around nicely in 2021 from a hefty loss in the first year of pandemic led by a recovery in refining business while its battery business stayed in the red due to massive expansion despite record sales.

SK Innovation said in a regulatory filing on Friday that it had an operating loss of 47.3 billion won ($39.3 million) on a consolidated basis during the October to December period 2021, reversing from the previous quarter’s record operating profit of 672.5 billion won but narrowing from 198.7 billion won loss a year ago. Sales gained 10.08 percent on quarter and 76 percent on year to 13.72 trillion won, while net profit fell 68.02 on quarter to 163.4 billion won but swung back to the black from a year ago when it recorded a net loss of 232.6 billion won.

For full 2021, the company posted 1.76 trillion won in operating income, turning around from an operating loss of 2.4 trillion won in 2020 on sale of 46.8 trillion won, up 35.58 percent.

Shares of SK Innovation were trading at 216,000 won, up 0.23 percent on Friday.

SK Innovation showcases NCM 9 battery. [Source: SK Innovation Co.]

Mainstay refining and petrochemical business strengthened on the back of an increase energy prices from the global economic recovery. Sales from its battery unit also hit an annual record high but losses incurred due to the company’s aggressive investments to build new factories around the world to ramp up battery output.

Its battery business raked in 3 trillion won in sales in 2021, nearly doubled from 1.6 trillion won in the previous year after the commencement of mass production from its new battery lines in Yancheng and HuiZhou, China.

In 2022, SK Innovation expects its battery sales to top 6 trillion won as it plans to expand its global battery production capacity from 40 gigawatt hours (GWh) to 77 GWh. SK Innovation’s first plant in the United States and Hungary will begin operating this year, and the construction of the second plant in China began last year. It also plans on operating its second plant in the U.S. in 2023 and its third plants in China and Hungary in 2024.

Due to expenditure for expansion, the battery division logged an operating loss of 683.1 billion won last year.

[Source: SK Innovation Co.]

Refining business earned 1.2 trillion won in operating profit in 2021 on sales of 29.6 trillion won. For the fourth quarter, refining business posted an operating profit of 221.8 billion won, down 23 percent from the previous quarter due to a rise in one-off expenses and decline in inventory related gains from a fall in year-end oil prices. Revenue hit 85.6 trillion won.

Its petrochemical division had an operating loss of 209 billion won in fourth quarter because of declining aromatics spread and variable costs. The lubricant oil sector had an operating profit of 268 billion won, a decline from the previous quarter’s 328.3 billion won as rising costs and declining selling prices pushed down margin. For the full 2021, the division’s sales hit 9.5 trillion won and 161.6 billion won in operating profit.

The Exploration & Production (E&P) division saw an increase in both sales and operating profit. For its battery business, however, operating loss widened from 98.7 billion won the previous quarter to 309.8 billion won due to initial fixed costs, higher SG&A including R&D expenses, and one-off labor costs.

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