Falling oil prices, battery losses put SK Innovation in red

SK Innovation turned red in the first quarter driven by falling oil prices, with its battery-making business failing to turn a profit.

SK Innovation Vice Chairman Kim Jun speaks during a shareholder meeting in March in central Seoul. [YONHAP]

SK Innovation turned red in the first quarter driven by falling oil prices, with its battery-making business failing to turn a profit.

SK Innovation reported 52 billion won ($40 million) in net losses in the first quarter from 863.3 billion won in net profit in the same quarter last year. It missed the market consensus of 45.4 billion won of net profit compiled by FnGuide.

Operating profit plunged 77.3 percent to 375 billion won. It beat market expectations of 236 billion won.

Revenues rose 17.7 percent to 19 trillion won, also beating analyst estimates of 18.1 trillion won.

"Falling oil prices and reduced value of inventory caused a sharp decline in profit," said an SK Innovation spokesperson.

The average price of Dubai crude oil was $80.3 in the first quarter, compared to $96 in the same period last year.

In the first three months, the oil refining business generated 275 billion won of operating profit, down 82 percent. It reported nearly 1.5 trillion won only in the oil refining business in the same period last year, helped by high oil prices impacted by the Russia-Ukraine war.

Its battery business continued to make losses despite all-time high quarterly sales.

SK On posted an operating loss of 344.7 billion won, while sales hit a quarterly record high of 3.3 trillion won.

"The loss comes on one-time expenses like incentives for its employees," SK On chief financial officer Kim Kyung-hoon said in a conference call Thursday.

"Also, we did not reflect an estimated tax credit from the U.S. Inflation Reduction Act as the law is yet to have specific details."

Under the Advanced Manufacturing Production Credit, the IRA grants domestic battery manufacturers a tax credit of $35 per kilowatt-hour for battery cells and an additional $10 per kilowatt-hour for battery modules manufactured and sold in the United States from 2023.

SK On aims to turn a profit next year, with a goal of going public in 2026.

BY SARAH CHEA [chea.sarah@joongang.co.kr]