SK innovation’s sees drop in 2023 operating profit

SK innovation Ulsan Complex SBM(Solid Bed Merox) [Courtesy of SK innovation]

SK innovation Co. suffered a sharp decline in annual operating profit in 2023 due to a drop in refining margins and other factors, despite seeing its highest-ever revenue from its battery business.

According to regulatory filings by the company on Tuesday, SK innovation’s annual operating profit for 2023 was estimated to be 1.9 trillion won ($1.43 billion), down 51.4 percent from the previous year. Revenue fell by 0.98 percent to 77.29 trillion won compared to the previous year, and net profit decreased by 71.17 percent to 546.3 billion won.

But the company’s battery business raked in its highest-ever revenue in 2023.

“The annual revenue of the battery business in 2023 was 12.9 trillion won, an increase of about 70 percent compared to the previous year,” the company said, adding that its order backlog at the end of the year exceeded 400 trillion won thanks to the expansion of orders from existing and new customers, leading to an anticipated increase in operational rate and profitability in the medium to long-term. The annual operating loss for the battery business in 2023 was 581.8 billion won.

By segment, the petroleum business recorded an annual revenue of 47.55 trillion won and operating profit of 810.9 billion won, while the chemical business’s revenue was 10.74 trillion won and operating profit was 516.5 billion won.

The lubricants business saw revenue of 4.69 trillion won and operating profit of 997.8 billion won, while the petroleum development business recorded revenue of 1.13 trillion won and operating profit of 368.3 billion won. The materials business’s revenue was 192.8 billion won and operating profit was 11 billion won.

Looking at the fourth-quarter results for 2023, the operating profits for the quarter stood at 72.6 billion won, turning to profit from the operating loss of 764.9 billion won recorded during the same period of the previous year. But the figure was far lower than the market expectation of 154.9 billion won compiled by Yonhap Infomax. Fourth-quarter revenue and net loss were 19.53 trillion won and 10.9 billion won, respectively.

By segment, the petroleum business turned to losses in the fourth quarter compared to the previous quarter, with revenue totaling 12.88 trillion won and an operating loss of 165.2 billion won. The decline is believed to have been affected by the weakness in refining margins and inventory-related losses due to falling oil prices.

The chemical business posted revenue of 2.45 trillion won and an operating profit of 400 million won due to the decrease in product spreads and reduced volume due to regular maintenance. The lubricants business recorded revenue of 1.09 trillion won and an operating profit of 217 billion won, with operating profit decreasing compared to the previous quarter due to the effects of falling oil prices and inventory adjustments.

In the battery business, revenue was 2.72 trillion won, with an operating loss of 18.6 billion won recorded. Despite the impact of metal price declines, efforts to improve productivity and reduce corporate costs helped to minimize the operating loss rate.

The petroleum development business recorded revenue of 310 billion won and operating profit of 107.1 billion won, while the materials business recorded revenue of 50 billion won and operating profit of 11.6 billion won.

Meanwhile, SK innovation announced that its board agreed to sell all its buyback shares within the range of distributable profits for fiscal year 2023, instead of cash and in-kind dividends. The total number of shares to be sold is 4,919,974 shares, with a book value of 793.6 billion won. This exceeds the previously announced dividend policy of 30 percent, with a shareholder return rate including dividends and the sale of buyback shares based on 2023’s performance hitting 319 percent. The company said it plans to continue its efforts to enhance shareholder value moving forward.