SK Innovation cancels treasury shares as its profit plummets

SK Innovation's 2023 profit plummeted due to weak oil refining margins, but its battery-making subsidiary showed growth. The company plans to cancel all treasury shares rather than paying cash.

SK logo shown at SK office building in Jongno District, central Seoul, where SK Innovation is headquartered [NEWS1]

SK Innovation’s operating profit plummeted 51.4 percent on year to 1.9 trillion won ($1.43 billion) due to weakened oil refining margins and inventory-related losses from declines in oil prices.

The figure was below the market consensus of 2.06 trillion won compiled by the market tracker FnGuide.

Annual revenue dropped 0.98 percent on year to 77.3 trillion won, exceeding the market expectation of 76.85 trillion won.

Annual net profit fell 71.17 percent to 546.3 billion won, missing the analyst projection of 703.8 billion won.

SK On failed to turn a profit, posting an operating loss of 581.8 billion won over 2023. However, the company emphasized that its battery-making subsidiary had logged the highest annual revenue of 12.9 trillion won, an on-year increase of 69.3 percent.

“The record-breaking figure was possible due to increases in orders from existing and new customers,” SK Innovation said in a statement. “The order backlog, by the end of 2023, is expected to exceed 400 trillion won, leading to increased medium- to long-term operational rates and profitability.”

The company’s quarterly operating profit swung to the black to 72.6 billion won, missing the market consensus of 310.2 billion won.

Revenue for the October-December period was 19.53 trillion won, rising 2.05 percent on year. Net profit swung to red, posting a loss of 10.9 billion won. Both figures missed market consensus.

By sector, the oil refining business swung to red with an operating loss of 165.2 billion won. The petrochemicals segment posted operating profit of 400 million won and the lubricants business 217 billion won. Oil development logged 107.1 billion won.

Meanwhile, the company announced that it will cancel all of its treasury shares to enhance shareholder value instead of paying cash or in-kind dividends for the fiscal year of 2023. The total 4,919,974 shares worth 793.6 billion won will be canceled, approved by the board of directors, it said on Tuesday.

“This exceeds the previously announced dividend payout ratio of 30 percent,” the company said. “The shareholder return rate amounts to 319 percent based on last year’s dividends and the cancellation of the treasury shares. SK Innovation plans to continue its efforts to enhance shareholder value.”

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]