SK Innovation posts Q2 losses, SK On’s 11-quarter profit drought continues

SK Innovation remained in the red due to weak oil prices in the second quarter, with its battery-making arm, SK On, failing to turn a profit for the 11th consecutive quarter.

The SK logo is shown at the SK Seorin Building in Jongno District, central Seoul, where SK Innovation is headquartered. [NEWS1]

SK Innovation remained in the red for the second quarter due to weak oil sales with its battery-making arm, SK On, failing to turn a profit for the 11th consecutive quarter.

The oil refiner posted operating losses of 45.8 billion won ($34 million) for the April-to-June period, compared to losses of 106.8 billion won during the same period a year earlier.

The results fell significantly short of the market consensus of 97 billion won in operating profit compiled by FnGuide.

Revenue rose by 0.4 percent to 18.8 trillion won, missing analyst estimates of 19.2 trillion won.

Net losses widened to 640 billion won in the second quarter.

SK Innovation Chief Financial Officer Kim Jin-won attributed the shortfall to “a decline in sales volume” and “weak performance in battery business” on the company's earnings call on Thursday.

The oil refining business generated 144.2 billion won of operating profit, down 76 percent from the previous quarter due to shrinking refining margins.

The lubricant business posted 152.4 billion won in operating profit, “due to bearish demand from faltering demand in China,” Kim added.

A major loss came from SK On. The battery maker posted 460.1 billion won in operating losses, underperforming the market expectation of around 200 billion won loss.

The result marked an 11th straight quarter of losses for the Korean battery maker, which has not yet turned a profit since its establishment in October 2021.

“Our sales were harshly impacted by the low operation rate of overseas plants amid stalled global EV demand,” Ahn Kun, head of SK On's controller office, said during the conference call.

Nevertheless, “the operation will see a recovery in the second half,” Ahn added. “We are in discussions with various other automakers for new orders.”

SK Innovation also anticipates a rosier second half due to its planned merger with energy subsidiary SK E&S, which Kim expects will bring the company “2.2 trillion won of additional profit through 2030.”

The merger will be put to a vote at a shareholder meeting scheduled for Aug. 27. If approved, the merged entity will be established on Nov. 1.

SK On is also pushing hard for a three-round merger with SK Trading International, a crude oil trading subsidiary previously owned by SK Innovation, and SK Enterm, an energy logistics subsidiary.

SK Innovation shares rose 2.9 percent to close at 107,200 won on Thursday.

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