SK Innovation swings to loss in Q3 on falling oil prices, refinery margins

SK innovation CI

SK innovation Co., an integrated energy and materials company under South Korea’s SK Group, turned red in the third quarter due to falling oil prices and refinery margins that determine profitability of its petroleum business.

SK innovation announced on Monday that it swung to an operating loss of 423.3 billion won ($308 million) in the third quarter from an operating profit of 1.5 trillion won in the same period last year.

Third-quarter sales stood at 17.7 trillion won, down 11.2 percent from a year ago. Net loss came to 588.1 billion won.

Despite the improvement in profitability of its battery business, SK innovation’s earnings worsened due to inventory losses tied to lower oil prices and reduced spreads on key chemical products.

“We expect refinery margins to recover in the fourth quarter, driven by easing concerns over a global economic recession,” the company said. “We also expect an increase in battery shipments as our clients begin operations of their North American plants and launch new vehicle models.”

SK innovation’s petroleum business suffered an operating loss of 616.6 billion won in the third quarter, due to the global recession fears and a fall in oil demand from China, leading to declines in oil prices and refinery margins.

The chemical business posted an operating loss of 14.4 billion won, falling into the red due to inventory effects from lower product spreads.

The lubricants business saw its operating profit increase by 22 billion won from the previous quarter to 174.4 billion won in the third quarter on the back of a sales increase in the United States and Europe.

The oil development business saw a decrease in operating profit to 131.1 billion won.

The battery business, on the other hand, recorded its first quarterly profit of 24 billion won in the third quarter on sales of 1.4 trillion won.

On Friday, SK innovation completed its merger with SK E&S Co., establishing itself as the largest private energy company in the Asia-Pacific region.

The company plans to maintain growth momentum by strengthening its energy business portfolio to ensure financial stability and profitability.