Technological watch

[SK Innovation’s Q1 2023 Financial Results] Recording sales of KRW 19.14 trillion and operating profit of KRW 375 billion

? Achieved turnaround from the previous quarter due to improved refining margin and para-xylene (PX) spread

– Refining business achieved operating profit of KRW 274.8 billion (KRW 936 billion increased QoQ); petrochemical business recorded KRW 108.9 billion for operating profit (KRW 197.3 billion increased QoQ)

– Lubricants business recorded operating profit of KRW 259.2 billion, a slight decrease due to price adjustments and exchange rate effects; E&P business accomplished operating profit of KRW 113.5 billion

? Battery business achieved the highest quarterly sales of KRW 3305.3 billion, expecting additional improvement in profitability when reflecting benefits from the US’ AMPC (Advanced Manufacturing Production Credit) after the second quarter

? Expecting continued improvement in profitability by full-fledged re-opening in China and improved yield in the battery business in Q2

On May 4, SK Innovation announced in its Q1 2023 earnings report that it accomplished sales of KRW 19.1429 trillion and operating profit of KRW 375 billion.

Compared to the fourth quarter of 2022, the company achieved a successful turnaround as it recorded a QoQ increase of KRW 6.2 billion in sales and KRW 1139.9 billion in operating profit. When comparing to the same quarter in the previous year, it recorded an increase in sales by KRW 2.8814 trillion, but a decrease in operating profit by KRW 1274.1 billion.

SK Innovation said, “The improvement in refining margin and para-xylene (PX) spread drove the Q1 performance,” and it explained, “Those two factors led to the stable increase in sales and improved operating profit of the refining and petrochemical businesses, and as a result, the two businesses accomplished a successful turnaround.” It also added, “The battery business achieved the highest quarterly sales, and its improved profitability is on the momentum.”

The pre-tax profit recorded KRW 156.3 billion as non-operating loss of KRW 218.7 billion occurred by the increased loss related to the higher exchange rate and decrease in product-related profits.

The net debt recorded KRW 15.55 trillion, which is an increase by KRW 1036.2 billion compared to the end of the last year, due to the increased expenditure for investing in the battery business.

? Q1 2023 earnings by business

When breaking down the performance by business area, the refining business accomplished a turnaround as it recorded operating profit of KRW 274.8 billion, the QoQ increase by KRW 936 billion compared to 2022 Q4. The factors for the improved operating profit are the enhanced refining margin from the decline in the Official Selling Price (OSP) of crude oil from Middle Eastern oil producing countries such as Saudi Arabia and reduced inventory-related loss caused by the mitigated decline in oil prices.

The petrochemical business achieved operating profit of KRW 108.9 billion, the QoQ increase by KRW 197.3 billion, as its performance was bolstered by the increased PX margin, the influence of the inventory-related profits and losses, and reduced fixed costs.

The lubricants business saw operating profit of KRW 259.2 billion, the QoQ decrease by KRW 9.2 billion, due to intensified sales competition and the impact of the decline in the average exchange rate compared to the previous quarter.

Despite the increased sales and reduced selling, general, and administrative expenses (SG&A), the E&P business recorded operating profit of KRW 113.5 billion, the QoQ decrease by KRW 3.1 billion.

The battery business experienced continuous growth due to the ramp-up of factories that started operation in 2022, achieving the highest quarterly sales of KRW 3.3053 trillion, the QoQ increase by KRW 429.7 billion. In terms of its operating loss, it had a small increase and recorded KRW 344.7 billion due to the increased one-off costs. However, the business’ operating profit rate was improved as there were an increase in battery sales and an improved production yield of new plants.

The materials business recorded operating loss of KRW 4 billion as it reduced the loss by KRW 900 million compared to the previous quarter thanks to dissolved one-off costs, increased production, and cost improvements.

? Q2 2023 market outlook

In the second quarter, there is a promising outlook for the refining business that the refining margin is expected to demonstrate solid performance as demand for oil products will increase due to the summer driving season and full-fledged re-opening of China. The petrochemical business is expected to benefit from not only the PX spread in upturn but also improved spreads of polyethylene (PE) and polypropylene (PP) as there is an anticipation for the vitalized domestic consumption of the Chinese market. As a tight global supply and demand balance is expected due to the upcoming summer driving season, the lubricants business is likely to experience steady spreads of its products despite the increased cost burden caused by rising oil prices.

For the battery business, the additional ramping up of new overseas production plants is expected to improve its sales and profitability. In particular, additional improvements in profits and losses are anticipated as the tax credit benefits from the Advanced Manufacturing Production Credit (AMPC) in accordance with the enforcement of the Inflation Reduction Act (IRA) of the US will be reflected in its financial statements. The materials business is also expected to see a gradual increase in sales as there is an increased demand from its major clients.

Head of Finance Division Group of SK Innovation Kim Yang-seob stated, “Despite the highly volatile situations this year, SK Innovation plans to maintain a stable financial structure by continuously improving profitability through optimizing its business operation.” He added, “The company will continue to develop the green business portfolio centered on clean energy production, carbon emission reduction, and a circular economy, and strive to operate business activities focused on enhancing corporate value.”


1. SK Innovation quarterly earnings (based on K-IFRS)  (Unit: KRW hundred million)Q1 2022Q4 2022Q1 2023YoYQoQRevenue162,651191,367191,429+28,814+62Operating income16,491-7,6493,750-12,741+11,3992. 2023 Q1 earnings by business (based on K-IFRS)
(Unit: KRW hundred million)
Refining*Petrochem*LubricantsE&PBatteryMaterials**StaffTotalRevenue116,06925,35113,0233,28533,053424224191,429Operating income2,7481,0892,5921,135-3,447-40-3273,750(*) Refining: SKE, SKTI, SKIPC refining business / Petrochem: SKGC, SKIPC petrochemical business
(**) Materials: Based on the consolidated financial statements of SK Innovation, which removed internal transactions between SK Innovation’s affiliates

Publication date: 04/05/2023

SK Innovation

This project has been co-funded with the support of the LIFE financial instrument of the European Union [LIFE17 ENV/ES/000438] Life programme

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Last update: 2022-01-31