SK Innovation (096770) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was KRW 18,799.1 billion, nearly flat QoQ, with operating profit dropping sharply to a loss of KRW 45.8 billion, mainly due to weak battery and refining margins.

• EBITDA fell to KRW 543.9 billion from KRW 1,187.3 billion sequentially, reflecting margin pressures across segments.

• Net debt increased by KRW 3.5 trillion to KRW 19.0 trillion, and debt/equity ratio improved to 161% from 169% at 2023 year-end.

• Completed or announced major mergers with SK E&S, SK Trading International, and SK Entem to drive synergies, enhance profitability, and target significant EBITDA growth by 2030.

• Maintained a diversified business portfolio across petroleum, chemicals, lubricants, batteries, and materials.

Financial highlights

• Total assets at Q2-end were KRW 86.39 trillion, with tangible assets rising by KRW 6 trillion YTD due to new battery plant construction.

• Liabilities stood at KRW 53.29 trillion; borrowings increased by KRW 3.6 trillion for CapEx expansion.

• Debt-to-equity ratio at 161% as of June 30, 2024.

• H1 2024 consolidated revenue was KRW 37.65 trillion, with operating profit of KRW 579 billion and net loss of KRW 645 billion.

• Basic EPS for H1 2024 was -KRW 6,691.

Outlook and guidance

• Refining margins expected to recover in H2 2024, supported by OPEC+ production cuts, seasonal demand, and tighter supply.

• Battery business aims for break-even in H2 2024, focusing on cost savings, operational improvements, and demand recovery.

• Continued investment in battery and materials capacity, targeting 199GWh annual battery production by 2025.

• Lubricant demand and profitability anticipated to rise in H2 as macroeconomic recovery and supply chain advantages materialize.

• Focus on expanding green energy and materials portfolio, including battery recycling and new energy ventures.