SK Innovation (096770) Q3 2024 earnings summary

Executive summary

• Completed merger with SK E&S as of November 1, launching as a Total Energy & Solution company to strengthen the energy portfolio and management control, with 85.75% shareholder approval and lower-than-expected appraisal rights exercise.

• Announced Corporate Value-Up Plan targeting 10% ROE and over 35% shareholder return by 2027, with a minimum dividend of 2,000 won per share.

• Q3/3Q24 saw weaker sales and operating losses due to lower oil prices and petrochemical spreads, partially offset by improved battery and lubricant segment profitability.

• Revenue for the first nine months of 2024 was ₩55.3 trillion, down from ₩77.3 trillion year-over-year, reflecting lower oil prices and weaker demand.

• Net loss attributable to owners was ₩1.26 trillion, compared to a net profit of ₩256 billion in the previous year.

Financial highlights

• Q3/3Q24 total sales were KRW 17,657 billion, down KRW 1,142.2 billion QoQ, mainly from weaker refinery sales.

• Q3 operating profit fell KRW 377.5 billion QoQ to a loss of KRW 423.3 billion, despite battery business break-even.

• EBITDA increased to KRW 543.9 billion in 3Q24 from KRW 159.6 billion in 2Q24.

• Debt-equity ratio at 166% at Q3-end, down from 169% at end-2023.

• Cash and cash equivalents at Q3-end were ₩12.4 trillion.

Outlook and guidance

• Expect recovery in refining margins in Q4 due to seasonal demand, supply constraints, and Chinese stimulus.

• Battery shipments projected to rise in Q4 and 2025 with new North American capacity and car launches.

• CapEx for battery business expected to decrease in 2025 as major 2024 investments conclude; flexible investment approach planned.

• Ongoing restructuring and portfolio optimization are expected to improve long-term profitability.

• Focus on cost control and operational efficiency amid continued oil price and demand volatility.