SK Innovation (096770) Q4 2023 earnings summary

Executive summary

• Consolidated FY2023 sales were KRW 77,288.5bn and operating profit KRW 1,903.9bn; Q4 operating profit dropped to KRW 72.6bn from KRW 1,563.1bn in Q3.

• Battery profitability improved QoQ on stronger North American productivity and higher AMPC effects, despite lower sales; FY2023 battery revenue reached a record high.

• Separate FY2023 results improved YoY, with operating profit of ₩1,235.5bn and net income of ₩1,110.5bn; petroleum exploration and development revenue declined.

• FY2023 separate financial statements received an unmodified K-IFRS audit opinion, and internal control over financial reporting was assessed effective at year-end.

Financial highlights

• Q4 sales were KRW 19,529.3bn, down KRW 359.8bn QoQ; EBITDA was KRW 656.4bn and pre-tax loss KRW 61.1bn.

• FY2023 consolidated EBITDA was KRW 4,135.5bn and pre-tax income KRW 923.6bn, both lower YoY.

• Separate FY2023 sales were ₩2,489.4bn vs. ₩1,983.5bn; operating profit was ₩1,235.5bn vs. ₩611.4bn and profit before tax ₩1,144.6bn vs. ₩602.1bn.

• Separate net income was ₩1,110.5bn vs. ₩453.2bn; basic EPS was ₩12,170 vs. ₩5,346.

• Separate operating cash flow rose to ₩1,263.5bn from ₩534.7bn; year-end cash and cash equivalents were ₩1,265.6bn vs. ₩424.8bn.

Outlook and guidance

• Battery shipments are projected to grow in 2024; profitability may slow temporarily in 1H due to new plant operations and lower ASPs, then improve in 2H with stable yields and battery prices.

• Refining margins may benefit from OPEC+ output cuts, Chinese stimulus and firmer travel demand; high interest rates and demand contraction remain concerns.

• Petrochemical spreads may gain support from Chinese demand policies and stronger polyester-chain, PTA and gasoline-blending demand; lubricant base-oil demand may rise under tighter environmental rules.

• SKIET plans to diversify its customer portfolio to strengthen mid- to long-term competitiveness amid downstream demand uncertainty.