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SK Innovation Co., South Korea’s leading energy and chemical company, reported substantial losses for the second quarter of 2023, driven by weak oil prices and declining refining margins. The company recorded an operating loss of 106.8 billion won ($83.3 million), a sharp reversal from the 2.3 trillion won operating profit achieved in the same quarter last year.
The financial results fell short of market expectations, which had anticipated an operating profit of 136.2 billion won, according to market tracker FnGuide. Revenue dropped by 6% to 18.7 trillion won, slightly surpassing the forecasted 18.4 trillion won. Net losses amounted to 120 billion won, better than analysts’ predictions of 196.3 billion won in net losses.
The downturn was primarily attributed to falling oil prices and shrinking refining margins. The average price of Dubai crude oil in the first half of 2023 was approximately $75 per barrel, significantly lower than the previous year’s peak of $127.86 per barrel, influenced by the Russia-Ukraine conflict. This substantial drop in crude oil prices led to decreased profitability in SK Innovation’s refining business, which reported operating losses of 411.2 billion won in the first three months of 2023, a sharp decline from the 2.33 trillion won operating profit reported in the same period last year.
SK Innovation’s wholly-owned battery-making subsidiary, continued to face challenges, marking its 11th consecutive quarter without a profit. The unit posted an operating loss of 131.5 billion won for the second quarter, though it achieved record-high quarterly sales of 3.7 trillion won. Despite the losses, SK On has been gradually narrowing its deficits, reflecting the company’s efforts to optimize operations and scale its production capacity.
SK On’s annual sales are projected to double this year compared to last year, driven by increased sales and production volumes. He mentioned ongoing negotiations with several automakers to expand the company’s manufacturing footprint in North America, signaling potential growth and profitability in the future.