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 weaker refining and battery 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.

• Major mergers with SK E&S, SK Trading International, and SK Enterm are planned to drive synergies and enhance financial stability.

• Net profit for the six months was W318.2 billion, down from W435.2 billion year-over-year.

Financial highlights

• Total assets at Q2-end were KRW 86,390.1 billion; tangible assets rose by KRW 6 trillion YTD due to new battery plant construction.

• Liabilities stood at KRW 53,288.4 billion; borrowings increased by KRW 3.6 trillion for CapEx expansion.

• Debt-to-equity ratio improved to 161% from 169% at 2023 year-end.

• Operating profit margin turned negative at -0.2% in Q2 2024.

• Cash and cash equivalents stood at W1,259.1 billion at June 30, 2024.

Outlook and guidance

• Refining margins expected to recover in 2H24, supported by OPEC+ production cuts, seasonal demand, and tighter supply.

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

• Lubricant demand anticipated to rise in H2 with macroeconomic recovery and supply chain advantages.

• SKIET sales volume to increase in 2H24 with new North American customer shipments.

• Management expects enhanced competitiveness and sustainable growth from planned integrations.