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 and strengthening the energy portfolio and financial stability; 85.75% shareholder approval and lower-than-expected appraisal rights exercise.

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

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

• SK On achieved breakeven in Q3, with improved US utilization expected in Q4 due to new plant operations and vehicle launches.

• Report covers SK Innovation's separate interim financials for the nine months ended September 30, 2024, reviewed under K-IFRS.

Financial highlights

• Q3/3Q24 revenue was 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.

• Net profit for nine months: W335.8 billion, compared to net loss of W13.9 billion in prior year.

• Debt/equity ratio improved to 166% from 169% at year-end 2023.

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.

• Lubricants segment anticipates improved profitability as temporary demand weakness resolves.

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

• Company expects no significant impact from new K-IFRS amendments adopted in 2024.