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2Q24 Financial results

Dear Shareholders,

SK Innovation would like to share with you our financial results and strategic direction for the second quarter of 2024. Despite continuous economic changes and challenges within the industry, we have maintained a solid business structure and are laying the foundation for future growth.



Financial Performance

In the second quarter of 2024, SK Innovation recorded a revenue of 18,799 billion KRW. Despite an increase in sales of petroleum products and a rise in production volume in the E&P business, this is a decrease of 560 billion KRW from the previous quarter, due to a drop in the selling price and sales volume of the battery business.

The operating loss was reported at 45.8 billion KRW, which can be attributed to weak refining margins and a decrease in the operating rate of the battery business. Non-operating income improved, resulting in a better outcome compared to the previous quarter by 124.7 billion KRW, ending with a loss of 481.8 billion KRW, due to a decrease in the rate of currency value increase and a fall in oil prices.



Business Performance and Outlook

[Refining]

The second quarter saw an operating income of 144.2 billion KRW, a slight decrease from the previous quarter due to an unfavorable macroeconomic environment and the delayed economic recovery in China, which led to a decline in refining margins. However, the third quarter is expected to show a recovery trend as the bottom of oil prices is anticipated to be strengthened by supply tightness, and a tight supply situation for products is also expected.

[Pet.chem]

Despite the rise in spreads for major products, operating income decreased to 99.4 billion KRW due to reduced sales volumes from scheduled maintenance. The second half of the year is expected to see an improvement in performance due to increased Polyester demand in preparation for winter clothing and China's domestic stimulus policies.


[Lubricants]

Operating income recorded a slight decrease to 152.4 billion KRW from the previous quarter due to weak demand in China and falling oil prices. However, with the expected economic recovery following interest rate cuts and an increase in demand for base oils and lubricants, the outlook remains positive. In the current environment where global logistical issues persist due to geopolitical risks, the company's competitive advantage in the global supply chain is expected to lead to increased volumes in the second half of the year.

[E&P]

The second quarter's sales volume slightly increased, but operating income showed a slight decrease to 142.1 billion KRW compared to the previous quarter due to a decline in complex selling prices and an increase in cost of sales. The company will continue to actively participate in bids for promising new blocks in Southeast Asia and strive to enhance the value of existing blocks in Malaysia and Vietnam.


[Battery]

Although the operating loss widened to 460.1 billion KRW in the second quarter due to a decrease in selling prices and initial costs associated with new equipment operations, profitability is expected to improve in the second half of the year thanks to a recovery in forward demand and cost reduction efforts. Despite the unfavorable domestic and international management environment, the company is making concerted efforts to achieve a break-even point in operating income fueled by cost improvement activities and market demand recovery.


[SKIET]

While sales volumes to major customers increased, the deficit widened to 70.1 billion KRW due to inventory-related losses. However, sales volumes are expected to increase in the second half of the year with the commencement of shipments to new customers in North America.


Merger Synergies and Future Strategies

If these synergies are successfully realized, it is expected that by 2030, an additional EBITDA of over 2 trillion KRW will be generated annually.

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In addition, through the growth of the battery business and profitability improvements in existing businesses including LNG and power, we aim to increase the consolidated EBITDA to approximately 20 trillion KRW annually and evolve into a Total Energy & Solution Company, enhancing the corporate value and expanding returns to shareholders.

We place great importance on the opinions of our shareholders and investors and are committed to fostering ongoing communication to enhance transparency and trust. We ask for your continued interest and support for the strategic direction of SK Innovation.

Thank you.




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