Release Date: April 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SK Innovation Co Ltd (XKRX:096770, Financial) confirmed oil reserves at the Vietnam Block 15-2/17, with test production reaching 10,000 barrels per day, indicating potential future revenue growth.
- The company signed a significant battery supply agreement with Nissan for the North American market, marking its first order from a Japanese customer.
- SK Innovation Co Ltd (XKRX:096770) secured a 20-gigawatt hour order from the US EV startup Slate, diversifying its customer base.
- The US battery capacity utilization is expected to improve significantly due to OEMs seeking more local supply, enhancing operational efficiency.
- Despite market challenges, the company expects stable profitability in its lubricant business due to strong demand for Group three products.
Negative Points
- The refinery business experienced a significant decline in operating profit due to falling crude prices and weaker refining margins.
- The petrochemical business recorded an operating loss, continuing losses from the previous quarter due to weak PX and polyar markets.
- The ENP business saw a decline in operating profit due to decreased sales volume, impacted by increased hydropower generation in Peru.
- The battery business reported an operating loss despite increased sales volume, with uncertainties in the market due to US tariff policies.
- SK Innovation Co Ltd (XKRX:096770) faces challenges in improving its financial soundness due to increased borrowings and weak performance.
Q & A Highlights
Q: What is the impact of the Trump administration's tariff policy on the battery business, and what are your company's countermeasures?
A: Kim Kyong Juon, Head of Planning and Support at SK Earthon, explained that the US tariff policy introduces uncertainties affecting the EV and EV battery business. OEMs are increasing local production to mitigate higher tariffs. SK Innovation's local production in the US is advantageous, but short-term cost impacts are expected. The company plans to localize raw material sourcing from the US and explore non-China regions for anodes to minimize tariff impacts.
Q: Due to recent increases in borrowings and weak performance, what efforts is SK Innovation making to strengthen financial soundness?
A: Seo Geon-ki, Chief Financial Officer, stated that SK Innovation is focusing on maximizing profitability and portfolio rebalancing to improve financial soundness. The company is considering options to enhance cash flow and debt-to-equity ratio, with a significant reduction in 2025 CapEx. Efforts are also underway to improve profitability across businesses, particularly in the battery segment, by securing new orders and enhancing plant utilization.
Q: What is SK ON's strategy for gaining competitiveness in battery form factor and chemistry, given its later entry into cylindrical and prismatic battery segments?
A: Jang-Woo Kim, Head of Financial Support Office at SK ON, emphasized that the company focuses on prismatic batteries and has developed technology for cylindrical batteries. SK ON aligns with customer needs and plans mass production of bidirectional and unidirectional batteries by 2027-2028. The company is leveraging its NCM development capabilities to enhance LFP batteries, addressing their weaknesses to secure a competitive position.
Q: What is the outlook for the lubricants business in light of the increasing penetration of EVs?
A: Kim Ji-yong, Head of Corporate Planning and Development Office at SK Enmove, noted that while the base oil and lubricants market may decrease due to EV penetration, demand for Group three and Group three plus products will remain strong due to stricter environmental regulations. The company expects stable profit generation and is exploring new business areas like EV fluids and immersion cooling to create a balanced portfolio.
Q: What are SKI E&S's plans regarding overseas investments, particularly in the Alaska LNG project?
A: Kim Kyong Juon, Head of Planning and Support at SK Earthon, stated that SKI E&S currently has no plans for direct equity investment in overseas LNG gas fields. The company will monitor LNG demand growth and consider investments in small-scale gas fields when necessary to expand its value chain.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
