SK Innovation: "BlueOval SK Nears Termination... Focus on Financial Structure Improvement"

Annual Operating Profit Reaches 448.1 Billion Won
Up 25.8% Year-on-Year
Electrification Strategy Set as Key Task for This Year
Focus on Expanding LNG Value Chain
No Dividend for Fiscal Year 2025
"A Necessary Measure to Secure Future Growth Drivers"

Despite strong refining margins and solid performance in the lubricants business in the fourth quarter of last year, SK Innovation saw its operating profit decline quarter-on-quarter due to reduced profitability in its battery business.

Electric vehicle manufacturing facility in Blue Oval City, Tennessee, USA. Photo by Ford

On January 28, SK Innovation announced in a regulatory filing that its consolidated annual operating profit for last year was provisionally tallied at 448.1 billion won, a 25.8% increase compared to the previous year. During the same period, revenue rose 8.2% to 80.2961 trillion won, but net loss widened to 5.4061 trillion won.

In the fourth quarter of last year, operating profit reached 294.7 billion won, up 67.6% year-on-year. Revenue was 19.6713 trillion won, and net loss stood at 4.154 trillion won. Fourth-quarter operating profit exceeded the market consensus of 244.3 billion won compiled by Yonhap Infomax by 20.7%, but compared to the previous quarter, revenue fell by 3.7% and operating profit dropped by 49.7%.

By business segment in the fourth quarter, the petroleum business posted revenue of 11.7114 trillion won and operating profit of 474.9 billion won. The chemical business recorded revenue of 2.1211 trillion won and an operating loss of 8.9 billion won, continuing to operate at a loss. The lubricants business maintained stable profitability with revenue of 989.6 billion won and operating profit of 181 billion won. The petroleum development business reported revenue of 322.7 billion won and operating profit of 81 billion won.

The battery business posted revenue of 1.4572 trillion won and an operating loss of 441.4 billion won, while the materials business recorded revenue of 17.2 billion won and an operating loss of 75.2 billion won. SK Innovation E&S business reported revenue of 3.0379 trillion won and operating profit of 117.6 billion won.

During its earnings conference call, SK Innovation stated, "In the fourth quarter of last year, we pursued internal strengthening of the battery business through restructuring of the joint venture structures in China and the United States," adding, "This year, stabilizing our financial structure will remain our top priority."

In November of last year, the company completed a share swap for its joint venture plant with EVE Energy and decided to end the BlueOval SK joint venture with Ford Motor Company. Additionally, SK Innovation finalized the merger between SK On and SK Enmove and conducted portfolio rebalancing, including the sale of non-core assets.

SK Innovation plans to complete the termination procedures for the BlueOval SK joint venture by the end of the first quarter of this year. Once the process is complete, Ford will acquire the assets and liabilities related to the Kentucky plant, which is expected to reduce SK Innovation's consolidated debt by approximately 5.4 trillion won.

For 2026, the company has identified its key priorities as strengthening fundamental competitiveness through business restructuring, stabilizing its financial structure, and advancing its electrification strategy as a future growth driver.

While aiming to enhance the profitability of its petrochemical business and energy supply chain to reinforce its role as a stable cash cow, the company will focus on restoring competitiveness in the battery business by improving yield and reducing costs.

Regarding the electrification strategy, SK Innovation plans to transition to a power business operator centered on the three pillars of production, consumption, and solutions, and to focus on expanding the LNG value chain. The company intends to secure competitively priced LNG in the United States, Southeast Asia, and Australia to strengthen its power generation cost competitiveness, and to expand its business into high-growth electricity demand regions such as the semiconductor cluster in Yongin, Korea, and Vietnam.

Meanwhile, non-operating loss in the fourth quarter of last year was 4.6573 trillion won, a further widening of losses compared to the previous quarter. This was due to asset impairment resulting from the termination of the BlueOval SK joint venture, with SK On recognizing impairment losses of 4.2 trillion won.

SK Innovation explained that it has streamlined assets with low future profitability through one-off impairment losses, and improved its mid- to long-term profit structure by reducing depreciation costs previously incurred at the Kentucky plant as a result of the joint venture termination.

This year's capital expenditure is set at 3.5 trillion won, with 1.3 trillion won allocated to the battery business, 900 billion won to SK Innovation E&S, and 1.3 trillion won to regular and strategic investments.

SK Innovation has decided not to pay a dividend for the 2025 fiscal year.

Seogun-gi, Head of Finance at SK Innovation, stated, "We inevitably decided to forgo dividends in order to improve our financial structure and secure future growth drivers," adding, "By minimizing cash outflows, we aim to restore financial soundness early and, based on that, enhance corporate value."

This content was produced with the assistance of AI translation services.