SK Innovation's Oil Export Margins, Lubricants Deliver a "Double Boost"; Q3 Operating Profit Hits Record KRW 3.7043 Trillion
Oil export margins and lubricant business lift operating profit to more than six times year-earlier level
SK Enmove surpasses record annual profit in a single quarter
SK On remains in the red; sales recovery expected in Q4
SK Innovation posted its highest-ever quarterly operating profit in the third quarter, driven by strong export margins amid disruptions to oil product supplies from the Middle East and robust performance in its lubricant business.
SK Innovation said on October 29 that it recorded consolidated revenue of KRW 28.7738 trillion and operating profit of KRW 3.7043 trillion in the third quarter. Operating profit rose by KRW 3.1186 trillion, more than sixfold, from KRW 585.6 billion in the same period last year, and was also KRW 217 billion higher than in the previous quarter. Revenue increased by KRW 8.1819 trillion year over year but fell by KRW 383.4 billion from the previous quarter.
The oil business led the results. International crude prices and refining margins rose as geopolitical tensions in the Middle East persisted and Ukrainian attacks on Russian refineries intensified supply disruptions. Operating rates also increased due to a base effect from scheduled maintenance in the second quarter, lifting SK Energy's operating profit by KRW 554.6 billion from the previous quarter to KRW 1.2058 trillion.
SK Enmove, SK Innovation's lubricant subsidiary, posted operating profit of KRW 1.0906 trillion as global base oil supply disruptions sustained high spreads. This was its highest-ever quarterly profit and exceeded its record annual operating profit of KRW 1.0712 trillion, set in 2022, in just one quarter. The company recently expanded its North American distribution network by signing a long-term Group III base oil supply agreement with U.S. refiner HF Sinclair.
SK Innovation E&S posted operating profit of KRW 774.4 billion, up KRW 668.5 billion from the previous quarter, on higher system marginal prices (SMP), long-term contracted liquefied natural gas (LNG), and stable imports of gas from Australia's Barossa gas field. SK Geocentric earned KRW 86.7 billion in operating profit on wider paraxylene (PX) and benzene spreads, while SK Incheon Petrochem and SK Earthon posted operating profits of KRW 270.3 billion and KRW 31.4 billion, respectively.
SK On, the battery subsidiary, recorded revenue of KRW 1.5263 trillion and an operating loss of KRW 80.5 billion. Its performance declined from the previous quarter due to lower sales volume and a base effect from one-off gains in the prior quarter. However, the company said underlying profitability, excluding one-off factors, continued to improve through cost reductions and operational efficiency measures. SK On is also strengthening the foundation for its North American ESS business, signing a supply agreement with U.S.-based NeoVolta for approximately 9 GWh of lithium iron phosphate (LFP) pouch cells for energy storage systems (ESS), as well as LFP cathode material supply agreements with L&F and POSCO Future M.
The oil business is expected to remain strong in the fourth quarter. SK Innovation expects market conditions to remain firm as scheduled maintenance at major refineries coincides with export restrictions by major countries and rising winter demand. Lubricants may remain volatile depending on when the blockade of the Strait of Hormuz is lifted, and spreads could gradually narrow if supply disruptions ease. The company expects a gradual recovery in the battery business, supported by increased sales volumes from major customers.
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An SK Innovation official said, "Global geopolitical uncertainty continues to drive uncertainty and price volatility in energy markets. We will do our utmost to ensure stable domestic supplies of oil products and other items, while continuing efforts to improve operational efficiency in each business and strengthen our underlying competitiveness."
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