SK Innovation (KRX: 096770) announced its financial results for the first quarter of 2023.
The company posted revenues of KRW 19.14 trillion ($14.44 billion) and operating income of KRW 375 billion ($283 million).
This represents a successful turnaround from the fourth quarter of 2022 when the company posted a sequential increase of KRW 6.2 billion ($4.68 million) in revenues and KRW 1,139.9 billion ($860.4 million) in operating income.
The Q1 performance was driven by improvements in refining margins and para-xylene (PX) spreads.
The refining and petrochemical businesses posted stable sales and operating profit increases, while the battery business achieved its highest quarterly sales.
However, SK Innovation reported a pre-tax loss of KRW 156.3 billion ($118 million) due to increased non-operating losses related to higher foreign exchange rates and decreased product-related profits.
Net debt increased to KRW 15.55 trillion ($11.74 billion), up to KRW 1,036.2 billion ($783 million) from the end of the previous year, mainly due to increased investment in the battery business.
In the first quarter of 2023, the refining business experienced a turnaround and recorded an operating profit of KRW 274.8 billion ($207.4 million), up KRW 936 billion ($706.5 million) from the fourth quarter of 2022.
The improvement was attributed to improved refining margins, the decline in crude oil's official selling price (OSP) from the Middle East oil-producing countries, and reduced inventory-related losses.
The petrochemicals business posted an operating profit of KRW 108.9 billion ($82.2 million), an increase of KRW 197.3 billion ($149 million) from the previous quarter.
Improved PX margins, inventory gains, and reduced fixed costs supported this.
The lubricants business saw a slight decrease in operating profit, while the E&P business recorded an operating profit of KRW 113.5 billion ($85.7 million), a sequential decrease of KRW 3.1 billion ($2.3 million).
The battery business achieved its highest quarterly sales of KRW 3,305.3 billion ($2.49 billion), a sequential increase of KRW 429.7 billion ($324.5 million).
Operating loss increased slightly to KRW 344.7 billion ($260.3 million) due to higher one-time costs, but the company's operating profit margin improved.
In the second quarter of 2023, the refining business is expected to maintain solid performance due to increased demand for petroleum products during the summer driving season and the full reopening of China.
The petrochemical and lubricant businesses are also expected to grow steadily.
SK Innovation plans to maintain a stable financial structure by continuously improving profitability by optimizing its business operations.
The company will focus on developing a green business portfolio. The focus will be on clean energy generation, carbon emission reduction, and circular economy.