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(Adds comments from SK Innovation's earnings conference call, background)
By Heekyong Yang and Joyce Lee
SEOUL, Nov 3 (Reuters) - SK Innovation Co Ltd , the owner of South Korea's top oil refiner SK Energy, said on Thursday it expects a gradual recovery in refining margins this quarter as stronger Western sanctions on Russia and the winter season push up fuel demand.
However, the company said margins will likely remain not far from third-quarter levels due to global recession worries.
SK Innovation's operating profit rose to 704 billion won ($493 million) in the July-September period from 669 billion won a year earlier, it said.
Revenue rose 82% to 22.8 trillion won, beating an average analyst estimate of 19.8 trillion won according to Refinitiv SmartEstimate.
SK Innovation's wholly owned battery unit SK On, whose clients include Ford Motor Co, Volkswagen AG and Hyundai Motor Co, accounted for nearly 10% of the company's revenue in the third quarter.
When asked about the impact of the U.S. Inflation Reduction Act, SK On said in a conference call the law could benefit its battery business, betting on its existing U.S. factories.
The U.S. law requires automakers to source a certain percentage of critical minerals for their electric vehicle (EV) batteries from the United States or an American free-trade partner to qualify for U.S. EV tax credits.
SK Innovation, which has a total refining capacity of 1.115 million barrels per day (bpd) at its plants in Ulsan and Incheon in South Korea, said it operated its facilities at 85% of capacity on average in the past quarter, up from 76% in the first half of this year.
It expects to keep the utilisation rate at about low 80% of capacity in the current quarter, given scheduled maintenance, and plans to operate them at a high 80%-low 90% range of capacity next year as refining margins improve.
SK Innovation shares were trading up 0.8% in morning trade, versus a 0.6% fall in the broader KOSPI. ($1 = 1,426.8700 won) (Reporting by Heekyong Yang and Joyce Lee; Editing by Richard Pullin and Himani Sarkar)