SK Innovation Co Ltd (XKRX:096770) Q4 2024 Earnings Call Highlights: Revenue Surge Amidst ...

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Fri, Feb 7, 2025, 12:00 AM 4 min read

Total Revenue: Increased by KRW1,748.7 billion quarter over quarter to KRW19.405.7 billion.
Operating Profit: Increased by KRW583.2 billion quarter over quarter to KRW159.9 billion.
Non-operating Income: Declined by KRW994.3 billion quarter over quarter to a loss of KRW1,300.6 billion.
Total Assets: KRW110.6 trillion as of the end of Q4 2024.
Liabilities: KRW70.7 trillion as of the end of Q4 2024.
Debt Equity Ratio: 177%, decreased by 8 percentage points from the end of 2023.
Refinery Business Operating Profit: Increased by KRW595 billion quarter over quarter to KRW342.4 billion.
Petrochemical Business Operating Loss: KRW84.2 billion for the quarter.
Lubricants Business Operating Profit: KRW139.5 billion, down by KRW34.9 billion quarter over quarter.
E&P Business Operating Profit: KRW145.8 billion, up KRW14.7 billion quarter over quarter.
Battery Business Sales: KRW1.598 trillion, up KRW167.9 billion or 12% quarter over quarter.
Battery Business Operating Loss: KRW359.4 billion for the quarter.
SKI E&S Operating Profit: Decreased by KRW237.4 billion to JPY 114.2 billion quarter over quarter.
Dividend: KRW2,000 per share, pending approval.

Warning! GuruFocus has detected 9 Warning Signs with XKRX:096770.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Successful merger with SK E&S, enhancing SK Innovation Co Ltd (XKRX:096770)'s consolidated financials and creating a stable financial structure.
Discovery of oil in Vietnam 15-2/17 block, with high potential for development, contributing to future revenue and profit growth.
Dividend of KRW2,000 per share announced, pending shareholder approval, indicating a commitment to enhancing shareholder returns.
Refinery business saw an increase in operating profit due to improved refining margins and inventory gains.
Battery business sales grew by 12% quarter-over-quarter, driven by easing of temporary production halts and increased local production sales in North America.

Negative Points

Decline in refinery business revenue due to weaker oil prices, despite the merger with SK E&S.
Petrochemical business recorded an operating loss of KRW84.2 billion due to weakened spreads for key aromatic products.
Battery business recorded an operating loss of KRW359.4 billion, impacted by inventory valuation losses and settlements with customers.
Non-operating income declined significantly, resulting in a loss of KRW1,300.6 billion due to factors like FX-related losses and derivative losses.
Increased liabilities and borrowings by KRW15.7 trillion due to CapEx, leading to a high debt equity ratio of 177%.

Q & A Highlights

Q: What is SK ON's profitability and shipment guidance for 2025? A: Kim Kyung Hoon, CFO of SK ON, stated that despite uncertainties, they anticipate a meaningful improvement in performance compared to 2024. Global EV demand is expected to grow steadily in the mid- to long term, driven by eco-friendly policies and OEMs' EV lineup expansion. The revenue is expected to grow in double digits, primarily driven by North America.

Q: What are SK Innovation's CapEx plans and measures to secure financial soundness for 2025? A: Seo Gong-gi, SKI's CFO, mentioned that the planned CapEx for 2025 is approximately KRW6 trillion, with significant allocations to the Battery and E&S businesses. The company aims to maintain a prudent investment policy and expects financial pressure to ease as EBITDA from initial investments starts to be generated and merger synergies come into effect.

Q: How will Trump's reelection impact the refining industry, and what is the outlook for SK Innovation's refinery business? A: Chu Yonggyu, Head of Strategy Operation Division at SK Energy, explained that Trump's reelection could open opportunities to procure oil at cheaper prices, benefiting margins. US refineries might reduce utilization rates, potentially increasing product prices and margins for SK Innovation.

Q: What is the impact of the recent rise in natural gas prices on SK E&S performance? A: The rise in natural gas spot market prices has led to increased costs for power plants using LNG, but this is reflected in the electricity wholesale price, contributing to increased revenue. SKI E&S leverages a sourcing portfolio to mitigate profit and loss volatility, and the commercial production from the Australian Caldita Barossa gas fields is expected to improve import cost competitiveness.

Q: What is the market outlook for SK ON's battery business in the US for 2025? A: Jang-Woo Kim, Head of Financial Support Office at SK ON, noted that despite policy uncertainties, market growth is expected to continue long-term. Traditional OEMs and new EV models are expected to sustain the battery business, with increased sales anticipated from new lineups by Hyundai Motor, KIA Motor, and Ford.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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