SK Innovation Co.’s petrochemical complex in Ulsan, 414 kilometers southeast of Seoul, is seen in this photo taken on May 6, 2020. (Yonhap)
SEOUL, Jan. 29 (Korea Bizwire) – SK Innovation Co. said Friday it turned to the red in 2020 on heavy losses from its refinery business hit by the COVID-19 pandemic but plans to expand investment to increase production of electric vehicle batteries.
South Korea’s top refiner said it posted 2.2 trillion won (US$2 billion) in net losses last year, turning from a net profit of 65.7 billion won a year earlier, the company said in a regulatory briefing.
The annual operating losses reached a record of 2.6 trillion won for the year, also shifting from an operating profit of 1.1 trillion won in 2019. Its sales tumbled 30.7 percent on-year to 34.2 trillion won.
Despite the downbeat performance of its mainstay petrochemical business on weak global demand and cracking margins, the company said its battery business posted 1.6 trillion won in sales in 2020 thanks to strong demand for EV batteries.
The company said its cracking margins will gradually improve this year, while pinning hope on its growing battery business improving profitability.
The company supplies its automotive batteries to major automakers, including Volkswagen, Ford, Daimler, Hyundai Motor Co. and Kia Corp.
In the fourth quarter, SK Innovation posted a net loss of 2.2 trillion won, turning from a net profit of 657.7 billion won in the same period of last year.
The company also shifted to an operating loss of 2.6 trillion won in the October-December period from an operating profit of 1.1 trillion won a year ago.
Sales tumbled 30.7 percent on-year to 3.4 trillion won over the period as refinery and chemical products remained sluggish amid the pandemic.
“Sales of petroleum and chemical products decreased due to sluggish global demand, and falling margins for the main products dragged on profitability,” the company said.
While revenue from its battery business more than doubled to 497.2 billion won in the last quarter, the firm said it posted 108.9 billion won in operating losses due to high costs.
Company officials said the operating losses widened in the fourth quarter due to legal costs related to its suits with its local rival LG Energy Solution Ltd., without elaborating on the amount.
This file photo, provided by SK Innovation Co., shows its researchers holding battery cells for electric vehicles.
SK Innovation faces uncertainties over its battery business as it awaits the U.S. International Trade Commission’s final ruling on its trade secret case with LG Energy Solution, slated for Feb. 10.
LG Energy Solution, wholly owned by LG Chem Ltd., filed trade complaints with the ITC in early 2019, claiming SK Innovation stole its trade secrets in EV battery technology by hiring its former employees.
SK Innovation is currently building its first U.S. battery plant in Georgia for completion by 2022 and recently broke ground on its second plant.
SK Innovation, which has denied any wrongdoing, said it is mulling various measures to mitigate the ICT’s ruling on its clients in the worst-case scenario, while making continuous efforts to reach an agreement with LG Energy Solution.
“Although the operating losses seem a little too much, it means that there is much room for improvement in profitability when the legal dispute is resolved,” Yoon Hyung-jo, head of SK Innovation’s battery business, said in a conference call.
An adverse ruling could ban SK Innovation from shipping in materials needed to make EV batteries at its U.S. factory in Georgia, which could deal a blow to its clients such as Volkswagen and Ford Motors.
The company said its new production lines in China will begin mass production in the first quarter and roll out batteries in Hungary and the United States in early 2022 to reach a break-even point.
SK Innovation said it plans to ramp up its battery production capacity globally to 85 GWh in 2023 and over 125 GWh by 2025 to meet growing demand for EV batteries.
As part of the plan, the company said it will invest 1.3 trillion won to build a third battery factory in Hungary, with a goal of beginning mass production in 2024.
Currently, SK Innovation runs a plant with an annual capacity of 7.5 gigawatt-hours (GWh) in the northwestern Hungarian city of Komarom, with a second plant under construction to begin mass production in 2022.
SK Innovation said it plans to list SK IE Technology Co., a material business unit, later this year to finance the expansion of its production capacity of lithium-ion battery separation, a key part for EV batteries.
(Yonhap)
