📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

SK Innovation profit tops forecast, battery unit sees EV demand recovery

Published 04/28/2024, 08:08 PM
Updated 04/29/2024, 05:46 AM
© Reuters. FILE PHOTO: The logo of SK Innovation is seen in front of its headquarters in Seoul, South Korea, February 3, 2017.  REUTERS/Kim Hong-Ji/File Photo

By Heekyong Yang and Joyce Lee

SEOUL (Reuters) - SK Innovation said on Monday its SK On battery-making unit is still on target to break even in the second half of this year after a forecast-beating first-quarter operating profit, sending its shares up nearly 6.5%.

The company, which also owns South Korea's top refiner SK Energy, said it expects solid refining margins to continue in the second quarter, backed by firm demand.

It posted operating profit of 625 billion won ($454 million) for the January to March period, versus 375 billion won a year earlier and an average analyst forecast of 466 billion won. First-quarter revenue fell 1.5% to 18.9 trillion won.

"While we saw drops in EV battery shipment in the first quarter... we expect to see an improved market environment backed by launches of new EVs in North America," SK On Chief Financial Officer Kim Kyunghun said in a post-earnings conference call.

SK On, whose clients include Ford Motor (NYSE:F), Volkswagen (ETR:VOWG_p) and Hyundai Motor (OTC:HYMTF), widened its operating loss to 332 billion won in the first quarter from 18.6 billion won a quarter before as EV battery shipments fell. However, it maintained its target to break even in the second half.

"When... Hyundai Motor kicks off EV production in the United States later this year, it would help raise SK On's EV battery shipment and amount of tax credit received under the U.S. Inflation Reduction Act," said Hyundai Motor Securities analyst Kang Dong-jin.

Shares in the company, which rose as much as 6.5%, closed up 5.6% against a 1.2% rise in the benchmark KOSPI.

Kang said Monday's jump in Chinese property shares had helped lift SK Innovation, amid speculation that more stimulus measures for the battered real estate sector could be unveiled this week, potentially lifting demand for petrochemical products.

Analysts are hopeful that SK On's battery shipments will increase later this year, but note persistent near-term uncertainty over EV demand due to car buyers' preference for hybrid vehicles.

SK On's major automaker customer Ford earlier this month said it had delayed the launches of three-row EVs in Canada and its next-generation electric pickup truck built in Tennessee.

Last week, SK On's cross-town rival LG Energy Solution said it planned to minimise capital expenditure this year due to slowing global EV demand, after reporting a 75% drop in quarterly profit.

SK, which has total refining capacity of 1.115 million barrels per day at its plants in Ulsan and Incheon, said it expects to see solid refining margins in the second quarter.

The refiner said it has secured contingency plans to source crude oil for its products in case of the blockade of the Gulf's Strait of Hormuz, through which it sources more than 70% of its crude oil.

© Reuters. FILE PHOTO: The logo of SK Innovation is seen in front of its headquarters in Seoul, South Korea, February 3, 2017.  REUTERS/Kim Hong-Ji/File Photo

SK added that it plans to carry out maintenance work for its No.5 crude distillation unit (CDU) in the second quarter.

($1 = 1,376.4300 won)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.