July 28, 2023 [Reuters]- SK Innovation Co Ltd (096770.KS), owner of South Korea’s top refiner SK Energy, said on Friday it expects refining margins to gradually improve in the second half thanks to favourable market conditions backed by solid travel season demand.
The company posted a worse-than-expected operating loss of 107 billion won ($83.41 million) for the second quarter ended June, versus a 2.3 trillion won profit a year earlier.
That compared with an average analyst forecast of a 25 billion won loss compiled by Refinitiv SmartEstimate.
Analysts said SK Innovation’s refining business had been hit by declines in refining margins and oil prices, while its battery business had continued generating losses due to costs related to its newly set up U.S. battery plants.
SK Innovation’s battery unit SK On, which was split off last year, accounted for about 20% of the company’s revenue in the second quarter.
SK Innovation said it expects its battery unit’s profitability to improve in the second half thanks to the U.S. tax subsidies from the Inflation Reduction Act.
SK On, which supplies Ford Motor Co (F.N) and Hyundai Motor Co (005380.KS) among others, said it expects its sales in North America to continue to grow in the second half of the year, but warned of slowing electric vehicle (EV) demand in Europe.
SK On Chief Financial Officer Kim Kyunghoon said in a post-earnings conference call that the company has been in talks with a new potential partner, an automaker with a strong presence in North America, to discuss a supply deal, while continuing talks with its existing customers regarding additional battery supplies.
SK On’s cross-town rival LG Energy Solution (373220.KS) on Thursday warned of sluggish EV demand in Europein the second half of this year due to economic uncertainties, such as high inflation.
Shares of SK Innovation were trading down 0.9%, versus benchmark KOSPI’s (.KS11) 0.5% fall at 0210 GMT. The stock has risen about 20% so far this year.
($1 = 1,282.8300 won)
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