■ Revenue of KRW 24.21 trillion and operating profit of KRW 2.16 trillion, driven by lagging effects, inventory valuation gains, and petroleum product export effects
■ Approximately KRW 780 billion, or around 60% of SK Energy’s operating profit, attributable to inventory valuation gains that may decline or reverse if oil prices fall
■ Continued focus on operational optimization and stable profitability amid Middle East uncertainty, while ensuring stable energy supply
SK Innovation reported strong first-quarter earnings for 2026, driven primarily by improved refining margins, inventory valuation gains, and stronger export margins following a sharp rise in oil prices amid geopolitical tensions in the Middle East.
At its earnings conference held on May 13 (KST), SK Innovation announced consolidated revenue of KRW 24.21 trillion and operating profit of KRW 2.16 trillion for the first quarter (Q1) of 2026. Compared to the previous quarter, revenue increased by KRW 4.54 trillion and operating profit rose by KRW 1.87 trillion. On a year-over-year (YoY) basis, revenue increased by KRW 3.19 trillion, while operating profit returned to profit.
The improvement in Q1 earnings was largely driven by lagging effects arising from the time gap between crude oil procurement and petroleum product sales, as well as increased inventory valuation gains. Since domestic refiners maintain inventories throughout the transportation, storage, and refining process, previously purchased lower-cost crude is reflected in product costs with a delay during periods of rising oil prices, temporarily improving refining margins and operating profit.
Following the escalation of tensions in the Middle East on February 28, the average Dubai crude price rose sharply to USD 128.5 per barrel in March, compared to an average of USD 63.9 per barrel over the previous three months. While prices for petroleum products such as diesel and jet fuel increased, product costs continued to reflect crude oil procured before the price surge, resulting in a substantial lagging effect.
A representative from SK Innovation stated, “SK Energy, our refining business subsidiary, recorded a significant quarter-on-quarter (QoQ) increase in operating profit driven by lagging effects from rising oil prices and increased inventory valuation gains. However, these lagging effects and inventory valuation gains are temporary accounting gains that may decline or disappear if oil prices fall in the future.”
The representative added, “SK Energy’s Q1 performance was largely attributable to temporary inventory valuation gains and improved export conditions. Any settlement related to the implementation of the petroleum price cap system will be verified and processed in accordance with the prescribed procedures.”
SK Innovation stated that approximately KRW 780 billion, or around 60%, of SK Energy’s Q1 operating profit of KRW 1.28 trillion was attributable to inventory valuation gains.
As a key Q1 business highlight, SK Innovation announced the successful arrival of the first LNG cargo from the Barossa gas field in Australia, in which the company holds an equity stake, at the Boryeong LNG Terminal in Chungcheongnam-do, South Korea. Amid heightened volatility in the global gas market driven by geopolitical uncertainties, the long-term import of 1.3 million tons of LNG annually over 20 years is expected to contribute to strengthening Korea’s energy security.
The company also noted that it had been selected as the final project developer for the Quynh Lap combined-cycle gas power plant and LNG terminal and port development project in Vietnam. The project is expected to serve as a strategic foothold for SK Innovation to expand its LNG value chain model into overseas markets and strengthen its position as a global LNG player.
In addition, SK On secured 284MW out of a total 565MW awarded under Korea’s second centralized Energy Storage System (ESS) contract market auction, achieving a market share of 50.3%. The company plans to build on this achievement to accelerate the growth of its ESS business while continuing to participate in future bidding opportunities.
■ Q1 2026 Business Performance
On a consolidated basis, Q1 results by subsidiary were as follows:
- SK Energy: Revenue of KRW 11.98 trillion, operating profit of KRW 1.28 trillion. Operating profit increased by KRW 1 trillion QoQ, driven by a sharp rise in oil prices following the closure of the Strait of Hormuz amid the Middle East conflict. Key contributors included one-time inventory valuation gains of KRW 780 billion and lagging effects associated with rising oil prices.
- SK Geo Centric: Revenue of KRW 3.21 trillion, operating profit of KRW 127.5 billion. The company returned to profit in Q1, supported by inventory valuation gains resulting from higher naphtha prices. Improved margins for aromatic products also contributed to profitability, supported by scheduled maintenance at regional paraxylene (PX) facilities and the partial resumption of benzene (BZ) exports outside the region.
- SK Enmove: Revenue of KRW 1.22 trillion, operating profit of KRW 188.5 billion. Operating profit increased by KRW 7.4 billion QoQ despite margin pressure resulting from rising oil prices, supported by inventory valuation gains.
- SK Incheon Petrochem: Revenue of KRW 3.02 trillion, operating profit of KRW 647.1 billion.
- SK Earthon: Revenue of KRW 117.7 billion, operating profit of KRW 64.7 billion. Operating profit increased by KRW 39.00 billion QoQ due to improved blended selling prices driven by higher oil and gas prices.
- SK On (Battery Business): Revenue of KRW 1.79 trillion, operating loss of KRW 349.2 billion. Operating loss improved by KRW 91.6 billion QoQ, supported by a slight increase in sales volumes in North America and recovering demand in Europe and Asia.
- SK On Trading International: Revenue of KRW 15.11 trillion, operating profit of KRW 15.6 billion.
- SK IE Technology: Revenue of KRW 35.90 billion, operating loss of KRW 73.20 billion.
- SK Innovation E&S: Revenue of KRW 3.7 trillion, operating profit of KRW 283.2 billion. Operating profit increased by KRW 165.2 billion QoQ, driven by higher city gas sales during the winter heating season and increased System Marginal Prices (SMP).
■ Q2 2026 Outlook
The refining business is expected to see continued volatility in oil prices and refining margins during the second quarter (Q2), depending on developments in the Middle East conflict and conditions surrounding transit through the Strait of Hormuz. The company plans to respond with flexible and optimized operations based on changing market conditions.
The petrochemical business is expected to see earnings improvement in Q2 from lagging effects, as rising feedstock costs are reflected in product prices with a delay. However, profitability may also become more volatile due to inventory effects if oil prices decline. The company plans to respond through strategic inventory operations and optimized marketing activities.
In the lubricants business, spreads are expected to improve despite uncertainty surrounding the Middle East conflict, supported by supply disruptions among competitors and feedstock supply issues. Amid growing concerns over supply stability driven by geopolitical risks, the company aims to maintain profitability based on its differentiated competitiveness supported by multiple production bases.
For the battery business, favorable conditions are expected due to strengthened European local production incentives and subsidies, as well as growing ESS demand in North America linked to AI data centers and clean energy initiatives. The company plans to improve mid- to long-term profitability by stabilizing operations at its European production bases and expanding ESS orders in North America.
Seo Kun-ki, Chief Financial Officer of SK Innovation, stated, “Volatility and uncertainty in the energy market have intensified more than ever amid expanding geopolitical risks. Even under rapidly changing business conditions, we will continue striving to secure stable profitability through optimized operations and the competitiveness of our business portfolio, while also fulfilling our responsibility to ensure the stable supply of petroleum products in Korea and maintain energy supply chains.”
[Attached]
1. SK Innovation quarterly earnings (based on K-IFRS) (Unit: KRW hundred million)
| Q1 2025 | Q4 2025 | Q1 2026 | YoY | QoQ | |
|---|---|---|---|---|---|
| Revenue | 210,261 | 196,713 | 242,121 | +31,859 | +45,408 |
| Operating income | -307 | 2,953 | 21,622 | +21,929 | +18,669 |
2. Q1 2026 performance by business (based on K-IFRS) (Unit: KRW hundred million)
| SK Energy | SK Geo Centric | SK Enmove | SK Incheon Petrochem | SK Earthon | |
|---|---|---|---|---|---|
| Revenue | 119,786 | 32,130 | 12,223 | 30,154 | 1,177 |
| Operating income | 12,832 | 1,275 | 1,885 | 6,471 | 647 |
| SK On (Battery) | SK On Trading International | SK IE Technology | SK Innovation E&S | Others* | Total |
|---|---|---|---|---|---|
| 17,912 | 151,092 | 359 | 36,961 | -159,672 | 242,121 |
| -3,492 | 156 | -732 | 2,832 | -252 | 21,622 |
