■ Financial results were impacted by inventory losses due to declines in oil prices and exchange rates.
■ Battery Business achieved a record high of KRW 273.4 billion in AMPC, with operating profit improving by KRW 233 billion compared to Q2.
■ SK Innovation continues rebalancing efforts, including the merger of SK On and SK Enmove, which are aimed at securing a stable financial structure and creating synergies in electrification.
SK On, the integrated battery business under SK Innovation, has transitioned to profitability. Despite uncertainties surrounding U.S. policy, SK On has proactively addressed American demand, leading to a significant improvement in operating profit. The company plans to focus on enhancing profitability through operational efficiencies moving forward.
In its financial results for the second quarter of 2025, announced on the 31st, SK Innovation reported revenues of KRW 19.31 trillion and an operating loss of KRW 417.6 billion. Compared to the previous quarter (QoQ), revenue decreased by KRW 1.84 trillion, and operating profit declined by KRW 373 billion. SK Innovation noted that this decrease was due to challenging external factors, including global economic uncertainty, tariff impacts, and declining oil prices. However, the battery business saw a marked improvement in operating profit, driven by increased production rates at North American facilities and recording the largest-ever Advanced Manufacturing Production Credit (AMPC).
Looking ahead to the third quarter, SK Innovation anticipates further improvement in refining margins, reduction in oil tariff pressures, and increased sales volumes in its battery business in Europe to positively impact performance.
Following the board’s resolution on July 30th to merge SK On and SK Enmove and raising significant capital, SK Innovation announced its “Corporate Value Enhancement Strategy.” The merged entity aims to secure future growth drivers centered on electrification and anticipates generating an additional EBITDA of over KRW 200 billion by 2030.
SK Innovation is also committed to reducing net debt through proactive financial structure improvements, such as the securitization of non-core assets, and aims to secure a total of KRW 8 trillion in capital this year with a target of achieving KRW 20 trillion in EBITDA by 2030.
Notably, SK Earthon, the energy exploration and production (E&P) subsidiary of SK Innovation, has confirmed additional crude oil reserves in the Vietnam 15-1/05 block, with production expected in the second half of next year. Additionally, SK Earthon has successfully secured two promising blocks in Indonesia, located near Java Island and the Maluku Islands, with plans for ongoing exploration and evaluation.
Q2 2025 Business Performance by Segment
• Refining business: Revenue of KRW 11.12 trillion, operating loss of KRW 466.3 billion. The business faced increased market volatility due to U.S. tariff policies and OPEC+ production adjustments. Despite recovering refining margins, operating profit decreased by KRW 502.6 billion QoQ due to inventory valuation losses from declining oil prices and exchange rates. The company plans to gradually increase operating rates in anticipation of improved refining margins due to reduced regional and global supply.
• Petrochemical business: Revenue of KRW 2.27 trillion, operating loss of KRW 118.6 billion. Although olefin spreads improved due to falling naphtha prices, the business was impacted by a decline in benzene spreads and regular maintenance at the paraxylene plant, resulting in a KRW 4.3 billion decrease in operating profit QoQ.
• Lubricants business: Revenue of KRW 893.8 billion, operating profit of KRW 134.6 billion. The business experienced a KRW 13.2 billion increase in operating profit QoQ, driven by stable sales prices and cost reductions from falling oil prices.
• E&P business: Revenue of KRW 341.7 billion, operating profit of KRW 109 billion. The business saw a KRW 11.4 billion decrease in operating profit QoQ as a result of declining oil and gas prices.
• Battery business: Revenue of KRW 2.11 trillion, operating loss of KRW 66.4 billion. Revenue increased by 31% QoQ, enabled by improved production rates at U.S. and European plants and increased sales volumes. Operating profit improved by KRW 233 billion, with the integrated SK On entity achieving a quarterly profit of KRW 60.9 billion for the first time post-merger. The AMPC under the U.S. Inflation Reduction Act for Q2 increased by 60% QoQ, reaching KRW 273.4 billion. This record high was achieved by timely responding to rising demand from U.S. clients.
• Materials Business: Revenue of KRW 19.5 billion, operating loss of KRW 53.7 billion. The business improved its operating loss by KRW 1.1 billion QoQ thanks to expanded sales of products for electric vehicles (EVs) and energy storage systems (ESS) to major clients.
• SK Innovation E&S: Revenue of KRW 2.55 trillion, operating profit of KRW 115 billion. Reduced sales volumes during the city gas off-season and power plant maintenance in May contributed to a KRW 78.1 billion decrease in operating profit compared to the previous quarter.
Q3 2025 Outlook
The refining business is expected to see continued recovery in refining margins due to increased demand for petroleum products in the summer and regional supply shortages.
In the petrochemical business, the spread improvement is expected to be limited due to the entry into the polyester off-season and increased benzene supply. The olefin sector is also expected to continue weak spreads owing to reduced downstream demand in the region, but the company plans to focus on profitability improvement through optimal facility operation and operational efficiency.
The lubricants business anticipates stable profitability with increased demand driven by the holiday driving season and stockpiling in anticipation of hurricanes. This is expected to counterbalance the increase in supply following the completion of regular maintenance by major suppliers.
As for E&P business, following the confirmation of additional crude oil reserves in the Vietnam 15-1/05 block in May, the company plans to continue evaluating business potential through the drilling of three appraisal wells in the Vietnam 15-2/17 block, beginning in the third quarter.
In the battery business, conservative inventory management by clients is expected due to tariff and policy uncertainties in the U.S. market. SK On plans to focus on defending profitability through operational efficiencies based on its manufacturing capabilities in the U.S. In Europe, the company aims to enhance profitability by increasing production rates in response to rapidly growing demand from key clients.
The materials business expects gradual performance improvement by increasing the proportion of sales in North America and expanding efforts to grow its ESS client base.
SK Innovation E&S plans to improve operating profit by maximizing power plant operating rates, considering the trend of high SMP during the summer season.
Seo Kun-ki, CFO (Head of Finance Division) of SK Innovation, commented, “SK Innovation is proactively pursuing business structure reorganization centered on electrification and financial structure stabilization to enhance global market competitiveness. We will continue to enhance portfolio rebalancing execution to secure profitability and growth, contributing to corporate value enhancement.”
[Attached]
1. SK Innovaion quarterly earnings (based on K-IFRS) (Unit: KRW hundred million)
| Q2 2024 | Q1 2025 | Q2 2025 | YoY | QoQ | |
|---|---|---|---|---|---|
| Revenue | 187,991 | 211,466 | 193,066 | +5,075 | -18,400 |
| Operating income | -458 | -446 | -4,176 | -3,718 | -3,730 |
2. 2025 Q2 performance by business (based on K-IFRS) (Unit: KRW hundred million)
| Refining* | Petrochem* | Lubricants | E&P | Battery | Materials** | E&S | Staff | Total | |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 111,187 | 22,686 | 8,938 | 3,417 | 21,077 | 195 | 25,453 | 113 | 193,066 |
| Operating income | -4,663 | -1,186 | 1,346 | 1,090 | -664 | -537 | 1,150 | -712 | -4,176 |
(**) Materials: Based on consolidated financial statements of SK Innovation, which removed internal transactions of SK Innovation affiliates
