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SEOUL : SK Innovation Co Ltd, parent of battery maker SK On, said on Friday its battery business targets to turn a profit in the current quarter after it posted a forecast-beating operating profit in the third quarter, sending its shares soaring.
SK Innovation, also the owner of South Korea’s biggest oil refiner SK Energy, said it expects fourth quarter refining margins to remain strong amid low inventory levels, winter stockpiling and recovering China demand.
Operating profit jumped 122 per cent to 1.6 trillion won ($1.20 billion) for the third quarter ended in September.
That compared with 704 billion won in the same quarter last year and an average analyst forecast of 878 billion won compiled by LSEG SmartEstimate.
SK Innovation’s battery unit SK On, which supplies electric vehicle (EV) batteries to Ford Motor Co, Volkswagen AG and Hyundai Motor Co among others, accounted for about 16 per cent of the company’s revenue in the third quarter.
“EV demand growth in North America is expected to outpace EV supplies until 2035, but there has been a slight slowdown in EV growth in North America,” SK On Chief Financial Officer Kim Kyunghoon said in a post-earnings conference call.
Asked about weaker EV demand on the firm, SK On said the impact has been limited but there have been adjustments in its production output to respond to its customers’ EV sales.
“The company’s forecast about its battery unit turning profit in the current quarter and its operating profit coming in above market expectation sent shares soaring,” said Kim Chuljoong, an analyst at Mirae Asset Securities.
“While SK On is trying to turn a profit, the company is also being cautious about overall slowing EV demand sentiment, which could lead to order cuts from automakers,” Kim added.
SK On narrowed its operating loss to 86.1 billion won in the third quarter from 132 billion won in the previous quarter.
Ford Motor, one of SK On’s major customers, last week warned of cooling EV demand and said it would delay some of its planned investment in new EV and battery production capacity, joining a growing number of automakers and suppliers expressing caution about demand for EVs.
SK On said it was reviewing whether to delay production at its No.2 Kentucky joint factory with Ford, which was originally expected to start production in 2026.
Last week, SK On’s cross-town rival LG Energy Solution Ltd warned of slowing revenue growth in 2024 due to global economic uncertainties affecting the outlook for EV sales, joining a growing number of automakers and suppliers expressing caution about demand for EVs. There are concerns higher financing costs from a rise in interest rates and sputtering growth in major economies such as China and Europe will impact car buyers.
SK On has completed developing cheaper lithium iron phosphate (LFP) batteries and is in talks with various automaker customers about supply deals, CFO Kim added.
Shares in SK Innovation were trading 9.8 per cent in morning trade, versus the benchmark KOSPI’s 1.1 per cent rise.
($1 = 1,334.5600 won)
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