SEOUL (Reuters) -SK Innovation Co Ltd, owner of South Korea’s biggest oil refiner SK Energy, swung to an unexpected operating loss in the first quarter on weaker oil prices, but forecast a recovery in refining margins in the second quarter.
The company posted an operating loss of 45 billion won ($32 million) for the quarter ending March 31, sharply lower than the 625 billion won profit it registered a year ago.
Analysts had estimated a profit of 393 billion won, according to LSEG SmartEstimate.
“Operating income declined despite improved earnings from the battery business, due to weaker international oil prices and refining margins,” SK Innovation said in a statement.
Operating profit from its refining business declined from the previous quarter due to concerns over a global economic slowdown, an easing of OPEC+ production cuts, and increased output in Africa and the Middle East.
The company said it expects refining margins to improve in the second quarter with the start of the driving season and increased cooling demand heading into summer.
Battery subsidiary SK On, which supplies automakers like Hyundai Motor, Kia Corp, Ford Motor, and Volkswagen, recorded an operating loss of 299 billion won, narrower than a loss of 332 billion won a year earlier.
“The battery business is expected to see increased sales in North America from the second quarter, with sustained growth throughout the year,” SK Innovation said, with its battery production output and sales volume in the U.S. expected to significantly improve this year.
When asked about U.S. tariffs, SK On said it expects to see some benefit from operating battery factories in the United States, but said there could be some short-term cost impact as tariffs could affect the entire battery supply chain.
“We are currently reviewing raw material sourcing options for anode materials from regions outside of China, given the high dependence on Chinese supply,” SK On Chief Financial Officer Kim Kyunghoon said in a post-earnings conference call.
SK On’s rival LG Energy Solution said earlier on Wednesday it expected lower revenue in the second quarter ending June partly due to the uncertainty from U.S.-driven tariff policies.
While SK On has been expanding its customer base, announcing supply deals with Nissan and Slate, analysts said its performance could be affected by major customer Kia’s recent decision to cut its EV sales target.
SK Innovation’s first-quarter revenue rose 12.2% year-on-year to 21.1 trillion won.
Shares in SK Innovation closed 2.5% lower ahead of the earnings announcement, underperforming the benchmark KOSPI index which rose 6.6%. The shares have dropped 15.7% year-to-date.
($1 = 1,420.6900 won)
(Reporting by Heekyong Yang and Joyce Lee; Editing by Christian Schmollinger, Mark Potter, Rachna Uppal and Kate Mayberry)
By Heekyong Yang and Joyce Lee
