| SK Innovation's operating profit |
By Nam Hyun-woo
SK Innovation said Wednesday it will expand its electric vehicle (EV) battery production capacity to 100 gigawatt-hours by 2025, adding it intends to make further investments in the business.
"We launched the commercial operation of battery plants in Hungary and Changzhou this year, and this will raise our annual battery production capacity to 20 gigawatt-hours," the company said during a conference call about its second-quarter earnings.
"In 2023, the capacity will grow to 71 gigawatt-hours upon the completion of the second Hungarian plant and two plants in the U.S. And we plan to increase the number to 100 gigawatt-hours by 2025, and will update investors when we fix our investment plan."
The refining, chemical and battery company projected an optimistic plan to enhance its battery business, but it did not made an upward revision to its battery sales target for this year, maintaining a 1.8 trillion won ($1.5 billion) target.
Earlier this year, SK Innovation set its EV battery sales target for this year at 2 trillion won, but quickly downgraded it to 1.8 trillion won at the end of the first quarter, citing global carmakers' operational shutdowns in the wake of the COVID-19 pandemic. Though the majority of carmakers resumed operations in the second quarter, the company retained a cautious stance.
The company's battery business logged a 113.8 billion won operating loss in the second quarter, expanded from 104.9 billion won from January to March. SK Innovation said the sales volume has increased from the previous quarter but the increase in one-off costs for stabilizing overseas battery plants contributed to the loss.
Following an improved financial standing for additional investments in the battery business, the company said it will launch the initial public offering (IPO) of its subsidiary SK IE Technology (SKIET) in the first half of next year.
Spun off from SK Innovation in April last year, SKIET makes lithium-ion battery separators and flexible covers that replace the glass in displays. Given soaring global battery demand, the IPO is anticipated to be valued highly. The company said it has yet to set a share price or a target for the amount it is seeking to raise, but expressed hopes that "the IPO will help improve the financial standing of the company."
The company added that it expects to claim the sale price of its stakes in two Peruvian gas fields later this year, and this will also improve its financial prudence.
The earnings in the battery business is expected to improve in the fourth quarter of this year, when the company begins delivering EV batteries for Hyundai Motor's new EV platform, Electric-Global Modular Platform (E-GMP).
Hyundai Motor is developing E-GMP as the general basis of its EVs which will debut next year. The first vehicle based on this is expected to be a crossover known as NE.
Over its ongoing patent suit against LG Chem at the U.S. International Trade Commission, however, SK Innovation did not elaborate, saying it will spare no efforts to draw out the best outcome.
In its refining business, the company anticipated improvements in the second half of this year, as the global economy is recovering gradually from the pandemic to ramp up demand for petroleum products.
"The overall market condition remained hostile in the second quarter, but OPEC+'s continued production cuts resulted in a drop in original selling prices of Middle East Crude," the company said. "The refining margin for the second half of this year is anticipated to improve following economic boost policies across the world."
In the second quarter, SK Innovation posted 7.2 trillion won in sales, down 44.71 percent from a year earlier. Its operating loss stood at 439.7 billion won, down from 497.5 billion won a year earlier. The operating loss in the second quarter was narrowed from its 1.78 trillion won loss in the first quarter.
Citing its losses, the company said it will not pay interim dividends to shareholders this year.