SK Innovation has decided to slow down its investments in the battery sector, following LG Energy Solution and POSCO Future M, both of which also postponed their investments amid decelerating global demand for electric vehicles (EVs), the oil refiner said Monday.

The decision came as SK Innovation's battery unit, SK On, recorded a 331.5 billion won ($241 million) operating loss during the first quarter, after an 18.6 billion won loss during the previous quarter. Its revenue also dropped 49 percent year-on-year to 1.68 trillion won due to falling sales volume and price.

The overall revenue of SK Innovation fell 1.5 percent year-on-year to 18.9 trillion won, but its operating profit rose 67 percent to 624.7 billion won, thanks to the rising refining margin after the global oil price hike.

"Because we will flexibly adjust the timing of increasing our facilities in Europe and China to cope with an unfavorable business environment, we anticipate improvement in (the battery unit's) profitability," SK Innovation Chief Financial Officer (CFO) Kim Jin-won said during a conference call on first-quarter earnings.

In particular, SK On delayed the start of its third Hungarian factory's operation to the second quarter from the first quarter. The battery firm also lowered an outlook on its overall production capacity.

SK On's third Hungarian factory is seen under construction in Ivancsa in this July 2023 file photo. Screenshot from SK On Hungary's Facebook

During the conference call, SK Innovation also confirmed the ongoing rebalancing of its business portfolio, although it did not disclose details about its plan. It was presumed the refiner would merge SK On and its lubricant unit, SK Enmove, to list the entity on the stock market.

"We are trying to gain momentum for growth by sorting out businesses we should focus on," Kim said.

SK Innovation also remained optimistic about the goal of making its first-ever quarterly operating profit from its battery business during the second half of this year, despite SK On's worsening profitability.

"We expect an improvement in market conditions due to an increase in advanced manufacturing production credit following sales growth in the U.S. and the release of new EVs," SK On CFO Kim Kyung-hun said.

In response to concerns about possible setbacks in crude supply amid conflicts in the Middle East, SK Innovation said there is a slim chance of a blockade on the Strait of Hormuz, considering similar geopolitical risks in the past.

"Even if the strait is blocked, we can detour to another route to ship crude oil," the SK Innovation CFO said.

Regarding S&P Global's decision last month to lower the credit ratings of SK Innovation and its petrochemical unit, SK Geo Centric, to "BB+" from "BBB-," the company said the downgrades will have a limited impact, as its subsidiaries have raised money in the domestic market.