Seoul: SK Innovation reported a 77.3 per cent on-year drop in the first-quarter operating profit due mainly to falling oil prices, while forecasting improvement in profitability for its loss-making battery unit after the second quarter upon US tax benefits.
Operating income came to 374.9 billion won ($283.2 million) for the January-March period, compared with 1.65 trillion won the previous year, the refinery unit under South Korea's SK Group said in a filing.
Revenue rose 17.7 per cent on-year to 19.1 trillion won. It turned to a net loss of 52 billion won from 863.3 billion won a year ago, reports Yonhap news agency.
The first-quarter profit, however, represents an on-quarter turnaround from the operating loss of 764.9 billion won in the fourth quarter of last year, boosted by strong performances in the refinery segment, which takes up more than 80 percent of the company's business portfolio.
"We turned to the green due to stable sales growth and improved operating profit in the petroleum and chemical businesses," SK Innovation said. "The battery sector has achieved the largest quarterly sales, continuing to improve its profitability."
The refinery unit booked 274.8 billion won in operating profit, a 936 billion-won jump from the previous quarter.
The chemical business, in a push for a pivot to plastic recycling, generated 108.9 billion won in operating income, up by 197.3 billion won from three months ago.
SK On Co, its battery split-off, posted the largest quarterly revenue of 3.3 trillion won in the first quarter, up 429.7 billion won from the previous quarter, boosted by the ramped-up production after its second factory in Georgia began operations late last year.
"We expect additional improvement in profitability once we reflect AMPC benefits in the second quarter, in which the benefits from that during the first quarter will also be reflected retroactively," SK On CFO Kim Kyung-hun said in an earnings call.
AMPC refers to the Advanced Manufacturing Production Credit, or tax credits eligible companies can receive under the Inflation Reduction Act (IRA).
The IRA gives up to $7,500 in tax credit and subsidies to electric vehicles that were assembled in North America, and made with minerals mined and processed in the U.S., or countries or regions that have free trade agreements with Washington.
SK Innovation said it expects a solid refining margin for the second quarter due to China's reopening and the summer driving season.