SK Innovation projects slower growth in global EV demand

SEOUL: South Korean energy group SK Innovation today forecast slowing growth in global electric vehicle (EV) demand, joining an increasing number of automakers and suppliers expressing concern about the market for EVs.

The owner of South Korea's biggest refiner SK Energy posted operating profit of 73 billion won (RM257mil) for the fourth quarter ended December, compared with a 765 billion won loss a year earlier.

The result was far below an average analyst forecast of 558 billion won profit compiled by LSEG SmartEstimate.

The company said its petrochemical business swung to a loss due to weaker refining margins and lower prices.

Fourth-quarter revenue rose 2.1% to 19.5 trillion won from the same period from year earlier.

SK Innovation said it had a capital spending budget of about 9 trillion won for this year, slightly down from about 10 trillion won last year, with more than 80% allocated for its battery business as it continues to ramp up production abroad.

While battery unit SK On narrowed its operating loss to 18.6 billion won in the fourth quarter from 86.1 billion won in the previous quarter, it missed its previously announced target to turn a profit in the fourth quarter, adding that it aims to reach a break-even point in the second half of this year.

"The overall battery shipment in the first half of this year would likely drop slightly, however, with automaker customers' launch of new EVs and lower interest rates supporting an increase battery shipments in the second half of the year," SK On chief financial officer Kim Kyunghoon said in a post-earnings conference call.

SK On's major customer Ford Motor Co last month said it would reduce production of its F-150 Lightning pickup truck as demand for EVs had been lower than expected.

In late January, SK On's cross-town rival LG Energy Solution forecast slowing growth in the EV market this year, signalling further challenges ahead amid intensifying competition from Chinese rivals.

SK, which has total refining capacity of 1.115 million barrels per day at its plants in Ulsan and Incheon, said it expects economic stimulus measures and firmer travel demand backed by the lunar New Year holiday in China to push up refining margins.

The oil major also said it will shut its 40,000 barrels per day (bpd) No. 1 and No. 2 vacuum residue desulphurisation (VRDS) units at the Ulsan refinery for maintenance in the first quarter of 2024.

The company, however, did not specify an exact time frame. A VRDS unit typically breaks down residue oil from the refinery's vacuum distillation unit into products such as low-sulphur fuel oil.

The time line is likely to be sometime from mid-March to mid-April for the first unit and end-March to early May for the second unit, said three trading sources.
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