■The battery business set a new annual revenue record of 1.6 trillion KRW for the first time in 2020

■The company recorded revenue of 7.6776 trillion KRW and operating loss of 243.4 billion KRW in the 4^th quarter of 2020

• Annual revenue and operating loss in 2020 were 34.1645 trillion KRW and 2.5688 KRW respectively

■2021 is the first year the company promotes growth based on its financial story while accelerating its green initiative for change

On January 29, SK Innovation said its battery business set a new revenue record, which has surpassed a trillion Korean KRW for the first time in its announcement of financial results for last year, despite decline in its other key business areas due to the impact of COVID-19. SK Innovation’s battery business revenue last year was 1.61 trillion KRW, more than doubling from the previous year’s revenue of 690.3 billion KRW.

SK Innovation recorded sales of 7.6776 trillion KRW and operating loss of 243.4 billion KRW in the 4^th quarter of 2020. The battery business also recorded its highest quarterly revenue of 479.2 billion KRW. Annual sales were 34.1645 trillion KRW and operating loss were 2.5688 trillion KRW.

SK Innovation’s battery business is expected to continue to grow as its factories at Yancheng and Huizhou in China with an additional 20GWh production are in full operation this year, bringing up the total capacity to 40Gwh, which is 4 times larger compared to capacity at the end of 2019.

<Financial results of the 4^th quarter of 2020>

The revenue and operating profit/loss of each business in the 4^th quarter last year are as follows: ▲ refining: sales 4.7692 trillion KRW, operating loss 192.5 billion KRW; ▲ petrochemical: sales 1.6194 trillion KRW, operating loss 46.2 billion KRW; ▲ lubricants: sales 652 billion KRW, operating profit 125.3 billion KRW ▲ E&P: sales 14 billion KRW, operating profit 1.6 billion KRW.

▲ Battery business recorded sales of 497.2 billion KRW, 2.2 times higher than the same period last year (225 billion KRW). However, despite the continuous improvement in profitability, it recorded an operating loss of 108.9 billion KRW due to the initial cost of overseas factories

▲ Material business decreased by 4.6 billion KRW to 25.3 billion KRW compared to the previous quarter, despite increased sales of LiBS (lithium-ion battery separator), due to the falling exchange rate and the burden of initial fixed costs of new equipment in its Chinese plants.

<Financial results of 2020>

The annual revenue and operating loss/profit of each business in 2020 are as follows: ▲ refining: sales 22.6379 trillion KRW, operating loss 2.2228 billion KRW; ▲ petrochemical: sales 7.541 trillion KRW, operating loss 121.2 billion KRW; ▲ lubricants: sales 2.3713 billion KRW, operating profit 262.2 billion KRW; ▲ E&P: sales 59.3 billion KRW, operating profit 4.8 billion KRW; ▲battery: sales 1.6102 trillion KRW, operating loss 426.5 billion KRW; ▲ material: operating profit 125.9 billion KRW.

<Battery and material business>

SK Innovation’s battery business is leading the company’s green growth. It is on a full-fledged growth track with annual sales of 1.61 trillion KRW, an increase of 919.9 billion KRW from the previous year’s annual sales (690.3 billion KRW).

Battery sales increased sharply due to stable operation of the first plant in Hungary and Changzhou plant in China, which began mass production in 2020. The early stabilization of overseas factories helped the company’s battery sales increase and improve profitability.

SK Innovation’s battery plants in Yancheng and Huizhou are scheduled to start mass production in the first quarter of 2021, which is expected to improve financial results of the company greatly in the future. Besides, the second battery plant with capacity of 9.8GWh and the third plant in Hungary will begin their mass production in the first quarter of 2022 and the first quarter of 2024 respectively. In Georgia, the U.S., SK Innovation’s first battery plant with capacity of 9.8GWh and the second plant with capacity of 11.7GWh will start mass producing in the first quarter of 2022 and the first quarter of 2023 respectively.

SK Innovation is targeting to have annual battery production capacity of 85GWh by 2023 and 125GWh by 2025. The company decided to increase the annual capacity by more than 25GWh by 2025 compared to its original target of 100GWh, making aggressive investments in the business to keep up with rapid growth of EVs.

The material business has been expanding its separators facilities as well. Currently, the 530 million m² plant in Cheongju and Jeungpyeong, Korea and the 340 million m² plant in China have been operating since the end of last year and providing annual production capacity of 870 million m². When overseas factories such as China and Poland’s are put into operation sequentially, the total capacity is expected to reach 1.37 billion m² by the end of this year and 1.87 billion m² by 2023.

Meanwhile, SK Innovation decided not to pay dividends in 2020 due to decreased financial results brought by COVID-19 and increased investments in its new business. Still, the company said it is developing a plan to return to its shareholders in the mid- and long-term based on its business performance and corporate values created by its new business since shareholder value is of prime importance for the management of the company.

“Facing unprecedented business environment due to COVID-19, SK Innovation’s business performance showed substantial outcomes resulted from its new business for growth,” said President & CEO of SK Innovation Kim Jun. “This year is the first year to begin the company’s financial story and we are also focused on adopting green business models in our existing business as well as new business while promoting breakthrough innovation,” he added.

[Attached]

1. SK Innovation quarterly financial results (based on K-IFRS)

(Unit: KRW hundred million)

2. 2020 annual financial results by business (based on K-IFRS)

(Unit: KRW hundred million)

(*) Refining: SKE, SKTI, and SKIPC’s refining businesses / Petrochem: SKGC and SKIPC’s petrochemical businesses

(**) Including batteries, I/E and staff overhead