■ Recorded a KRW 9.2398 trillion in revenue, KRW 502.5 billion in operating profit

– Made a turnaround due to margin rise in petrochemical products and inventory-related profits from rise in oil prices

■ Sales in battery business recorded KRW 526.3 billion, up about 80% from the previous year due to increase in sales volume

■ “SK Innovation will focus on strengthening our core competitive power to evolve into a Green Energy & Materials Company through green-centered, full-scale, fundamental innovation.”

SK Innovation reported its earnings for the first quarter of 2021 on the 13^th.

SK Innovation announced that its sales in the first quarter of 2021 reached KRW 9239.8 billion, up KRW 1562.2 billion from the previous quarter, due to a rise in oil prices and prices of petrochemical products.

The company has made a successful turnaround, recording an operating profit of KRW 502.5 billion in the first quarter, up KRW 2317.9 billion from the same period last year year, and up KRW 745.9 billion from Q4 2020.

However, its pre-tax profit recorded a loss of KRW 527.6 billion. This is attributable to non-operating losses of KRW 1030.1 trillion, including exchange rate losses and l the battery-related dispute settlement.

<2021 Q1 earnings by business>

Refining business recorded an operating profit of KRW 416.1 billion, up KRW 608.6 billion from the previous quarter, as refining margins improved significantly due to supply disruptions caused by the U.S. cold wave and inventory-related profits increased due to the rise in oil prices.

Petrochemical business recorded an operating profit of KRW 118.3 billion, up KRW 164.5 billion from the previous quarter, due to improved spreads of aromatic products such as PX and benzene, a rise in sales volume due to the completion of regular maintenance in the previous quarter, and inventory-related profits.

Despite the decline in sales volume as shipments declined due to the global supply disruptions caused by the U.S. cold wave, the lubricants business recorded an operating profit of KRW 137.1 billion, up KRW 11.8 billion from the previous quarter, due to inventory-related profit from the rise in oil prices.

E&P business recorded an operating profit of KRW 11.3 billion, up KRW 9.7 billion from the previous quarter, due to a rise in sales volume and sales unit price.

Battery business recorded a sales of KRW 526.3 billion, up about 80% from the previous year (KRW 288.8 billion), due to a rise in sales volume. Operating losses recorded KRW 176.7 billion, up KRW 67.8 billion from the previous quarter, due to the rise in the initial cost of overseas plants.

The material business recorded an operating profit of KRW 31.7 billion, up KRW 6.4 billion from the previous quarter, due to cost reductions from increased productivity in the lithium-ion battery separator (LiBS) China plant and a decline in raw material costs.

<Battery business and material business>

After showing robust growth following 2019, the battery business, the leading player in SK Innovation’s eco-friendly growth, is setting new sales records each quarter.

Along with the Plant 1 in Hungary and the Changzhou plant in China, which began mass production in 2020, other SK Innovation’s EV battery plants that are under construction include Plant 2 in Hungary, and Plant 1, Plant 2 in Georgia, the U.S. A significant rise in earnings is expected as the Yancheng and Huizhou plants in China began mass production in the first quarter of this year and thereby sales will increase.

With the rapid growth of electric vehicles, SK Innovation plans to make aggressive investments in battery business, aiming to reach an annually total production capacity of over 85GWh by 2023, and over 125GWh by 2025.

The material business is continuously pushing the expansion of lithium-ion battery separator (LiBS) facilities. The company’s LiBS production capacity is expected to increase from 860 million m² per year as of last year’s end to 1.36 billion m² by the end of this year. In the second quarter of this year, additional expansion of the plant in China will be completed, and mass production of the new line will follow. Besides, mass production at the plant in Poland will begin in the third quarter.

As more overseas plants start operating in sequence, the company’s production capacity of LiBS is expected to increase to a total of 2.73 billion m² by 2024, including 520 million m² in Korea, 670 million m² in China, and 1.54 billion m² in Poland.

CEO of SK Innovation Kim Jun said, “As the business environment is gradually recovering from the pandemic, we are seeing an improvement in our main businesses such as the petrochemical business. Simultaneously, new businesses such as the battery and material businesses are continuously showing growth. We will focus on strengthening our core competitive power to evolve into a Green Energy & Materials Company through green-centered, full-scale, fundamental innovation.”

[Attached]

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

(Unit: KRW hundred million)

2. 2021 Q1 annual earnings by business (based on K-IFRS)

(Unit: KRW hundred million)

(*)Refining: SKE, SKTI, SKIPC refining business/ petrochemical: SKGC, SKIPC petrochemical business

(**)Battery business, E&P business, and staff expenses included