■ Recorded KRW 12,300.5 billion for sales and KRW 618.5 billion for operating profits in Q3 2021

– Along with increase of the sales of batteries, increase in oil price and petrochemical products contributed to the continued increase in sales

■ Battery sales recorded a new high for the quarter as much as KRW 816.8 billion, accumulatively KRW 1,973.3 billion for 3 quarters, anticipating over KRW 3 trillion in annual sales.

■ Lubricants business hit new record with quarterly operating profit of KRW 329.3 billion

SK Innovation has announced that it achieved more than KRW 600 billion in operating profit in Q3 2021, reaching KRW 1,627.5 billion for accumulated operating profit for three quarters.

In Q3, the operating profit of lubricants business hit a new top high, which means new records have been set for two consecutive months. Meanwhile, refining business has recovered with KRW 112 billion improved QoQ. Also, sales in battery business recorded KRW 816.8 billion, a new high for the quarter, and gained accumulatively KRW 1,973.3 billion for three quarters. SK Innovation is anticipating that its battery sales will surpass KRW 3 trillion this year.

Through a (provisional) earnings disclosure for Q3 on 29^th, SK Innovation announced that its sales for Q3 2021 have increased from KRW 1.18 trillion in last quarter to KRW 12.300 trillion, due to amelioration of the oil price and the market condition for petro-chemical products, and the increase in battery sales.

The operating profit for Q3 was KRW 618.5 billion, an increase of KRW 672.2 billion YoY and KRW 112 billion QoQ. The earnings before tax recorded KRW 703.6 billion, reflecting the gains from sales from the liquidation of the SK Seorin Building and SK Energy’s gas stations.

SK Innovation’s accumulated in three quarter this year increased to KRW 32,659.9 billion from last year’s KRW 26,486.9 billion, while accumulated operating profit for the same periods turned to KRW 1,627.5 billion from the loss of KRW 2,325.4 billion in 2020. Operating profit has been increasing for three quarters in a row, and most likely to increase in Q4 as well.

Refining business’s operating profit is boosted by the improvement of the margins from oil products such as kerosene, diesel, etc. along with oil price rise and increased in KRW 57.5 billion from Q2 to KRW 290.6 billion. As the influence of Covid-19 is dwindling during Q4, the demand for oil products is expected to be recovered, which will lead to the big enhancement to the margin from the refining process.

Petrochemical business recorded KRW 84.4 billion in operating profit, which is KRW 83.5 billion less than that in Q2, due to the decrease in the margins caused by price spread drop for petrochemical products, such as PX, the increase of the power cost due to the increase of the oil price, etc.

Lubricants business’ operation profit increased by KRW 102.8 billion from the previous quarter to KRW 329.3 billion due to the increased margin from better market condition and expanded sales in markets in the US and Europe. This is the highest record for quarterly operating profit for the company since it officially became a subsidiary company of SK Innovation in 2009. The business is breaking the record every quarter this year and this trend is expected to be continued for Q4, leading to the anticipation of the new highest annual record.

E&P business recorded KRW 16.4 billion for its operating profit, increased in KRW 12.8 billion from Q2, thanks to the oil price rise, increased sales volume, and decrease of the SG&A fee.

Battery business’ sales literally shows a skyrocketing growth. Thanks to the increased rate of operation in the factories in Yancheng and Huizhou, China, which begun mass production H1 this year, the sales in Q3 2021 was KRW 816.8 billion, increased by KRW 186.6 billion compared to that in Q2 and by 68% YoY (from KRW 486 billion).

As mentioned earlier, the annual sales of Battery business are anticipated to go beyond KRW 3 trillion, due to several issues including instability in the supply of the automotive semiconductors. Next year, when the first plant in the U.S. and the second plan in Europe will begin mass production, the growth is expected to go up even more drastically, recording mid-6 trillion KRW.

The sales increased along with the gross profit margin ratio, while other costs including the R&D increased, so the overall business loss in battery business decreased to KRW 98.7 billion, KRW 800 million less than Q2.

Despite the production in the LiBS factory in China was stabilized, the operating profit in material business decreased to KRW 40.1 billion, down KRW 1.3 billion compared to the previous quarter, due to the diminished demands for small batteries for smartphones in the Chinese market.

CEO of SK Innovation Kim Jun said, “As the performance of the entire company is largely being improved thanks to the synergy from the balanced portfolio among all the subsidiaries, SK Innovation’s initiative toward the Financial Story will be accelerated as well.” “Through a massive drive for the transition to green business, SK Innovation will achieve a big reap, growing the company value to please all the stakeholders,” he continued.

[Attached]

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

(Unit: KRW hundred million)

2. 2021 Q3 annual earnings by business (based on K-IFRS)

(Unit: KRW hundred million)

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

(**) SKI-related internal transactions excluded, different from SKIET’s disclosure result|

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