Good morning. We will now start SK Innovation's earnings conference call. Good morning. I am Jung So-young from the IR team at SK Innovation. Thank you for joining the company's fourth quarter 2024 earnings presentation. I have with me SK Innovation CFO Seo Geun-ki, Head of Corporate Finance Planning Office , Park Il-hak and members of management from each business subsidiary on this call with us today. For the agenda today, CFO Seo Geun-ki will first run through the company-wide business results for the fourth quarter of 2024, followed by presentations from the officers of each business division, after which we will have a Q&A session. Please note that the earnings that we are presenting today have yet to be audited by the external auditor and thus are subject to change upon the review. With that, let me invite CFO Seo Geun-ki to present the fourth quarter performance. Good morning.
This is Seo Geun-ki, and I am the new CFO of SK Innovation. Allow me, by starting to thank you, the shareholders, investors, and analysts for your continued interest in the company. And I will begin with the highlights of the fourth quarter 2024 business performance. First, on November 1st of last year, the merger between SK Innovation and SK E&S was successfully completed, and SK E&S was included in SK Innovation's consolidated financials from the fourth quarter of 2024. We expect the business environment in 2025 to be uncertain, but based on the full energy value chain that has been created and by accelerating synergies, we will continue to strive to become a leading energy company in the global market. Second, SK Earthon, last January, confirmed oil presence in the Vietnam Block 15-2/17 . The company has 25% ownership in this block and has participated in the exploration since 2019.
It is located adjacent to Block 15-1, which represents the second highest accumulative crude oil production historically in Vietnam, and thus we assess a high potential for development. In addition to the Block 15-2/17 in Vietnam, the company is engaged in a multiple number of exploration and development projects, including the Vietnam Block 16-2 and Malaysia Block 427, which we expect to lead to revenue and profit growth in the future. Lastly, at the BOD yesterday, the board decided on a dividend of ₩2,001 per share. This dividend will be finalized upon approval from the shareholders at the GSM planned for March. Through this merger with SK E&S, the company has been able to create a stable financial structure, and by strengthening its business competitiveness, will continue to enhance shareholder returns in the future. This concludes my overview on the business highlights.
Now, let me move on to the fourth quarter performance of our business in more detail. To discuss the top line for the fourth quarter, the refinery business revenue declined on the back of cheaper oil purchases, but upon the merger with SK E&S, its performance was included from November, leading to full company revenue increasing by KRW 1,748.7 billion quarter over quarter to KRW 19,405.7 billion. On operating income, contribution from the petrochemical and lubricant business declined, but an improvement in refining margins for the refinery business and the inclusion of SK E&S led to operating profit increasing KRW 583.2 billion quarter over quarter to KRW 159.9 billion. On the non-operating side, due to factors including the strong dollar resulting in FX-related losses, non-operating income declined KRW 994.3 billion quarter over quarter to a loss of KRW 1,300.6 billion.
In detail, FX-related losses were KRW 330.8 billion, product derivative losses KRW 23.7 billion, net interest expenses KRW 342.5 billion, equity method losses KRW 185.9 billion, and other expenses KRW 417.6 billion. Next, let me discuss our financials. As of the fourth quarter of 2024 end, total assets stood at KRW 110.6 trillion. Due to the new factories constructed for the battery business, tangible assets and intangible assets increased KRW 21.6 trillion versus the end of last year. Liabilities were KRW 70.7 trillion, and as CapEx increased, borrowings increased by around KRW 15.7 trillion.
The debt equity ratio was less by 8% versus the end of 2023 at 177%. Next, we will present the fourth quarter performance by business line. The performance and outlook for each area will be presented by management from the respective businesses. First, the refinery business and SK Energy's Head of Strategy Business Operation, Choo Yong-gyu, will give the presentation.
Yes, good morning. This is Choo Yong-gyu, Head of Strategy Business Operation at SK Energy. Let me go over the petroleum business. In the fourth quarter, crude prices showed volatility due to challenges in the global political landscape, but a recovery in refining margins and a strong dollar led to operating profit increasing KRW 595 billion quarter over quarter to KRW 342.4 billion. To elaborate a bit more, due to the Israeli-Iran conflict in October, oil prices increased in the beginning of the fourth quarter, but during the quarter, price dampening factors such as Trump's election win and dwindling expectations on China economic stimulation measures, mixed with price supporting factors such as the OPEC announcement to extend production cuts, resulted in price fluctuation until December.
On the product side, in early fourth quarter, inventory fell and low refining margins drove refineries to lower utilization, which adjusted supply, leading to much higher product crack levels, but weaker demand for petroleum products driven by China created a slightly weaker market in December. In total, though crude prices were volatile, a recovery in the product market coupled with a weaker one resulted in higher refining margins and inventory gains during the fourth quarter, leading to better operating profits quarter over quarter. Next, let me discuss the market outlook for the first quarter. Oil prices trend to be influenced by uncertainty on Trump 2.0 tariffs and energy policies, but Russia regulations and strong measures from OPEC to support prices are expected. Thus, oil prices are expected to be at the high $70 range until March.
In addition, as economic uncertainties continue, utilization rates are expected to remain conservative, which will somewhat limit production supply, but the seasonal demand is expected to be weak. In support, first quarter refining margins are expected to be flat to maybe slightly weaker than the fourth quarter. However, in light of the high market volatility due to the U.S. tariff policy on Canadian and Mexican crude oil, the company is planning to flexibly adjust run rates according to refining margin and market outlook and increase the import of extra heavy oil to flexibly address market changes. Next, on the petrochemical business, Kim Yong-soo, Head of Planning Office from SK Geocentric, will present.
This is Kim Yong-soo, Head of Planning Office of SK Geocentric, and let me discuss the petrochemical business.
The oil sales volume increased, spreads for key aromatic products weakened, leading to an operating loss of KRW 84.2 billion this quarter. Next, let me discuss the 2025 market outlook for our core products. For aromatics in 2025, there are positive factors such as a decrease in global PX capacity additions and expectations for stronger demand due to new PTA capacity going online. However, also negative factors such as concerns about an economic slowdown in key economies around the globe. So, as a result, we expect aromatic spread improvement to be limited. On the olefin side, supply and demand dynamics within the region had yet to improve, so we expect spread to remain at current levels.
Against this unfavorable business backdrop, the petrochemical business will continue to strengthen its business competitiveness by focusing on sustainable profitability, securing its financial profile, and securing a competitive edge in terms of cost and quality versus peers. Next, the head of corporate planning and development office at SK Enmove, Kim Mi-kyung, will go over the fourth quarter lubricants business.
I'm Kim Mi-kyung, head of corporate planning and development office at SK Enmove, and I will present on the lubricant business. Given that the fourth quarter is a seasonal off-peak period, the lubricants business saw its margin decline due to weaker sales prices. As a result, they recorded operating profit of KRW 139.5 billion, down by KRW 34.9 billion QOQ. In 2025, although some global capacity expansions are scheduled, steady demand for the group three products that we focus on is expected to continue.
Considering our strong position in the market, we anticipate maintaining stable profitability in 2025. Thank you very much. Next, I invite SK Earthon's Head of Planning and Support Office, Kim Gyeong-joon, to present on Q4 E&P business results.
Good morning. I am Kim Gyeong-joon, head of planning and support at SK Earthon. I will walk you through the E&P business. Despite the decline in oil prices in Q4, the E&P business recorded a solid operating profit of KRW 145.8 billion, up KRW 14.7 billion QOQ, driven by rising exchange rates, higher gas prices, and increased sales volume from the Peruvian blocks. In addition, we have recently confirmed the presence of oil in the Vietnam 15-2/17 exploration block in which we are involved and successfully completed test production.
This discovery, following the successful exploration well in the 16-2 block in 2023, represents a consecutive exploration success, greatly enhancing the potential of the Cuu Long Basin blocks we hold in Vietnam. We plan to proceed with full-scale development after confirming the reserve results through evaluation work such as appraisal well drilling. Next, CFO Kim Kyung-hoon of SK On will present on Q4 battery performance. Good morning. I am Kim Kyung-hoon, CFO of SK On. Let me walk you through the battery business for the Q4 of 2024 and the outlook for 2025. Despite a slight decline in battery selling prices due to destabilization of metal prices, Q4 sales grew modestly as the effects of temporary factors, including customers' summer vacations in the Q3, subsided. Sales recorded 1.598 trillion won, up 167.9 billion won, or 12% QoQ.
Q4 operating profit recorded a loss of KRW 359.4 billion, impacted by the base effect from settlements with customers in the previous quarter and one-off expenses such as inventory valuation losses. AMPC recorded KRW 1.3 billion, up approximately 34% from the previous quarter, driven by the partial easing of battery sales stagnation caused by temporary production halts at customer facilities. Amid concerns over the persistence of ongoing uncertain and unfavorable business environment in 2025, we are taking a conservative approach. With the expected growth in EV sales by key customers compared to the previous year, our company plans to focus on increasing local production and sales in our key North American market. As a result, we expect meaningful improvement in both top and bottom lines compared to 2024.
Profitability is expected to be partially affected by ramp-up costs associated with the operation of new plants in North America this year. That said, performance is expected to improve through, first of all, full-scale battery shipments to major customers' new North American OEM plants. Second, increased AMPC receipts in connection with such shipments. Third, enhanced profitability efforts through cost structure improvements. And fourth, synergies from mergers with SK Trading International and SK Enterm. Thank you very much. Next is on the materials. While sales volumes to major customers increased in the materials business, one-off costs such as inventory-related expenses resulted in a slight increase in losses. In 2025, sales are projected to rise gradually, driven by expanded sales to existing customers as well as new customer contracts and the start of shipments. Next, Mr.
Kang Myeong-gwon, Head of Management Planning Office of SK Innovation E&S, will present on Q4 E&S results. Good morning.
I am Kang Myeong-gwon, and I will walk you through SK E&S's business. A decrease in electricity demand caused by seasonality pushed SMP down compared to the summer peak season in Q3. As a result, SK E&S's operating profit decreased by 237.4 billion won to 114.2 billion QOQ. For reference, the figures have been recalculated based on the merged entity to enhance investor understanding. Sales for November and December 2024 reflected in the consolidated financial statements post-merger are 2.3537 trillion won, with operating profit of 123.4 billion won.
In 2025, although bearish oil prices and the entry of new power generators are expected to result in a decline in SMP compared to 2024, we aim to generate stable profits through competitive LNG supply, including the timely introduction of the Australia Caldita-Barossa gas fields, which is scheduled for commercial production in the second half of the year.
Thank you very much. This concludes the presentations, and we will now move on to the Q&A session. Before taking live questions, we would like to address some of the questions submitted in advance via our website. We have gathered a variety of questions from investors and analysts regarding this earnings release, and for effective communication, we have selected the most relevant and frequently asked questions in advance, which will be answered through simultaneous English interpretation. Question number one, SK On's 2025 revenue, profitability, and shipment guidance.
For that, I would like to invite SK On's CFO, Kim Gyeong-hoon.
Yes, I'm CFO Kim Gyeong-hoon of SK On. As I mentioned earlier, while uncertainty is expected to persist into 2025 with both upside potential and downside risks, we anticipate a meaningful improvement in performance compared to 2024. Global EV demand is expected to face continued delays in growth recovery in the short term, driven by factors such as the inauguration of a second Trump administration, the EU Commission's scaling back of green policies and regulatory easing, and major OEMs adjusting the pace of their electrification efforts. That said, the EV demand is expected to grow steadily in the mid to long term, driven by continued impact of eco-friendly policies such as fuel efficiency regulations in various countries, OEM's EV lineup expansion, and charging infrastructure growth.
Major market research firms project that the global passenger EV market will surpass 40 million units by 2030, maintaining solid annual growth over the long term. In 2025, this growth is expected to be driven primarily by North America, and we anticipate increased sales given our North America-focused portfolio. We believe that the revenue is going to grow. The sales volume is going to grow in double digits. Thank you very much. I'm moving on to the next question that has to do with 2025 SK Innovation's CapEx and measures to secure financial soundness. For this, I would like to invite Mr. Seo Geun-gi, SK Innovation CFO. Yes, I would like to address the question. First, to prepare for external uncertainties, we aim to maintain a prudent investment policy that allows for flexible responses through close monitoring of market conditions.
Our planned CapEx for this year is approximately KRW 6 trillion, with KRW 3.5 trillion allocated to the battery business, KRW 1 trillion to E&S, and around KRW 1.5 trillion for other businesses, combining routine and strategic investments at a level similar to last year. Due to the merger with E&S, an additional KRW 1 trillion in CapEx has been added this year. Nevertheless, the total CapEx has significantly decreased compared to last year. Once SK On's North America joint ventures with Ford and Hyundai Motor are completed as scheduled this year, CapEx is expected to continue to decline going forward. Next, I will discuss our approach to managing the company's financial structure. First, in 2024, we achieved tangible results through various self-help measures, including the merger with SK E&S. As a result, a global credit rating agency, S&P, upgraded our credit rating from non-investment grade to investment grade.
Nevertheless, the downturn in the battery market has led to an increased fixed cost burden and reduced AMPC benefits. Additionally, declining refining margins have weakened operating cash flow from existing businesses, and large-scale investments for future growth over the past four years have, to some extent, impacted the stability of our financial structure. In 2025, this significant CapEx outlay is expected to be completed with the upcoming completion of the North America Ford joint venture and Hyundai Motor joint venture. From this year onward, we expect financial pressure to ease as EBITDA from initial investments starts to be generated and merger synergies coming into effect. Furthermore, the management team, including the board of directors, is aligned in recognizing the need for ongoing efforts to improve the company's financial structure.
In 2025, as we execute our portfolio rebalancing, we will explore a range of options to enhance corporate value and secure financial stability. We will continue to do our utmost to maintain our investment grade rating from global credit rating agencies and manage a stable financial structure.
Thank you very much. Next, we will move on to the live questions. Consecutive interpretation is going to be provided for Q&A, so please be mindful of that, and also, before you ask your questions, let us know your name and affiliation. 지금부터 질의응답을 시작하겠습니다. 질문을 하실 분은 전화기 버튼의 별표와 1번을 누르시기 바랍니다. 질문을 취소하시려면 별표와 2번을 누르시면 됩니다.
Now Q&A session will begin. Please press Star 1, that is, Star and 1 if you have any questions. Questions will be taken according to the order you have pressed Star and 1.
For cancellation, please press Star 2, that is, Star N2 on your phone. 다음으로 질문해 주실 분은 하나증권의 윤재성 님입니다. The first question will be presented by Jae-sung Yoon from Hana Securities. Please go ahead with your question.
네, 질문 기회 감사합니다. 하나증권 윤재성입니다. 두 가지 질문 드릴 거고요. 일단 첫 번째는 정유 비즈니스 관련된 질문인데요. 경쟁사들 같은 경우는 캐나다 원유를 최근에 보급하면서 원가 절감 효과를 좀 누리고 있는 걸로 파악을 하고 있는데, 우리 회사 같은 경우는 원유 보입처에 대한 다변화를 어떻게 가져갈 것인지, 그리고 이 원가 절감을 어떻게 할 것인지에 대한 방안을 공유 부탁드리고요. 두 번째는 워스원에 대한 질문입니다. 중국 1703 광구가 작년 3분기를 피크 오일로 언급을 하셨었는데, 향후 실적 전망치를 어떻게 봐야 될지 방향성에 대해서 좀 전망을 공유 부탁드립니다. 감사합니다.
Thank you for the opportunity to ask questions. There are two questions that I would like to ask you. First is about your refinery business.
If you look at your competitors, some of them have recently started to import oil from Canada to actually lower costs. So in the case of our company, how are we going to move going forward in terms of your imports of crude? Do you have any plans to diversify, or what measures are you taking to actually cut on costs? The second question that I would like to ask is on SK Earthon. In the case of the China Block 17/03, it does seem to be that you mentioned that the third quarter of last year would be the peak. So in terms of the direction going forward, how should we look at production?
네, 에너지 경영기획실장입니다. 첫 번째 질문과 관련하여 말씀드리겠습니다.
당사는 중동산 중심의 장기 계약 원유를 안정적으로 도입하고 있는 한편, 유종별 시황 변동에 따라 최대 마진 확보를 위한 피드스톡 포트폴리오를 구성하면서 해외 공급선 다변화 노력을 지속 중에 있습니다.
So this is the head of the Strategy Operation Division at SK Earthon. So maybe I can address your question. With regards to our plan and the first question that you have asked, in terms of our sourcing, in terms of the Middle East oil that we have, of course, there are long-term contracts in place to provide us a stable basis for our sourcing. If we look at it by various crude types, according to the market changes that take place, in order to ensure that we are able to secure the maximum level of margins, we have created a feedstock portfolio, and we continue to put in efforts to try to diversify our out-of-the-region supply lines.
2025년 1분기 미국산 원유 도입 비율은 한 20% 정도 예상되고, 기회에 따라서 캐나다산 원유도 도입 예정에 있습니다. 당사는 미국산 원유의 프리미엄 변동과 캐나다산 원유의 프리미엄 변동에 따라서 경제성을 지속적으로 검토하고 있고, 향후에도 상황이 다른 대로 도입할 예정에 있습니다.
So if we look at the first quarter of 2025, and if we look at the overall level of crude that we import from the U.S., it's around 20%. And in addition to that, as opportunities arise, we may also explore the opportunity to import from Canada. So going forward, according to how the crude premium changes for U.S. and also Canada oil, we would look into the economics and to check what would be more feasible to determine our future plans.
네, SK Earthon 김경준입니다. 중국 1703 광구는 2024년 2분기 13개 생산장을 시추 완료한 이후에 이제 최대 원유 생산량을 기록했습니다.
This is Kim Gyeong-joon from SK Earthon, and maybe I can address your second question. In the case of the China Block 17/03, as in the second quarter of 2024, we actually completed the drilling for 13 production wells, and since then, in terms of the daily production volume, we are at a maximum level.
현재 25,000배럴 정도를 생산 중인데, 자연적인 생산량 감소이고요. 당사는 생산량 유지를 위해서 노력 중이고, 그 일환으로 생산정별 생산량 조정 등을 하고 있고, 그리고 이제 최적화, 그리고 금년도 이제 추가 생산장 등을 시추를 해서 생산량을 유지하려는 노력을 계속할 예정입니다.
So if we look at the current production volume, it is at around 25,000 barrels per day. However, we do see a moderation of that level that is taking place naturally. So of course, we are putting in efforts to try to maintain the level of production.
As an effort in that area, we are trying to adjust the production volume by each of the production wells and also make sure that we optimize these overall levels. And in addition to that, this year we are also going to drill additional production wells.
이번 올해 지금 시추할 추가 생산장 시추 이후에 이제 생산장 시추의 데이터들을 분석을 해서 필요할 경우에는 추가적인 생산장 시추를 이후에도 계획하고 있습니다. 이상입니다.
So in addition to the additional production wells that we will be drilling this year, based upon the overall data that we receive from those efforts, we will continue to look into, if necessary, drilling additional production wells after 2026. Thank you.
다음으로 질문해 주실 분은 신영증권의 신홍주 님입니다. The next question will be presented by Shin Hong-joo from Shinyoung Securities. Please go ahead with your question.
네, 안녕하세요. 저 신영증권 신홍주 연구원입니다.
저는 정유랑 배터리 E&S 관련해서 세 가지 질문 드리려고 하는데요. 우선 첫 번째로 저희 정유 사업 쪽에서 트럼프 재집권에 따른 영향이 좀 궁금합니다. 특히 캐나다, 멕시코산 원유 관세 부과 관련해서 좀 설명 부탁드리고요. 근데 두 번째는 저희 배터리 쪽 트럼프 취임 이후에 IRA 어떻게 변경될 걸로 좀 보시는지, 특히 좀 소비자 세제 혜택이나 AMPC 등 좀 존폐 여부와 관련해서 회사 전망 공유 부탁드리고요. 마지막으로 이제 E&S 쪽 관련해서 최근에 천연가스 가격 상승이 저희 회사 실적에 미치는 영향에 대해서 설명 부탁드립니다. 이상입니다. Thank you very much. I am Shin Hong-joo from Shinyoung Securities, and I have three questions I'd like to ask you. They concern refinery, battery, and also E&S business.
First of all, the refinery-related question is this: I would like to learn about the impact of Trump's reelection on the refining industry, especially what will be the effects on Korean refineries due to tariffs on oil products from Canada and Mexico. And my second question regarding battery is this: With the election of President Trump, how will this change IRA going forward? What is the company's outlook on consumer tax benefits and the potential abolition of AMPC? And finally, concerning E&S, what is the impact of the recent rise in natural gas prices on E&S performance? Thank you.
예, 에너지 경영기획실장입니다. 먼저 트럼프 재집권에 따른 그 영향의 당사 영향에 대해서 좀 말씀드리겠습니다. 그 뭐 캐나다하고 멕시코에 대해서 원유 관세 이후에 하루 정도 시장 변화를 한번 보셨을 걸로 저희가 예상을 하고 있습니다.
Yes, I am Choo Yong-gyu, Head of Strategy Operation Division from SK Earthon, and I'd like to address your first question regarding the impact of Trump's reelection on the refinery industry. I'm sure that you were able to also monitor the market situation a day after Trump's reelection.
기본적으로 미국의 경우 캐나다산 원유를 전부 대체할 상황이 아닙니다. 그래서 그 캐나다산 원유 중에 일부가 아시아로 넘어올 수 있고, 멕시코 또한 마찬가지입니다. 그 영향들이 아시아에 이제 공급 증가로 연결되면 저희는 조금 더 싼 원유를 구매할 수 있는 기회가 생기기 때문에 저희한테는 매우 긍정적인 효과가 있을 걸로 예상을 좀 하고 있고요.
And to tell you the truth, the United States is not in a situation to completely replace the Canadian oil. So I believe that some of the Canadian oil is going to reach Asia, and this is also the case for Mexican oil.
So for us, this opens up the opportunity to procure oil at a cheaper price, which is quite beneficial for us. r us, this opens up the opportunity to procure oil at a cheaper price, which is quite beneficial for us.
마진 관점에서 보면 그 미국 정유사들의 가동이 일부 감소할 수 있고, 소비자 가격들이 올라가면서 전체적으로 석유 제품 가격이 올라가기 때문에 마진 측면에서도 일부 긍정적으로 작용할 수 있을 걸로 예상하고 있습니다.
I also believe that this is going to work positively for margin as well. US refineries could partially reduce their utilization rate, and also consumer product prices could also increase, and product petroleum prices could also increase. And therefore, I believe that margins for us could also increase.
K-1 재무지원실장 전현욱입니다. 두 번째 질문 답변 드리겠습니다.
I am Jeon Hyun-wook, Head of Financial Support Office from SK On. I'd like to take your second question.
지난 1월 20일 트럼프 대통령 취임 이후 미국 에너지 생산 확대 등 행정 명령을 통해 IRA 보조금을 제한하려는 움직임이 가시화되고 있는 모습을 보이고 있습니다.
다만 IRA의 전면적인 폐기보다는 친환경제 세 공제, 즉 Section 30D와 같은 일부 제도 및 요건의 축소 또는 조정 방향으로 전개될 가능성이 있다는 것이 다수 전문가들 또는 시장 관측자들의 견해인 것으로 파악되고 있고, 당사도 시장의 여러 스테이크홀더와 논의를 나누고 한 결과 동일한 뷰를 가지고 있습니다.
With regard to your second question on battery, since President Trump's inauguration on January 20th, there has been some signs to limit IRA subsidies through executive orders, such as on leasing American energy. However, many experts believe that instead of a complete repeal, the IRA is most likely going to be partially scaled back or adjusted, for example, like Section 30D. We also share the similar view with market stakeholders.
소비자 세액 공제 같은 경우는 만약에 철폐가 되거나 축소가 되면 물론 수요에 영향을 주겠지만, 결과적으로 또 따져봐야 할 것은 출시되는 자동차의 경쟁력입니다.
당사 같은 경우는 당사가 공급했던 고객사 중에는 작년에 보조금에 해당되지는 않지만, 그럼에도 불구하고 판매가 원활히 잘 됐던 케이스도 있기 때문에 단순히 이제 보조금이 폐지된다고 해서 절대적으로 또는 중대하게 그게 실적에 영향을 주지는 않을 것으로 조심스럽게 예상을 하고 있고요. AMPC 같은 경우는 아무래도 이제 미국 현지의 그런 고용이나 여러 가지 연관된 요소들이 있기 때문에 쉽게 폐지가 되지는 못할 것으로 지금 보고 있습니다.
And of course, I think that there can be some impacts on consumer tax deductions. It could be abolished, and this could in turn affect the demand for EVs. However, if you look at the competitiveness of the EVs that are marketed in the market, which is very important, some of our customers will resupply our battery. Even though they did not receive subsidies, their sales were very quite well. So not having the subsidy doesn't really serve as a detrimental factor for the overall performance.
And on the AMPC front, we believe that this is also closely connected to U.S. employment as well. So I don't think that it's going to be an easy decision to simply abolish it.
아울러 이런 미국 정부의 정책 변화는 단순히 IRA 보조금 그 자체로만 보기는 어렵고, 관세 등 대중국 정책과 더불어 복합적인 관점에서 함께 고려될 문제라고 생각됩니다. 중요한 것은 이러한 정책적 불확실성이 계속될 것이기 때문에 당사는 그룹과 연계하여 미국 GR 역량을 최대한 활용하고 미국 정부 정책의 조정 방향성을 면밀히 모니터링하여 이에 대한 이제 적시적인 대응을 계속하고 고객사들과도 밀접한 커뮤니케이션을 통해 대응 방향을 원활히 수립하고 이행해 가도록 하겠습니다.
That said, I believe that these issues need to be considered in a broader context alongside different tariff policies and other U.S. policies against China.
We believe that the uncertainties could persist down the road, and so we will fully utilize the group's US government relations resources to closely monitor policy shifts and also actively respond to minimize any negative impact on the company. We will also continue our communication efforts with our customers so that we can come up with effective response measures.
마지막 질문인 천연가스 가격 상승이 E&S 실적에 미치는 영향에 대해 설명드리겠습니다.
Next, I would like to take the third question, which had to do with the impact of the recent rise in natural gas prices on E&S performance.
최근에 천연가스 현물 시장 가격 상승은 LNG를 연료로 사용하는 발전소들의 도입 원가 상승 요인으로 작용하지만, 동시에 전력 도매 가격인 SMP도 반영이 되기 때문에 매출 증가 요인이 되어서 발전사업에 직접적인 영향은 크지 않습니다.
The recent rise in natural gas spot market prices has led to an increase in the cost of power plants using LNG as a fuel. However, this is reflected in the electricity wholesale price, which is SMP, which contributes to increased revenue. So the direct impact on the power generation business is not significant.
그리고 E&S 소싱 물량의 약 70% 이상이 유가 또는 헨리 허브 인덱스와 연동된 장기 계약으로 구성되어 있기 때문에 단기 현물 가스 가격 변동이 큰 영향을 미치는 것은 아닙니다.
Also, more than 70% of the E&S sourcing volumes are composed of long-term contracts linked to oil prices or the Henry Hub Index. So fluctuations in spot gas prices do not have a significant impact.
다만 그 현물 카고 도입 비중이 큰 시기 또는 현물 시장 가격이 급변하는 경우에는 일시적으로 도입 원가와 판매 가격의 비중 차이가 발생하기 때문에 단기 손익에 영향을 줄 수 있습니다.
However, during periods with high proportion of spot cargo imports or when spot market prices fluctuate sharply, there may be temporary disparity between the cost of procurement and the sales price, which could impact short-term profits. SK E&S
는 국내 최대 LNG 사업자로서 600만 톤 이상의 장단기 소싱 포트폴리오를 활용해서 다양한 최적화 활동을 통해서 시황 변화에 따른 손익 변동성을 지속적으로 축소해 나가고 있습니다.
As the largest LNG operator in Korea, SK E&S leverages a sourcing portfolio of over six million tons, consisting of both long and short-term contracts, to carry out various optimization activities aimed at mitigating profit and loss volatility in response to market conditions.
특히 올해 3분기 이후부터 호주 칼디타-바로사 가스전 물량 연간 한 130만 톤의 상업 생산이 개시될 예정이기 때문에 변동성이 큰 스팟 물량의 비중이 줄어들면서 높은 원가 경쟁력을 갖춘 장기 LNG 물량이 추가됩니다. 따라서 전체적인 도입 원가 경쟁력이 제고될 것으로 기대하고 있습니다.
In particular, starting from Q3 of this year, the commercial production of 1.3 million tons annually from the cost-competitive Australian Caldita-Barossa gas fields is expected to begin. And as the share of volatile spot volumes decreases and LNG volumes with strong cost competitiveness are added, overall import cost competitiveness is expected to improve.
다음으로 질문해 주실 분은 NH 투자증권의 최영광 님입니다. The next question will be presented by Choi Young-kwang from NH Investment & Securities. Please go ahead with your question.
네, NH 투자증권 최영광입니다. 질문 기회 주셔서 감사합니다. 두 가지 질문 드리겠습니다. 올해 한국 가스전 계약 종료 시점하고 칼디타-바로사 가스전 생산 시점, 아까 저희 3분기 말씀해 주셨었는데 저희 IR 자료 보면 4분기도 들어가 있거든요. 그래서 좀 정확히 언제인지, 그리고 이에 따른 손익 영향이 어떻게 되는지 공유해 주시면 감사하겠고요.
두 번째로는 최근에 특히 작년 말 이제 중국의 teapot 업체들 구조 조정과 파산, 그런 동향이 어떤지, 그리고 당사와 국내 정유사에 대한 영향 어떻게 보고 계신지 공유해 주시면 감사하겠습니다.
Yes, thank you for the opportunity to ask questions. There are two questions that I would like to ask you. First, in the case of the Tangguh gas fields that you have, I do understand that the contracts are coming to an end. So when would that take place, and what impact do you believe that it will have? In addition to that, in the case of the Caldita-Barossa fields that you have, I think that you mentioned that production would start during the third quarter. However, if you look at the IR material that has been distributed, I think that it's mentioned that fourth quarter would be the timing.
So what is the right timing for that production, and how do you think that that will have an impact on your profitability for this business? The second question that I would like to ask you is about the refinery area. If you look at the situation since the end of last year in China for the Chinese teapot refineries, it does seem to be that there is restructuring taking place or some of the refineries actually closing down. So as a result of that, what would be the impact on our business and also the impact on the domestic refineries in general?
네, 첫 번째 질문인 탕구 계약 종료 시점과 그 시빅 가스전의 생산 개시 시점에 대해서 말씀드리겠습니다.
So yes, maybe I can address your first question, which was about when the contract ends for the Tangguh gas field and when we will actually start production for the Caldita-Barossa gas field.
먼저 인도네시아 탕구 가스전과의 장기 공급 계약은 당초에는 26년 중에 종료될 예정이었습니다만, 과거 탕구 가스전 생산 설비 이상 등으로 공급받지 못했던 물량들이 추가로 공급받을 수가 있기 때문에 26년에도 평년 수준의 카고 도입이 가능할 것으로 전망하고 있습니다.
First, to talk about the situation with regards to the Tangguh gas field and also supply contract that we have in Indonesia. This is a long-term supply contract that we have had, and initially the contract was to end within 2026. However, if you look at the past situation, because of issues such as various production facility issues that the gas field had experienced in the past, there was some supply volume that we were not able to receive.
So as a result of that, that is something that will be forthcoming in terms of supply. So as a result, for 2026, we do think that the overall cargo volume will be the level that we have seen on average in other years.
다만 26년 이후의 구체적인 카고 공급 시기나 규모, 종료 시점 등은 현재 셀러와 협의 중입니다.
However, that has been said. For the contract period after 2026, we are currently in discussions with the seller about detailed supply timing for cargo, also in terms of the size and when we will actually see an end to the contract.
그리고 탕구 물량 50만 톤 계약이 종료된 이후에도 당사 소싱 물량 중에서 가장 높은 원가 경쟁력을 갖고 있고, 또 물량도 두 배 이상인 130만 톤 규모의 시빅 가스전 공급 물량이 개시될 예정이기 때문에 손익 감소 영향은 제한적일 것으로 생각합니다.
In addition to that, even if the overall Tangguh volume of around 500,000 tons per year in terms of a contract does come to an end, we will be able to replace that with supply that is coming forth from the Caldita-Barossa gas field, which is, in terms of our sourcing, the most cost competitive source that we would have. And also, in terms of volume, it represents twice that of the Tangguh gas contract, which is in total 1.3 million tons. So that would be the size of the Caldita-Barossa. So in actuality, we actually believe that the impact on our profitability would be limited.
마지막으로 칼디타-바로사 가스전 생산 시기에 대해 여쭤보셨는데요. 본격적인 공식 상업 생산 개시일은 4Q이고요. 다만 실제 시운전 물량의 생산 개시는 3Q부터 일어나기 때문에 정식 상업 생산 시점은 4Q로 이해해 주시면 될 것 같습니다.
And lastly, in terms of the timing of the Caldita-Barossa production and when that will take place, officially speaking, for the full-fledged production, it will start in the fourth quarter. However, in terms of the productions for the pilot tests that we need and also the initial operations, that will be starting in the third quarter. So officially, fourth quarter would be the right timing.
네, 에너지 경영 계획실장입니다. 두 번째 질문에 대해서 답변드리겠습니다. 아시는 바와 같이 미국 제재 이전에도 중국 티팟 리파이너리에 대한 구조 조정은 지속적으로 이루어져 왔습니다.
Yes, this is the Head of Strategy and Operational Division at SK Energy, and maybe I can address your second question. So as you are aware, even before US sanctions were being discussed in terms of the Chinese teapot refineries, they were ongoing restructuring.
However, that has been said from last year in terms of the decrease in the overall tax returns that were provided for exports and also because of the stronger measures that were taken against the Chinese ports. If we look at the teapot refinery economics, it has worsened significantly. So that has been said. If you look at the situation, though, on the refinery side for the Chinese teapot refineries, there is restructuring ongoing.
However, if we look at capacity additions from non-teapot refineries in China, that is still something that is going on. So at the end of the day, if we look at the overall situation, we think that the impact of the teapot refineries' restructuring in terms of the regional market dynamics would be limited. However, for teapot refineries specifically, we do think that the pace of restructuring will be accelerated going forward.
다음으로 질문해 주실 분은 모건스탠리의 신영석 님입니다. The next question will be presented by Shin Young-suk from Morgan Stanley. Please go ahead with your question.
안녕하세요. 질문 기회 주셔서 감사드립니다. 저는 배터리 관련 질문 두 가지 드리고 싶은데요. 첫 번째는 좀 미리 말씀은 해 주셨지만 아직 미국 쪽에서 정책 불확실성이 많이 남아 있는데, 그래도 좀 더 디테일하게 어떻게 미국 사업을 보시는지, 고객별 동향은 어떻게 보시는지 조금 더 부연 설명 주시면 감사하겠고요.
두 번째는 올해 SK On 주요 증설 프로젝트 가동 시점 및 규모에 대해서 조금 더 디테일하게 알려주시면 감사하겠습니다.
Thank you very much for the opportunity to ask you questions. I have two questions pertaining to your battery business. First of all, as you mentioned earlier, I believe that there still are some uncertainties with regard to US policies. But could you elaborate on your battery business market outlook in 2025 in the US, especially the customers' dynamics in the US? And second, a battery-related question is SK On's key expansion project, the starting dates and the scale that you have in mind.
SK 온 전현욱 실장입니다. 첫 번째 질문 답변드리겠습니다.
Yes, I am Jeon Hyun-wook, head of Financial Support Office of SK On. I would like to take your first question.
앞서 말씀드렸던 대로 북미 지역 같은 경우는 트럼프 2기 행정부 출범에 따라 추가 불확실성이 증대되고 있는 것은 맞고요. 다만 이제 거기서도 관세 인상 등에 따라 기회 요인도 역시 상존하고 있습니다. 전체적인 시장을 보면 작년 같은 경우는 이제 분기별로 시장의 그런 전망치를 살펴봤을 때 계속적으로 하향 조정되어 왔던 게 사실이고, 다만 그럼에도 불구하고 올해를 비롯해서 이제 내년 그리고 내후년 연간 성장을 보면 그 성장 궤적은 계속적으로 유지가 되고 있습니다. 다만 그 속도만 조금 이제 하향 조정되었던 뿐이고, 그렇기 때문에 이제 여러 가지 정책적인 불확실성이 존재하긴 하지만 시장 자체는 계속적으로 이제 성장할 것으로 기대를 하고 있고요.
Yes, you have rightly mentioned that with the inauguration of Trump's second administration, there is a growing uncertainty in the market for battery. Now, if the tariffs increase, I believe that there will be some risks that are associated with it.
Back in 2024, if you look at the market outlook, we obviously had every quarter market outlook, and those outlooks showed a downward trend. However, going forward this year, 2025, and also 2026 and 2027, we believe that yearly growth rate will be sustained, although the scale of the speed of the growth is going to be rolled back a little. That said, although there are some policy uncertainties in the U.S. market, I believe that market growth will continue on long-term.
그리고 이제 OEM별 경쟁 다이내믹스를 조금 살펴보면, 작년 같은 경우는 이제 테슬라나 기존에 이제 선도했던 전기차 OEM들이 초기 출시했던 전기차 모델들, 라이프 사이클이 이제 중후반기 진입하면서, 그리고 또 뭐 신차 출시 지연 영향도 있고, 그런 걸로 인해 이제 판매량이 감소하는 한편, 이제 포드나 뭐 GM 등 상대적으로 이제 후발 주자였던 OEM들을 중심으로, 물론 이제 시장 초기 기대 수준을 미치지는 못했으나 판매량이 증대되는 이제 현상이 나타났습니다.
And I think that it's also important to note the OEM competitive dynamics. In 2024, there were some front runners when it comes to EV, like Tesla, and there were other EV OEMs, and their initial EV models, as they aged, became less popular. But, and also coupled with that, there were some new EV launch delays, and that led to eventual sales decrease.
And if you look at latecomers like Ford and GM, although it was below market expectations, I think that their sales did increase.
이런 전통적인 OEM과 기타 플레이어들의 신규 라인업이 이제 출시됨에 따라 이러한 현상은 계속적으로 이제 지속될 것으로 기대를 하고 있고요. 당사의 이제 핵심 고객인 현대차, 기아차의 경우 25년에는 아이오닉 9과 같은 신차를 이제 비롯하여 라인업 확충이 이제 계획되어 있습니다. 그리고 동시에 이제 북미 현지 생산 체계도 이제 강화하고 있기 때문에 판매량 증대가 이제 전망되고 있고, 시장 내 포지션을 지속 강화해 나갈 것으로 이제 보고 있습니다.
And if you look at the traditional OEMs and other players, I believe that their new lineups could give some sustainability in the battery business. And if you look at Hyundai Motor and Kia Motor, where we supply our battery, they also expect to have a new lineup, for example, IONIQ 9 this year.
They are also planning to expand local production in the U.S., which will eventually lead to increased sales and help to cement their position in the market.
당사의 또 다른 주요 고객인 포드 또한 25년에 E-Transit, 그리고 이제 퓨마 Gen-E와 같은 신차 출시가 또 예정되어 있어서 이 역시 EV 판매량 증가세에 기여할 것으로 예상되고 있습니다.
We also have our customer Ford, and E-Transit and Puma Gen-E is expected to be launched this year, which we believe will lead to increased EV sales.
네, SK온 기획실장 안곤입니다. 두 번째 질문에 대해 답변드리도록 하겠습니다.
Thank you. I am An Gon, Head of Planning Office from SK On, and I would like to address the second question.
25년에는 미국에서 포드랑 조인트 벤처인 보스크 3개 공장 중 켄터키 1공장이 신규 가동될 예정이며, 보스크 켄터키 1공장은 총 생산 케파 37GW 규모의 공장으로 일부 라인들이 25년 2분기부터 순차적으로 SOP가 진행될 예정입니다.
In 2025, the Kentucky Plant Number One, one of the three Blue Oval SK, the joint venture with Ford in the U.S., is expected to begin operations. The Blue Oval SK Kentucky Plant Number One is a facility with a total production capacity of 37 GW per hour, and some lines are expected to begin SOP sequentially starting from June 2025.
그런 보스크 3개 공장 중 총 생산 케파가 45GW 규모의 테네시 공장 또한 당초 25년 중 SOP를 계획하고 있었으나 시장 상황 등 고려하여 최적의 SOP 시점을 지금 재검토 중에 있습니다. 지금 현재 예상하기로는 26년 중에 가동을 개시할 것으로 지금 예상되고 있습니다.
Meanwhile, of the three Blue Oval SK plants, the Tennessee plant with a total capacity of 45 GW per hour was initially set to begin SOP in 2025.
We are reassessing the optimal SOP timing considering market conditions, and as of today, our expectation is that the operations will begin the second half of 2026.
당사는 고객 디맨드와 EV 시장 동향 등을 종합 고려하여 연중 상시로 생산라인 운영 계획을 최적화하고 있으며, 미국 SK Battery America 등 기존 생산, 기존에 양산 중인 대형 공장에서 축적한 경험과 역량을 바탕으로 신규 공장들의 램프업 기간 및 코스트 감소를 위해 최소화시키기 위해 최선을 다하고 있습니다.
We will optimize production line operations year-round considering customer demand and EV market trends. Based on the experience and capabilities gained from large-scale plants like SK Battery America in the US, we aim to minimize the ramp-up time for new plants and also minimize relevant costs.
마지막으로 질문해 주실 분은 iM Securities의 Jeon Yu-jin 님입니다. The last question will be presented by Jeon Yu-jin from iM Securities. Please go ahead with your question.
네, 안녕하세요. iM Securities Jeon Yu-jin입니다. 좋은 기회 감사드립니다.
세 가지 질문이 있는데요. 첫 번째는 일단 저희 올해 SK Enmove 상장 진행하고 계신 걸로 알고 있는데, 관련된 세부 일정이랑 저희 중장기적으로 뷰를 좀 어떻게 보고 계시는지 말씀해 주시고, 두 번째는 석유화학 시황이 좀 계속 안 좋은 상황인 것 같아요. 우려되긴 했는데 이쪽에서 저희가 전략적으로 좀 생각하고 계시는 방향성이 무엇인지 말씀해 주시면 감사드리겠습니다. 그리고 마지막으로 저희 SK Enmove 부분에서 이번 분기 영업이익이 한 KRW 340 billion 정도 나왔는데, 여기에서 뭐 지난 분기 대비 재고 이익이 얼마나 있었는지 좀 같이 공유해 주시면 감사드리겠습니다. 감사합니다.
Yes, thank you for the opportunity to ask questions. There are three questions that I would like to ask you. This year we do understand that for SK Enmove you are preparing an IPO. So what would be the IPO schedule, and what is the mid to long-term view for this business that the company has? The second question I would like to ask is about your petrochemical business.
We do know that the overall market drop is, or market situation is, challenging. With regards to the strategy going forward, what is the company currently thinking about? And the third question is about the refinery business. If you look at the operating profit for the refinery business this quarter, it represented around 340 billion won. Of that, how much would be the inventory-related gains?
네, 안녕하세요. 이노베이션 재무기획실장 백일학입니다. 첫 번째 질문 답변드리겠습니다. IPO는 저희가 지금 여러 가지 검토하고 있습니다. 근데 잘 아시겠지만 IPO 관련해서는 뭐 공모 비율이나 구조, 시장 상황 등 여러 면을 보아야 되기 때문에 지금 현재 IPO 시기가 확정되진 않았고요. 뭐 말씀드린 다양한 측면을 고려하고 있습니다. 중장기 뷰는 지금 올해 같은 경우는 뭐 작년과 비슷한 수준의 실적은 예상하고 있고요. IPO가 뭐 시장에 나온다면 저희는 뭐 굉장한 흥행할 거라고 기대하고 있습니다. 이상입니다.
Yes, maybe I can take the first question.
This is Pae Gi-rak, the Head of Corporate Finance Planning Office at SKI. With regards to the IPO, of course we are currently looking at various possibilities as of the current time. However, as of now, it would be difficult to give you a definitive answer because we are looking at various factors, including the overall structure, you know, the market situation, and also the level of IPO that we want to actually do, so over the mid to long term, in terms of the view for the company, I do think that the performance that we foresee would be similar to that of last year, and in addition to that, if the IPO were to go ahead, we do believe that it would be a very successful deal.
두 번째 질문에 답변드리겠습니다. SK 지오센트릭 김용수입니다.
a sustainable profit structure and financial structure through capital expenditure focused on essential investments and active OI activities. So yes, this is Kim Yong-soo, Head of Planning Office at SK Geocentric, and maybe I can take your second question. So with regards to the company's overall stance, of course right now for the time being we would be focused on very essential investments that are needed and also very active OI activity.
In addition to that, we would be focused on sustainable profit generations and also securing a sound financial structure. We are currently pushing forward with active portfolio rebalancing through the sale of idle assets and low-profit assets. In addition, we are also actively engaging in portfolio rebalancing initiatives. So as a result of that, we want to discard obsolete assets that we have or low profit generating assets. In the mid- to long-term, we plan to reorganize the business portfolio centered on high-value-added downstream to secure future production growth drivers.
Over the mid to long term, to ensure that we're able to secure the future growth drivers that are necessary for the business, we do want to engage in a portfolio revamp that would be focusing on the high value added downstream side.
네, 에너지 경영기획실장입니다. 세 번째 질문에 대해서 답변드리겠습니다. 24년 3Q에 재고 관련 손익이 마이너스 4,352억 원이었고 4Q에 플러스 901억 원이었습니다. 이에 증감 액수는 5,253억 원입니다.
This is the overall Head of Strategy Operation Division for SK Energy, and maybe I can address your last question. If we look at the inventory-related losses that we had in the third quarter of 2024, that represented KRW 435.2 billion. In the fourth quarter, we had a gain of KRW 90.1 billion. If you look at the difference quarter over quarter, that would represent KRW 525.3 billion.
네, 이상으로 Q&A를 마치며 2024년 4분기 SK 이노베이션 경영 실적 설명회를 마무리하도록 하겠습니다.
바쁘신 시간에도 참석해 주신 투자자 및 애널리스트 여러분들께 감사 인사드립니다. 고맙습니다.
So with this, we will wrap up the Q&A session for the fourth quarter of 2024 SK Innovation Earnings Conference Call. Once again, we would like to thank all of the participants here today. Thank you very much.