Good morning. I am Joe Lee, IR Project Leader at SK Innovation. Thank you for taking the time to join us today on this 2022 Q1 earnings call. Today's presentation has yet to be reviewed by our external auditor, so the results may be subject to change based on such review. With that, let me hand it over to the CFO, Mr. Yang Sub Kim, for the presentation.
Good morning. I am Yang Sub Kim, CFO of SK Innovation. First, let me thank our shareholders and investors for your continued interest in the company. On the call with me today are executives from SK Innovation and its major subsidiaries who will answer your questions during the Q&A. Now let me start the presentation on SK Innovation's 2022 Q1 performance. First, let me start with the full company performance, including sales and operating profit.
For sales, Q1 saw an increase in crude and refinery product prices, as well as EV battery sales volume, and as a result, it was up by KRW 2,540.2 billion QOQ to KRW 16,261.5 billion. For operating profit, a surge in refining margins and oil prices led to higher inventory gains for refining, while E&P profit also improved, resulting in operating profit increasing KRW 1,707.6 billion QOQ to KRW 1,649.1 billion. On non-operating profit, larger FX related losses driven by a weak won and more derivative losses on the back of rise in crude led to a decrease of KRW 222.4 billion QOQ to result in a non-operating loss of KRW 273.1 billion.
In detail, the non-operating loss can be broken down into FX related losses of KRW 82.8 billion, derivative losses of KRW 162.8 billion, net interest expenses of KRW 76.9 billion, equity method gains of KRW 38.9 billion, and others KRW 10.5 billion. Next, let me go over the balance sheet. Total assets as of the first quarter increased KRW 5,004.8 billion versus 2021 end to KRW 54,539.8 billion. The main drivers were higher inventory and trade receivables stemming from the rise in crude and refining product ASP and also an increase in tangible and intangible assets from investments made. Liabilities increased KRW 4,022.1 billion to KRW 33,946.3 billion, and the debt equity ratio is 165%.
The main drivers are an increase in trade payables due to higher crude and an increase in debt. In addition, net debt increased KRW 1,984.6 billion to KRW 10,397.5 billion as net working capital increased in tandem with crude and facility investments were made for battery capacity additions. Next, let me dive into the Q1 market and performance of each business. First, the refinery business market backdrop. Though monetary tightening led by the Fed's rate hike started, global oil prices surged as easing of COVID restrictions in major fuel markets fueled the recovery in demand and the Russia-Ukraine conflict led to concerns about supply challenges for oil.
If we look at the Q1 product crack, it strengthened significantly and demand led by middle distillates recovered with looser COVID measures and U.S. refineries blackout amid low inventory and shortage in Russian feed in Europe, which drove crack higher. In terms of gasoline crack, it strengthened on an increasing mobility demand in the region and export quota cuts from China and U.S. refineries production issues. Against low inventory, diesel crack also surged on concerns about supply shortages in Europe, which is highly dependent on Russia. In kero crack, it rose due to stronger winter heating demand and expectations on a recovery in jet demand, and also the influence of stronger diesel crack levels. Next, let me discuss our performance.
In terms of the operating profit for the refining business, strong refining margins coupled with a weak won created a better market backdrop while the rise in crude translated into higher inventory gains. On a QOQ basis, operating profit increased KRW 1,286.5 billion to KRW 1,506.7 billion won. In detail, the geopolitical tensions around Russia and Ukraine shook the supply balance of global crude and petroleum products, which increased refining margins. QOQ exports grew significantly, leading the improvement in profits. Inventory-related gains, including LCM in the Q1, was KRW 588 billion . For Q2, refining margins are expected to remain strong as supply remains tight due to Russia, Ukraine, and inventory continues to be low.
In the second half, we actually believe that refining margins may change based on the length of the Russia-Ukraine conflict and impact on global supply and demand from such a situation. In addition, possible post-COVID recovery and global demand or contraction may also take place due to high oil prices having an impact. Next, let me talk about the petrochemical market. For polymer in the first quarter, overall market recovery has been slow and inventory for certain products, including PP, has risen, resulting in weak market fundamentals and product spreads. For aromatics, including PX, PTA demand increased as new capacity from China Yanshan went online. Moreover, some Chinese have cut capacity and supply because of transportation issues, which together created flat to strong spread on a QOQ basis. Let me move on to the business performance.
For the petrochemical business in Q1, polymer spreads such as PE and PP were weak, but operating profit was supported by better QOQ PX spreads and gains on inventory from higher crude and naphtha. In total, turning operating profits back to the black. On the 2022 polymer market outlook, there is downside pressure coming from factors including a ramp-up of new PE capacity in the region. We also expect supply issues from lower utilization as costs increase. As COVID-19 in China surges, the timing of a recovery in PP demand is uncertain, but spreads are expected to improve as naphtha prices stabilize and some capacity goes into turnaround.
For PX and other aromatics, the second half turnarounds for PX and PTA capacity and new additions of PX and PTA in China are expected to lead to more volatile supply demand dynamics, but spreads in general are expected to improve gradually. Next, let me discuss the lubricants business. Lubricant margins and sales volume decreased as crude prices increased, leading to operating profit decreasing KRW 56.1 billion quarter-over-quarter to KRW 211.6 billion. As for the 2022 BO market outlook, we expect spreads to soften versus the fourth quarter of 2021 as costs increase and base oil supply eases. But as sales prices increase on the back of rising costs, spreads are still expected to maintain the first quarter levels. Moving on to the next page, I'll talk about the E&P business.
For the first quarter E&P operating profit, it was up by KRW 86.5 billion quarter-over-quarter at KRW 198.2 billion, which was the result of sales prices increasing, though sales volume decreased slightly. Next, let me go over the battery business. Battery sales in the first quarter increased KRW 193.4 billion quarter-over-quarter to KRW 1,259.9 billion due to stronger sales by European OEMs and an increase in ASP driven by higher metal prices.
Even though material prices increased and initial costs related to the new number two Hungary factory was recognized, an increase in sales volume and the base effect created by the absence of one-off expenses recognized in the previous quarter led to the first quarter operating loss, improving KRW 37 billion QOQ to a loss of KRW 273.4 billion. This year, full-fledged production from the new U.S. and Hungary factories is expected to generate revenue for new customers such as Ford and Volkswagen. For the details of capacity expansion by region, please refer to the appendix. For the full year 2022 sales, it is expected to exceed our initial guidance of the mid-6 trillion KRW and land closer to the mid-7 trillion KRW level due to strong customer demand and higher ASP levels.
Finally, let me move on to the ENEOS Materials business. Though sales volume softened, sales prices were adjusted in the beginning of the year and operating expenses increased. The consolidated operating profit of the ENEOS Materials business in Q1 was up KRW 29.3 billion QOQ to record a loss of KRW 3.1 billion due to the base effect of the previous quarter. For the details of the LIBs capacity expansion plans, again, please refer to the appendix. This is the end of our presentation, and we will now start the Q&A session. Before asking your questions, we ask that you state your name and affiliation. In addition, please remember that the Q&A will be conducted with consecutive interpretation.
Now, Q&A session will begin. Please press star one, that is star and one if you have any questions. Questions will be taken according to the order you have pressed star and number one. For cancellation, please press star two, that is star and two on your phone. The first question will be presented by Cho Hyunryul from Samsung Securities. Please go ahead with your question.
I am Cho Hyun-ryul from Samsung Securities. I would like to ask you three questions. First question is, you have just mentioned that regarding your guidance for your battery revenue, you are going to upgrade that guidance from KRW 6 trillion level to mid KRW 7 trillion level. Could you explain as to the rationale behind that change? And also, can we still expect your operating profit to reach breakeven point in Q4? Second question is regarding the capital requirement or the resources that are required for SK On. I understand that your refinery business has recently posted quite a bit of profit. I'm wondering whether SK Innovation, hence, has a plan to participate in capital increases for the benefit of SK On.
The third question is recently we've seen a very tight supply of the raw materials and feeds that are used for battery. Also in Europe there is a move to make battery recycling a mandatory requirement, but through legislation. We'd like to understand and get an update as to what the company's BMR battery metal recycle program is currently at.
Yes. This is the CFO, I'm Kim Yang-sub. I would think that you asked the question because there is expected to be quite significant amount of investment that will be required on the part of SK On. I think it'll be a good opportunity for me to walk you through the funding plans for SK On.
그리고 또 현지 정부로부터 어떤 Incentive도 중요한 어떤 투자 재원으로 활용할 생각입니다. 그래서 이런 어떤 그 JV와 Incentive를 통해서 당사가 직접 부담해야 할 Resource 부담을 상당 부분 완화시킬 수 있다라고 말씀드릴 수 있을 것 같습니다.
Now, in terms of the need for financing for investment. One of the ways is to go through the JV entity. For instance, the JV entity that we have set up with Ford. When we are financing through the joint venture, there will be equity investment on the part of our company as well as on the part of the OEM. In light of the fundraising capacity of the JV entity itself, there will also be debt financing that is actually being done by that JV entity. Also the incentive program that's provided by the government is another very important source of financing. Also in light of therefore the JV entity's capacity to raise funds as well as the incentive provided by the government.
We believe that the level of burden in terms of resource support that we need to provide to that entity is going to be much lessened.
이렇게 어쨌든 조달되고 나머지 추가적으로 필요한 부분들은 지금 현재 아시다시피 협상 검토가 진행 중인 Pre-IPO, 저희는 Long Term FI라고 하는데 그런 유치를 통해서 자본 조달을 할 예정이고요. 그리고 앞으로 Battery 사업이 지속적으로 실적이 개선되면서 영업 현금 흐름을 통해서도 일정 부분 조달이 될 것으로 생각을 하고 있습니다. 그래서 저희가 생각할 때는 어느 정도 충분하게 이런 계획들에 맞춰서 조달이 가능할 것으로 판단하고 있습니다.
After that, if we need any additional financing. As you may know, there is currently negotiation and discussion going on a Pre-IPO or we call it the Long Term Financial Investor Process. Through the Long Term FI, we will be able to finance for the required resources. As the battery business continuously develops, the earnings is going to go up and it will generate cash flow. Part of that will of course also be used for funding such investments. We believe we have sufficient plans in place to support the growth.
그렇게 이렇게 조달 계획 하에 현재 그 일정 부분 그 조달이 될 것으로 생각하기 때문에, 지금 질문 주신 SK 이노베이션이 SK On의 유상증자 하는 건에 대해서는 현재 전혀 검토하고 있지 않습니다. 아울러 저희가 SK On을 물적 분할시킨 이유 자체가, 이 성장을 위한 대규모 투자 자금을 원활하게 조달하기 위한 목적이었기 때문에 아마 이런 목적에 부합하게 앞으로도 자체적으로 Resource를 확보하는 방안으로 지속 추진할 생각입니다. 이상입니다.
We have such financing plans well in place. There will not be a case where SK Innovation will be making capital increase in injecting that to SK On. The key purpose and reason behind splitting off SK On as a subsidiary is basically to secure that investment resources. I can tell you that SK On will be able to continuously on its own fund and finance the required resources for investment.
SK Innovation BMR 추진 담당 김현석입니다. 세 번째 질문에 대해서 답변드리도록 하겠습니다. 먼저 말씀하신 유럽의 Battery 법안에 따르면 2030년부터 Battery 제조 시 일정 비율 이상의 회수 금속을 의무적으로 사용하도록 되어 있습니다.
I will respond to your third question. I am Hyun Suk Kim, Head of BMR Business Development Office. As you have mentioned, in Europe, starting 2030, there is a legislation in place making it mandatory for battery makers to use a specific percentage of recovered and recycled metals.
상황을 조금 더 지켜봐야 되겠습니다만, BMR 사업 관점에서는 광산이나 염호에서 채굴되는 금속과는 별개의 명확한 별도의 시장이 생기는 것이기 때문에 기본적으로 긍정적인 요인이라고 생각하고 있습니다.
Of course, we would have to wait and see a little more. I think from a BMR perspective, this actually triggers a creation of a separate market apart from mining or extracting metal from salt lakes. That is quite positive.
BMR 사업 추진 현황을 잠시 말씀을 드리면, 지난 Conference Call에서 저희가 개발한 Lithium 회수 설비에 대한 Demo Plant가 12월에 기계적 준공을 마쳤고, 2월 중에는 설비 가동을 시작할 수 있을 것으로 예상된다고 말씀드린 바 있습니다.
Regarding an update on our BMR initiative, we shared with you during the previous conference call that with respect to the lithium recovery plant, we have actually achieved mechanical completion by in December, and that we are planning to go into operation in February.
말씀드렸던 대로 지난 2월 18일에 Demo Plant의 첫 가동을 시작을 했고, 현재까지 정상적으로 가동 중입니다.
As mentioned, we have actually started the operations of the demo plant as of February the 18th, and it is under normal operation.
향후 다양한 원료와 운전 조건하에서 추가로 성능을 검증하고, 사업 설비 운전을 위한 최적 조건 등 관련 데이터를 확보해 나갈 예정이며, 상업설비 건설에 대한 준비도 해 나갈 예정입니다. 이상입니다.
We will be testing many different, I guess, parameters and conditions for the most optimal running of this plant. We will be able to define the optimal level of parameters and data for the commercial plant in the future. We will also make thorough preparations for a commercial plant.
The next question will be presented by Park Kwang-rae from CIMB. Please go ahead with your question.
네. 안녕하세요. CIMB 증권의 Park Kwang-rae입니다. 질문 기회 주셔서 감사드립니다. 저는 두 가지 질문드리도록 하겠습니다. 첫 번째는 지금 중국 lockdown 영향이 전반적으로 supply chain에 영향이 미치는 것 같은데요. 저희도 지금 중국 쪽 보시면은 세 개의 공장을 지금 가동 중인 걸로 알고 있고, Yancheng 같은 경우에는 지금 신규로 CAPA가 진행 중인 걸로 알고 있습니다. 이와 관련해서 생산 차질이 있는지, 아니면은 혹시 물류 쪽 영향이 있는지 궁금합니다. 두 번째 질문은 장기적으로 저번에 업데이트를 받았는데 LFP와 각형 form factor 배터리 개발 중인 걸로 알고 있습니다. 이와 관련해서 추가적으로 업데이트 있으시면은 좀 부탁드리겠습니다. 감사합니다.
I'm from CIMB. I would like to ask you two questions. First, due to the lockdown in China, I would presume that this would have an impact on the supply chain for the company as well. You're currently operating three plants in China, and I understand that you are adding capacity at Yancheng as we speak. Has there been any disruptions or interruptions in your production or in terms of logistics? Second question, can you provide us with an update on your battery development with respect to different form factors like the prismatic and also the LFP?
네. SK On 기획실의 Jin Seonmi입니다. 첫 번째 주신 질문에 대해 답변을 드리도록 하겠습니다. 우선 중국 내 봉쇄 영향을 여쭤보셨는데요. 첫 번째로 생산 관련돼서 말씀을 드리면 저희가 중국 내 보유하고 있는 생산 사이트들이 상해와 같이 봉쇄나 이동 제한 등의 영향이 있는 지역은 아닙니다. 그렇기 때문에 정상적으로 공장을 가동하고 있습니다. 특히 말씀주셨던 Yancheng 공장의 경우에는 중국 지방정부와의 우호적인 relationship 기반 하에 지속적인 communication을 통해서 생산은 물론이고, Yancheng 2기 건설까지도 일정이 차질이 없도록 최선의 노력을 다하고 있습니다.
This is Jin Seonmi from head of battery strategy and planning office. Relating to the lockdown impact in China on our production. Basically our site is currently under normal operation. The site that we are located in is not directly impacted by the lockdown or the restrictions on travel as had been applied to Shanghai. At Yancheng, we are very closely talking and cooperating with the local government. At this point, there is no production related interruptions that we are experiencing. We will continue to very closely communicate with the local authorities so that we make sure that there is no interruptions in the build out of the second plant.
물류에 대해서도 추가로 말씀을 드리면, 현재 상해를 포함해서 중국 내 주요 port의 입항이 제한되고 있는 상황이긴 하지만, 당사의 경우에는 연태나 청도 등 사전에 확보한 대체 루트를 사전에 활용함으로써 차질 없이 물류에 대응하고 있습니다. 다만 상해항의 봉쇄가 장기화될 경우에 대비해서 타 항구 물류 CAPA를 지속적으로 확보하기 위해서 노력하고 있고, 중국의 코로나 정책을 실시간으로 monitoring 하면서 대응하고 있습니다.
Now in terms of the logistics, currently it is correct that there is restrictions in the access to major ports within China, but our production sites in China have actually some alternative routes that we were able to secure, like in locations at Yantai and Qingdao. In terms of logistical aspect, there aren't any problems that we are experiencing. Port is extended, then we will of course continuously, you know, secure our or put in our efforts to make sure that we secure additional capacity in other port locations. In order to do that, we are on real-time basis monitoring China's COVID-19 related policies, and we are responding accordingly.
네. 두 번째 질문 주신 것에 대해 답변드리겠습니다. SK On 경영전략실장 Yoo Jinsook입니다.
Yes, I will respond to your second question. I'm Head of Battery Business Strategy Office.
말씀 주신 대로 최근에 시장 트렌드나 고객 니즈의 다변화에 따라서 chemistry나 form factor가 다양화되고 있는 것이 사실입니다. 이에 SK On도 이에 대해서 적극적으로 readiness 확보 차원에서 기술 개발을 진행 중에 있습니다.
You are correct in that the recent trend shows that there is diversified need for different chemistry and different form factor. SK On, in order to equip ourselves with appropriate readiness, we are engaged in technology development.
먼저 구체적으로 LFP에 대해 말씀드리겠습니다. 당사는 이미 십 년 전에 LFP 셀을 직접 개발한 이력을 보유하고 있습니다. 이러한 경험에 저희 high nickel 기술을 선도해 온 기존의 기술을 더해서 LFP의 에너지 밀도와 급속 충전을 개선할 수 있는 그런 기술을 개발 중에 있습니다.
For our company, we actually had an experience of developing an LFP 10 years ago. If we can bring our technological capabilities in bringing high nickel content, on top of which if we can improve on the energy density as well as the fast charging capabilities of LFP, that will prove to be quite helpful. We are planning to actually complete the development of LFP by the end of this year, and we are currently in discussions with the relevant customers on that. Of course, however, we will align our mass production schedule in line with the needs and the order requirements that we are seeing from different OEMs. Now in terms of a comparison between LFP in terms of energy density output, as well as low temperature characteristics, it actually lags behind the properties of NCM.
Recently there's been an increase in the cost base. The lithium carbonate prices have actually gone up. We will continuously monitor the technological trend as well as the cost backdrop. In terms of the prismatic, we are aware of some of the customer needs and requirements as we go on with the development, but we do not have any concrete commercialization or business plans in place. However, on a technology basis, we will be able to leverage the technology that we have used in developing the pouch type batteries. We, if we utilize that, we will be able to gain a differentiated edge and also the prismatic cells as well.
The next question will be presented by Parsley Ong from JP Morgan. Please go ahead with your question.
Hi. Thank you for the opportunity to ask question. Congrats on the strong result. I have three questions. First question is on your battery division. I think most investors are a little concerned about your Hungary and U.S. plant turnaround. Could you share with us some details about their operational status, like the ramp up schedule and customer new model launch schedule? I see some headlines about Volkswagen delaying some ID.4, ID.5 models. Maybe could you provide some color on the demand and new model launches for your European customers? Is there potential for your U.S. plant to break even earlier than your Hungary plant? Can you share with us what the margins are like at your China plants in 2021 and versus first quarter 2022? Are they already profitable?
Second question is on raw material cost pass through. Some of your peers have negotiated more raw material cost pass throughs. Could you share with us the details which SK On has negotiated to be on a cost pass through basis? Third question is on your inventory gain. Could you just give us the inventory gain breakdown by division? Thank you.
Uh,
많은 노력들이 지금 진행이 되고 있는데요. SK On 입장에서도 이런 부분에 대해서 혹시 진전이 되고 있는 것이나 아니면 협상이 진행 중인 부분들이 있다면 어떤 것들이 있는지, 이런 부분들에 대해서 말씀을 해주셨으면 좋겠고요. 그다음에 세 번째는 각 사업부별로 그 재고 관련 이익이 이번 분기에 각각의 사업 부분별로 어느 정도 지금 인식이 됐었는지에 대해서 얘기를 해주시면 좋을 것 같습니다.
네, SK On 기획실의 진선미입니다. 첫 번째 질문 주신 사항에 대해서 말씀을 드리도록 하겠습니다. 우선 헝가리와 미국의 이번에 미국 일공장 그리고 헝가리 이공장이 최근에 양산을 개시를 했습니다. 최근에 일분기에 양산 개시를 하다 보니 아직까지는 그 생산성, 그러니까 가동률이나 수율이 안정화되지는 않은 상황입니다. 대부분 공장에서 초기에 그러하듯이 여기에서도 초기에 여러 가지 양산 단계에서, 양산 초기 단계에서 이슈들이 좀 있었고요. 그러한 사소한 이슈들 때문에 말씀드렸던 것처럼 초기에 일부 비용 효과가 있었던 것이 사실입니다.
This is Jin Seonmi from the head of Battery Strategy and Planning Office of SK On and maybe I can take your first question. As you have mentioned in Hungary for the number two factory there and in the US, we do have the number one factory that just started commercial operations. Since the commercial operations have just started in the first quarter.
In terms of the productivity levels, whether it be in terms of utilization or in terms of yield, we are still yet to reach a very stable level. As we have seen in the case of other capacity, we're still in the initial stages of commercial operation, commercial authorization and production, and as a result of that, in this process, we are facing some minor issues that we need to iron out. As a result of that, as you can see, there were some initial costs that we recognized.
OEM의 판매 계획이나 그 판매에 연동되어 있는 앞단의 반도체 수급 이슈 등 여러 가지 이 판매 계획과 관련된 이슈들이 있을 수 있을 것 같습니다. 거기에 대해서는 저희가 구체적으로 지금 시점이 지연됐다거나 하는 것에 대해서는 확인을 해드리기는 사실 어려운 상황인데요. 저희는 기존 계획대로 양산과 판매에 차질이 없도록 계속 생산을 진행하고 있습니다.
With regards to the point about our OEM customers and their sales plans going forward, I do believe that there are a wide variety of elements that would impact our OEM customers sales plans, for example, how semiconductor shortages are solved, with a wide variety of other factors. As a result of that, it would be difficult for us to share with you in detail or confirm whether there would be a delay in that plan or not. What we can say is that from our side, according to the initial plan, we are trying to ensure that we are ready, whether it be in terms of mass production or in terms of sales, to move when necessary.
두 번째 말씀 주셨던 중국 공장의 수익성과 관련해서는 중국 공장의 경우에는 양산이 시작된 지가 이미 2~3년 정도 지난 비교적 성숙화된 단계에 있는 공장들입니다. 그렇기 때문에 신규로 가동되는 다른 타 사이트들에 대해서는 수익성이 높은 상황이라고 말씀드릴 수 있겠습니다.
About your point about the Chinese margins. What I can say there is that, of course, for China, the mass production there is now in the second to third year. On a relative basis, this is a more mature site that we have. When compared to the new capacity or new sites that we have opened, of course the margin levels are higher.
그렇기 때문에 지금 지난해에 이어서 중국 공장의 경우에는 안정적인 수익을 계속해서 지속할 수 있을 것이라고 보고 있고요. 그 외에도 신규로 가동을 시작한 미국이나 헝가리 공장도 기존 가동을 이미 하고 있는 다른 거점 공장들의 노하우를 반영해서 빠르게 안정화를 하고 있습니다. 그렇기 때문에 다른 기존 공장들과 마찬가지로 하반기에는 비슷한 수준까지 안정화된 수율과 가동률을 달성할 수 있을 것으로 기대하고 있습니다.
As a result of that, as was the situation last year from China this year, we do believe that stable margins would be enjoyed. In addition to that, for the new sites that we have opened in the US and Hungary, we are trying to apply the knowhow that we have been able to accumulate from other production sites elsewhere. As a result of that, we do think that the overall stabilization of that capacity will take place in a very quick manner. As a result, our expectations are that in the second half of the year, whether it be in terms of yield or in terms of utilization, we will be able to be on par with the levels that we see in other production sites.
원재료 메탈 연동과 관련된 질문에 답변드리도록 하겠습니다. 많은 분들이 이미 아시고 계시는 것처럼 배터리 가격에서 가장 높은 비중을 차지하고 있는 양극재 메탈의 경우에는 OEM과의 판가 연동 계약을 통해서 원가 상승분을 배터리 판가에 모두 반영을 하고 있습니다.
Maybe to move on to your second question about metal prices and the pass through mechanism that we have with our clients. As you are well aware, in terms of battery prices and battery costs, the largest cost item is the metal that goes into the cathodes. Therefore for that portion, we do have a pass through agreement with our OEMs. Any price increases in the metal will actually be passed through to our sales price.
However, 최근에 이러한 연동되어 있는 주요 metal 외에도 연동되어 있지 않은 다른 원재료들, 동박이나 알루미늄, 전해액 등 다른 가격 비연동 소재들 역시 전반적인 inflation 하에서 배터리 원가 상승에 영향을 주고 있는 상황입니다. However, if you look at the current situation, not only for these metals that are passed through, but on the non-metal side for other materials such as the thin copper film or in terms of aluminum or the electrolytes, these prices have also been rising. So as a result of that has uplifted our overall costs. 어, 이러한 비연동 소재들에 대해서는 중장기적으로 이 공급사와 전략적 협력 관계 구축을 통해서 공급사의 생산능력 확장을 도모하고 그럼으로써 단위당 양산 단가 인하를 유도하고 있습니다.
For these non-linked materials over the mid to long term, the strategy is that we want to have a strategic relationship with our suppliers so that we can increase their capacity and also decrease their unit production cost.
이와 동시에 말씀주신 것처럼 고객사와 협의를 통해서 이러한 비연동 소재들도 배터리 평가에 연동될 수 있도록 OEM들과 지속적으로 협의를 하고 있는 중입니다.
At the same time with our clients, we continue to have ongoing discussions to try to broaden the scope of pass through materials that we have. This is, of course, an ongoing process.
재무사업담당 이동훈입니다. 세 번째 질문에 대해서 답변을 드리겠습니다. 회사별, 사업별 재고 관련 손익은 석유 사업이 5,880억원, 화학 사업은 870억원, 윤활유 사업은 560억원 수준입니다.
Yes, this is Lee Dong-hoon , head of the Finance 3 Office, and maybe I can give you the breakdown of the inventory related gains that we have for each business line. Excuse me. For the refinery business, it was KRW 588 billion. For the petchem business, KRW 87 billion, and for the lubricants business, KRW 56.5 billion.
다음으로 질문해 주실 분은 하나금융투자의 윤재성님입니다. The next question will be presented by Yoon Jae-seong from Hana Financial Investment. Please go ahead with your question.
네, 말씀 잘 들었습니다. 하나금융투자 윤재성입니다. 두 가지 질문이 있고요. 첫 번째는 최근 러시아의 유럽향 가스 공급 중단에 따라서 전기료 급등도 나타나고 있고, 유럽의 제조업체들이 가동 중단하는 게 계속 목격이 되고 있는 것 같아요. 저희가 헝가리나 폴란드의 공장을 가지고 있는데 여기에 미치는 전기료 급등의 영향을 어떻게 봐야 될지 궁금하고요. 두 번째는 정유 사업인데요. 지금 현재 CDU 가동률이 77%인데 향후 가동률이 얼마큼 올라갈 수 있을지에 대한 전망 부탁드리고요. 그리고 디젤이 최근에 마진이 굉장히 좋은 상황인데, 이 디젤 수요 향상을 위한 내부적인 노력들이 있는지, 그 부분에 대한 말씀 부탁드립니다.
Hi, this is 윤재성 from Hana Financial Investment. I would like to ask you two questions. First, because of the geopolitical issues surrounding Russia had stopped supply of gas to European countries, which really pushed up the electricity price. Some of the plants based in Europe had to stop their operations. You have plants in Hungary and Poland. Would like to understand what the impact of that rise in electricity tariffs has on your operation. Second question, the run rate of the CDU is currently 77%. How far do you think that run rate could actually go up? The diesel margin we are seeing has been very strong recently. Are there any efforts on the part of the company to further bring up the yield?
SK On 기획실의 진선미입니다. 첫 번째 말씀주셨던 유럽의 동력비 관련해서 답변을 드리도록 하겠습니다. 현재 SK On은 헝가리에 두 개의 공장을 가동을 하고 있습니다. 최근에 러시아와 우크라이나 전쟁, 그리고 여러 가지 이슈들로 인해서 LNG 가격과 전력 가격, 동력비가 상승한 효과가 분명히 있습니다. 하지만 저희 헝가리 공장의 경우에는 중장기 계약 그리고 스팟 시장을 활용하는 계약을 통해서 차질 없이 전력과 LNG를 공급받고 있습니다.
I am Jin Seonmi from Battery Strategy and Planning Office. Responding to your question about the impact of the electricity cost in Europe. SK On, yes, has two plants based in Hungary. Recently because of the Russia/Ukraine conflict and some other issues, LNG price and electricity tariff had gone up significantly. However, we have in place in Hungary a mid to long term contract, electricity supply contract, and we also utilize spot contract as well. In terms of the power supply to our Hungary locations, we are currently experiencing no interruptions.
네, SK에너지 경영기획실장 이동열입니다. 두 번째 질문 답변드리겠습니다.
Yes, I am Lee Dong-yeol, the Head of Corporate Planning Office of SK Energy. I will respond to your second question.
당사의 가동량은 정제마진의 경제성을 고려하여 최적 가동량을 결정하고 있습니다. 가동량을 결정짓는 정제마진은 CDU 마진과 이차공정, 즉 고도화 공정의 마진인 크래킹 마진의 합으로 구성되어 있습니다.
The way we determine the level of utilization or the run rate is in consideration of the refining margin. The refining margin is comprised of the CDU margin as well as the secondary process that follow or which is called the cracking margin. Typically a CDU margin is going to be in the negative realm. What we do is rather than utilizing the crude, we minimize the run rate of the CDU facility. We want to maximize the use of the upgrading facilities by adopting an external feed source in order for us to maximize the refining margin. Basically in order to determine the run rate of the facilities for the upgrading processing or upgrading facilities, basically different refinery companies have different CDU or the differences in the CDU facilities that they operate.
Hence it is based off of that baseline that our CDU run rate is 77%. However, for us, we source some other external feed, and that helps us to determine the CDU run rate. Based off of the actual operation, based run rate currently as of Q1, that run rate or utilization is at 95%. In Q2, we expect with the prolonging Russia-Ukraine conflict and people's expectation for the resumption of post COVID following the reopening, we expect the product crack to be maintained at an elevated level. Based off of that crude conversion based or the actual run rate based figure, we are expecting our run rate to be 95%.
Recently, because we are seeing strong diesel margins, we have adjusted the process mode in order to maximize the production of kerosene or the middle distillates and also the CDU's diesel production would had gone up, and we have also adjusted the FCC in order to focus on maximizing the diesel production. For FCC, excuse me.
The next question will be presented by Baek Young-chan from KB Securities. Please go ahead with your question.
Yes. Thank you for the opportunity to ask questions. There are two questions that I would like to ask you. First is about your battery operations. For the initial costs that you incur for new capacity, there was some that we recognized in the first quarter related to your Hungary site. In the second quarter, what sites and also what amount of the same type of initial ramp-up cost would be recognized? That's the first question that I have. The second question that I have is for your next generation battery roadmap, in terms of development. Whether it be solid-state batteries or cobalt-free batteries, I do think that there are various other battery types that are under development. If you could discuss that with us, that would be appreciated.
Yes, this is Jin Seonmi, Head of the Battery Strategy and Planning Office at SK On, and maybe I can address your first question about the initial costs related to new battery.
지금 이 분기에 대해서 문의를 주셨는데, 사실상 이 분기 안에 완전히 정상적인, 100% 정상적인 수준으로 램프업이 되기는 사실상 어렵지 않을까라고 판단을 하고 있습니다. 하지만 단기적으로 추가로 양산 개시하는 사이트가 있거나 새로운 스펙의 제품을 생산하는 계획이 없기 때문에, 지금 현재 양산 개시한 제품의 경우에는 안정적으로 생산성을 안정화시켜 나갈 수 있을 것으로 보고 있습니다.
Your question asked about in the second quarter whether there would be another or more initial costs that we recognize. It is true that if we look at the second quarter in itself, for the overall normal ramp up of these sites, we do think that it will be very challenging to reach 100%. However, for the time being, we don't have any other, or for the short term, we don't have any other sites that we will be opening for mass production, and we don't have any new products that would require new specifications. As a result of that, we do think that we can focus on the current two sites that we have and stabilizing those productions.
두 번째 질문 답변드리겠습니다. SK On 경제저널의 기자 유진숙입니다.
Yes. This is Yu Jin Sook from SK On, head of the battery business strategy office, and maybe I can address your second question.
말씀 주신 대로 향후 차량 세그별 다양한 기술이 적용될 것으로 예상이 되고 있고, cobalt-free라든지 cobalt-less 이런 기술들에 대한 요구도 있고 현재 개발 중에 있습니다.
As you said, and as you have mentioned by different car type, we do think and also by different segment that there is a wide variety of different technology that will be required. For example, there could be a cobalt-free and also a cobalt-less.
그래서 향후 고객의 니즈라든지 기술 개발 수준을 보고 저희가 로드맵을 구체화해서 향후에 공유드리는 것이 적절할 것으로 보입니다.
I do believe that in light of that overall backdrop, it would be better for us to look at and understand the customer needs better and also the evolution of technology available to give you more details about the future roadmap at a later time.
다음은 차세대 배터리 중에 전고체 전지 기술 개발에 적극적으로 지금 대응 중에 있습니다.
I think what we can say is that of the various battery technology that is available for a solid-state battery, this is an area in which we are very actively engaging in research and development.
이미 아시겠지만 내부적으로 차세대 전고체 전지를 전담 연구하는 Emerging Energy Research Center라고 해서 별도 조직을 운영 중에 있고, 해당 조직을 통해 자체 연구 역량을 강화 중에 있습니다.
As you are probably aware, internally for solid-state batteries, we have a dedicated organization which is called the Emerging Energy Research Center. We are exerting various efforts through this organization to strengthen the overall resources required and also the R&D capabilities.
이와 동시에 이미 아시겠지만 저희가 Solid Power사에 지분 투자를 한 바가 있듯이 외부에 기술 전문성을 가진 업체와 적극적인 파트너링과 오픈 이노베이션을 추진 중에 있습니다.
As you are also aware, we have made an equity investment into Solid Power. As a result of that, going forward, we also will continue to have a very open stance towards using and utilizing outsourced technology and partnering up with different outside partners and engaging in open innovation.
전고체 전지의 경우에는 밀도라든지 안전성, 재고 측면에서 분명 경쟁 우위가 있는 것은 분명하나 아직까진 이온 전도도나 리튬 덴드라이트 해결 이런 이슈들이 있습니다.
For solid-state battery, of course, it does have its own benefits, whether it be in terms of energy. It does have its shortfalls, whether it be for stability, energy density, and also, the inventory that it can behold. But we think that at the same time, there are more issues that need to be solved, whether it be for the ion conductivity or the lithium dendrites.
현재 주요 전고체 전지 개발 업체들이 2020년대 중반을 목표로 발표를 하고 있으나 기술적 허들 극복을 위한 기술 개발 시간이 필요하고, 전고체 전지용 신규 공정이라든지 설비가 개발될 그 시간이 필요할 것으로 보이며, 또 향후 OEM에 특화된 그 제품을 개발하고 이걸 양산하는 데까지 시간이 소요될 것으로 예상됩니다. 이에 따라서 상업화 시기는 저희는 빨라도 2020년대 후반으로 그렇게 예상을 하고 있습니다.
Right now there are a lot of battery producers that are saying that a solid-state battery can be created by the mid-2020s. However, if we look at the overall situation, we do think that there will be more time that would be required for such development to take place. In addition to that, not only does the technology need to be in place, but also the processing and also the equipment that would be required to create these batteries in a more mass format. At the same time, to be able to have more customized products for OEMs, that in itself would require product development and also the mass production of that.
If we take all of these different factors into consideration, for a solid-state battery to be truly commercialized, we do think that it will have to be the late 2020s for that to take place.
이러한 관점에서 저희는 이십 년대 후반에 상용화 가능한 readiness 확보를 목표로 현재 기술 개발 중에 있습니다. 이상입니다.
From that point of view, right now we are focusing on the technology development that would be required for us to be in a state of readiness for the market to take off in the late 2020s.
시간 관계상 마지막 질문을 받겠습니다. Due to time restriction, we will take the last question of today. 마지막으로 질문해 주실 분은 Citi의 Oscar Lee입니다. The last question will be presented by Oscar Lee from Citi. Please go ahead with your question.
Thank you for the chance to ask question. Could you talk a little bit more about the sort of revenue guidance increase? Obviously, there was part of the ASP from the metal cost pass through. But in terms of shipment, battery shipment, are you actually raising your target compared to your original numbers, or is the revenue increase all because of ASP pass through? Second question is also for your first quarter results in terms of your revenue for EV battery. Will you also roughly give us an idea about in terms of the shipment basis on a QOQ basis, is it flat or up or down? You know, any sort of guidance? Thirdly, I saw your waterfall chart on the battery sort of cost.
The raw material price increase factor you mentioned there, right, is actually quite big. It is roughly working out to be around four percentage points. Which to me actually looks a little bit high because most of your metals, you know, has been passed through, you know. Anyway, is there any particular? I mean, among all the sort of other non-cathode items, you know, electrolyte or copper foil, you know, could you identify, you know, which of these items are driving that sort of raw material price increase on a QOQ basis? Thank you.
앞서서 매출 가이던스를 주셨습니다. 그러면서 설명해 주신 게 기본적으로 ASP 판가 쪽에 연동이 되어 있고, 판가가 높아지는 것이 주 원인이다라고 하셨는데, 그렇다면 출하량, 출고량, 판매량 같은 경우는 어떤가요? 실제로 출하량 기준으로의 목표값은 원래대로 유지를 하시는 거고, 이게 순전히 가격 상승에 기인해서 가이던스를 높이신 건지요. 그리고 일사분기 EV 배터리 매출을 보게 되면 실제로 QOQ로 보았을 때, 마찬가지로 EV 배터리의 출하량도 더 우상향 했나요? 아니면 하락했나요? 아니면 같은 수준을 유지를 하였나요? 세 번째 질문은 배터리의 원가 구조, 워터폴 차트를 보니까 말씀해 주신 것처럼 원재료 가격 인상의 영향이 가장 컸습니다. 4%포인트 정도의 임팩트가 있었는데, 이것이 조금 높아 보이는 것이 메탈 가격 같은 경우에는 주로 연동이 된다라고 말씀하셨는데, 그러면 비연동 요소 중에서 동박이랄지 전해액이나 음극재 같은 경우 어떤 아이템 때문에 주로 원소재 가격이 이렇게 높아졌는지요? SK On 기획실의 진선미입니다. 첫 번째 질문 주신 사항에 대해 답변을 드리도록 하겠습니다.
배터리 매출의 가이던스가 이번에 1조 정도가 상향 조정이 되었습니다. 말씀드렸던 것처럼 메탈 가격 상승에 따른 판가 인상이 그 주요 요인이라고 말씀을 드렸는데요.
This is Jin Seonmi from Battery Strategy and Planning Office. Responding to your first question, yes, we increased our revenue guidance by about one trillion won, and we mentioned that the rationale behind that is because of the ASP rise on the back of metal price increase.
지금 매출 판매 물량 관련해서는 저희가 계획 대비로 물량이 더 추가되었다라고 말씀드리기는 어려울 것 같습니다.
In terms of the shipment or the volume impact, we will not be able to say that there was any additional volume, as against our plan.
실제로 1분기 같은 경우에는 앞서 말씀드렸던 것처럼, 차량용 반도체 수급 이슈 등이 아직까지 남아있는 상황에서 일부 계획 대비 물량이 감소한 부분이 있었습니다. 이분기 이후로는 이러한 물량, 반도체 수급 이슈가 좀 안정화되면서 계획을 유지하는 것으로 보고 있습니다.
Now what I mean by that is because if you look at Q1 figures because of the semiconductor supply issue relating to automobiles, our volume shipment had been actually less compared to our plan. As we enter into the second quarter, we believe that such supply issue will somewhat be mitigated and hence we will be able to ship out based on the projections or the target that we put in our plan.