SK Innovation, parent of South Korea’s largest oil refiner and battery maker SK On, said on Wednesday it will merge with energy affiliate SK E&S as the nation’s No. 2 conglomerate undertakes a major overhaul to boost profitability.
The move, which creates a 100 trillion won (USD 72.57 billion) asset company, will help shore up the finances of loss-making battery maker SK On by combining it with a profitable company that has a stronger balance sheet, analysts said.
“The merger is expected to positively impact the company’s profit and financial structures by enhancing competitiveness of its mid- to long-term energy business,” SK Innovation said in a regulatory filing.
Unlisted SK E&S operates businesses including profitable city gas utilities and liquefied natural gas (LNG) power generation units. It reported 1.3 trillion won (USD 939.37 million) in 2023 operating profit out of 11.2 trillion won in sales.
Battery maker SK On has never made a profit since it was split off from SK Innovation in late 2021. Lately, it has been struggling with a drop in electric vehicle battery shipments amid a global slowdown in electric vehicle sales.
Its cumulative operating losses amount to about 2.3 trillion won (USD 1.7 billion) while its debt-to-equity ratio was 188% as of end-March.
Parent SK Innovation reported a consolidated 1.9 trillion won operating profit in 2023 out of 77.3 trillion won in sales.
