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SK Innovation Businesses Face Uncertainties as Middle East Conflict Continues

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Most of SK Innovation's key subsidiaries face uncertainties in Q2 due to logistical disruptions and oil price volatility caused by the ongoing conflict in the Middle East, the South Korean intermediate holding company said in its Q1 results on Wednesday.

Oil refiner SK Energy expects the normalization of production and logistics to "take time" even after conflict resolution. In Q1, higher oil prices have resulted in inventory gains.

SK Geo Centric, a chemical manufacturing company, said "oil price trends may drive volatility stemming from inventory effect," despite higher earnings in Q1 due to strong naphtha prices and aromatic spreads.

For SK Enmove, a lubricant and base oil producer, margins were lower in Q1 due to higher oil prices, but tight supply and feedstock availability concerns may improve results in Q2.

Exploration and production company SK Earthon also benefited from higher oil and gas prices in Q1, and may see resilient financial performance in Q2 due to "robust integrated selling price," according to the report.

For SK Innovation's battery business, SK On, long-term profitability is expected to improve due to sales growth in Europe and growing market in North America. The subsidiary has recently won three projects in a government tender, totaling 284 megawatts or 50.3% of the total capacity.

Meanwhile, the Energy & Service unit may see lower city gas demand in Q2 following a winter heating demand peak in Q1.

This segment, as well as the SK IE Technology, posted year-over-year declines in Q1 revenue. All other SK Innovation subsidiaries recorded positive revenue changes.

SK Innovation also said it had delivered the first liquefied natural gas cargo from Australia's Caldita-Barossa gas field, and will serve as project operator for the 1.5-gigawatt Quynh Lap LNG power project in Vietnam.

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