SEOUL, (Reuters) – 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 ($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 ($939.37 million) in 2023 operating profit out of 11.2 trillion won in sales.
Separately, SK On’s board said it had approved a merger with SK Trading International and SK Enterm to improve raw material purchasing efficiency and expand trading, helping improve SK On’s profit structure.
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 ($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.
($1 = 1,377.9500 won)
Reporting by Joyce Lee and Heekyong Yang, Editing by Louise Heavens and Miral Fahmy
