SK On swings to profit for first time in 7 quarters, posts record operating income since spinoff

An aerial view of SK On's Seosan factory. [SK On]

SK On, which had been mired in losses, swung to its largest quarterly profit since its spinoff, posting operating income of 821.8 billion won ($567 million) in the second quarter — its first profitable quarter in seven. It is the highest operating profit in any of the 19 quarters since the company spun off in 2021.

SK Innovation disclosed Thursday that SK On recorded sales of 2.95 trillion won and operating profit of 821.8 billion won in the second quarter of this year.

Sales rose 1.15 trillion won, or 64.5 percent, from 1.79 trillion won in the previous quarter, and were up 838.3 billion won, or 39.8 percent, from 2.11 trillion won in the same period last year.

The operating result improved by 1.17 trillion won from a loss of 349.2 billion won in the previous quarter, returning to the black. Compared with a loss of 66.5 billion won in the same quarter a year earlier, the operating result improved by 888.3 billion won.

The last time SK On posted a quarterly profit was the third quarter of 2024 — seven quarters ago. The company recorded operating income of 24.1 billion won then, its first profit since the spinoff, but slipped back into the red in the fourth quarter of that year with a loss of 359.4 billion won.

Losses continued throughout last year: 299.4 billion won in the first quarter, 66.5 billion won in the second, 124.8 billion won in the third and 440.7 billion won in the fourth, bringing the full-year operating loss to 931.4 billion won.

SK On posted an operating loss of 349.2 billion won in the first quarter of this year as well, but the large profit in the second quarter abruptly reversed the earnings trajectory.

SK On's container-type ESS product. [SK On]

Cumulative sales for the first half of this year reached 4.74 trillion won, up 1.02 trillion won, or 27.6 percent, from the same period last year. First-half operating profit came in at 472.6 billion won, a swing of roughly 838.5 billion won from an operating loss of 365.9 billion won in the year-earlier period.

The second-quarter improvement was driven by higher battery sales in Asia, cost reductions and a larger advanced manufacturing production credit under the US Inflation Reduction Act.

One-time gains — including compensation received from customers — added to those results, pushing operating income to its highest level since the spinoff.

SK Innovation said SK On returned to an operating profit "on the back of one-time factors such as customer compensation, along with cost reductions, expanded sales in Asia and increased IRA tax credits."

SK On's battery factory in Tennessee, now operated solely by SK On after the company completed the wind-down of its joint venture with Ford. [SK On]

SK On is also restructuring its business to improve profitability. In the second quarter, it completed the wind-down of BlueOval SK, its US battery joint venture with Ford, and converted the Tennessee factory into a wholly owned subsidiary called SK On Tennessee.

The company aims to accelerate decision-making and reduce investment and financial burdens by unwinding the joint-venture structure. It plans to further rebalance its production facilities and customer portfolio to cut fixed and structural costs.

In the second half, SK On intends to grow its ESS business into a new revenue stream alongside expanded electric vehicle battery sales. The strategy focuses particularly on securing ESS orders from hyperscalers operating AI data centers and from power utilities, with the aim of offsetting volatility in EV market demand.

SK Innovation said it expects "profitability improvements from fixed-cost reductions and operational efficiencies through portfolio rebalancing in the second half," adding that it will "expand EV battery sales and ESS orders to secure drivers of mid- to long-term profitability improvement."

kwater@heraldcorp.com