SK Innovation, parent of South Korea’s largest oil refiner and battery maker SK On, said on Wednesday it would merge with energy affiliate SK E&S as part of a major overhaul to boost profitability.
The move, which creates a KRW100 trillion (US$72.57bn) asset company, would 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 told Reuters.
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“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 cited by the news agency.
Unlisted SK E&S operates businesses including profitable city gas utilities and liquefied natural gas (LNG) power generation units. It reported KRW1.3 trillion ($939.37m) in 2023 operating profit out of KRW11.2 trillion in sales.
Separately, Reuters added, 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.
The battery maker 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 KRW2.3 trillion ($1.7bn) while its debt to equity ratio was 188% at 31 March.
Parent SK Innovation reported a consolidated KRW1.9 trillion won operating profit in 2023 out of KRW77.3 trillion in sales, Reuters noted.
