SK Group's Energy & Battery Businesses Face Test of Future Competitiveness

SK Group's energy and battery business divisions are at a critical turning point. As the refining business, which has led group performance, faces increased uncertainty and the battery business must improve profitability, redefining the role of energy within a strengthened semiconductor-centric growth strategy has become a key challenge determining SK's future competitiveness.

SK Group's energy business pillar, centered around SK Innovation, comprises refining, battery, and resource development operations. The refining business, which historically drove group earnings, has seen its stability weakened recently by oil price volatility and slowing demand, with refining margins continuing to fluctuate significantly based on Middle East tensions and global economic trends. While refining can see improved profitability short-term with rising oil prices, its long-term growth potential is gradually being limited by high volatility, global demand slowdown, and the shift towards eco-friendly energy. SK On, the battery business, continues to post losses due to a slowdown in global EV demand and the burden of increased investment, but is pursuing profitability improvements through production efficiency gains and adjusted investment pace. The market views SK Group's energy sector as entering a 'transitional phase,' where refining maintains a stable cash-generating role with limited growth, and batteries offer growth potential but low profitability.

Consequently, the need for business portfolio reorganization is growing. SK Innovation is shifting its focus from refining to batteries and energy. Although short-term performance remains highly volatile, the energy transition strategy is solidifying as a core competency for the group. The energy business is structured in conjunction with petrochemicals.