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SEOUL — SK Innovation delivered a blowout third-quarter performance, posting an operating profit of 3.7 trillion won (about $2.7 billion) — the strongest in its history — as refining margins and lubricant prices surged on tightening global supply.
SEO News Desk, October 26, 2025 — The South Korean energy group disclosed the results on Thursday, showing revenue of 28.77 trillion won, up 39.7% from a year earlier, while operating profit leaped a stunning 532.5%. The headline number masks a two-speed story: the oil refining and base-oil units are minting cash, while the battery arm, SK On, remains in the red — though a strategic shift into energy storage systems could change that.
Refining and lubricants lead the charge
The refining segment is reaping the benefits of supply-side stress. Utilization rates at Middle Eastern refineries have slipped, and Russia's continued restrictions on diesel exports are keeping petroleum product margins unusually high. SK Energy, the group's core refining business, posted operating profit of 1.2058 trillion won for the quarter, up 554.6 billion won from the previous quarter.
The lubricants business was even more striking. SK Enmube, which produces base oils, recorded a quarterly operating profit of 1.0906 trillion won — beating its entire annual profit of 1.0712 trillion won from 2022. Global disruptions to base-oil supplies have sent spreads to near-record levels, and the company is now the group's most profitable unit on a per-quarter basis.
SK Innovation E&S, which handles power generation and liquefied natural gas trading, contributed 774.4 billion won in operating profit, a jump of 668.5 billion won quarter over quarter. That improvement came on the back of higher spot electricity prices and long-term LNG contracts locked in earlier. SK Geo Centric, the petrochemicals arm, added another 86.7 billion won.
SK On: Losses persist, but ESS pivot gains traction
The weak spot remains electric vehicle batteries. SK On recorded revenue of 1.5263 trillion won and an operating loss of 80.5 billion won in the third quarter. Lower shipment volumes and a base effect from one-time gains in the prior quarter dragged down the numbers. Still, the company insists that underlying profitability improved when excluding those one-off items.
Now SK On is aggressively diversifying beyond EVs. It recently inked a supply agreement with U.S.-based NeoVolta for around 9 GWh of lithium iron phosphate (LFP) batteries for energy storage systems, or ESS. Additional orders are being discussed in North America and at home.
The logic is simple: instead of building new ESS factories, SK On plans to convert existing EV battery lines in Korea and the U.S. to produce storage products, saving billions in capital spending. The conversion pace will depend on order volumes, EV demand forecasts, and regional policy — but the direction is clear.
U.S. regulatory pressure on Chinese battery content provides another opening. Kim Young-gwang, head of SK On's financial management division, said U.S. ESS operators that previously relied on Chinese cells are now actively seeking non-Chinese alternatives. “Interest in stable, non-Chinese supply sources is rising sharply,” he said, noting that inquiries about volumes, pricing, and long-term contracts have increased.
Kim projected the North American ESS market would grow from 80 to 100 GWh this year to more than double by 2030. He also pointed to AI data centers as an emerging demand driver, with SK On working alongside SK Telecom to develop integrated multi-functional ESS products.
Exclusive analyst view
The new focus is winning cautious approval from the investment community. “SK On's ESS pivot directly tackles its two biggest problems: oversupply in EV batteries and geopolitical constraints on sourcing,” said Han Sang-won, an energy analyst at IBK Securities in Seoul. “U.S. restrictions on Chinese battery components could actually become a tailwind for Korean players, but the real test is execution — converting lines fast enough to meet a demand wave that is still forming.”
Han said the battery unit could return to operating profit within two to three quarters if ESS orders ramp as projected, though he cautioned that price competition in the EV segment remains intense.
Refining outlook: Solid, but tied to geopolitics
Management sees no immediate letup in refining conditions. “Unless oil prices collapse sharply, we expect to maintain quite solid results,” said Jung Young-gyu, head of SK Energy's management planning division. He added that geopolitical volatility, particularly tensions in the Middle East, will likely keep markets on edge through next year.
Analysts agree that the buffer to absorb supply shocks is thinning. Stockpiles are lower than usual, and spare production capacity is stretched. That combination, they argue, could push crude prices and refining margins higher for a while longer.
For now, SK Innovation shareholders are enjoying the ride. Shares rose as much as 3% in Seoul trading after the announcement, and the stock has climbed roughly 15% this year, outperforming the broader KOSPI index.
The big question is whether the refining windfall can buy SK On the time it needs to pivot toward a sustainable ESS business — before the next downcycle hits the oil market.
