SK Discovery posts record quarterly sales of W3.44tr on subsidiary growth, portfolio overhaul

SK Discovery posted record quarterly sales and pretax profit in the third quarter of this year, driven by improved earnings at key subsidiaries and a restructuring of its business portfolio. The company also strengthened its financial position by raising 1.6 trillion won through the partial monetization of stakes in its power generation subsidiaries.

SK Discovery disclosed Friday that its consolidated third-quarter sales reached 3.44 trillion won and operating profit came in at 170.8 billion won. Compared with the same period last year, sales rose 32 percent and operating profit increased 2 percent.

Pretax profit jumped 311 percent year-on-year to 368.7 billion won. Both figures are the highest for any quarter since the holding company was established in December 2017.

The results reflected profitability improvements at major subsidiaries including SK Gas, SK Chemicals and SK Plasma, as well as gains generated during the portfolio restructuring process. The outsized growth in pretax profit relative to operating profit is attributed largely to one-time gains from the business reorganization.

Among subsidiaries, SK Gas swung to an operating profit of 147.7 billion won in the third quarter, reversing a loss from the previous quarter. The turnaround was aided by business operations that capitalized on the price spread between LNG and liquefied petroleum gas.

SK Gas's pretax profit for the quarter reached 285.8 billion won, up 86 percent from a year earlier, reflecting the effect of diversifying its revenue base beyond its core LPG business into LNG and power generation.

SK Chemicals also improved its consolidated earnings despite a broader slump in the chemical industry. Third-quarter operating profit rose 115.6 percent year-on-year to 33.6 billion won, while sales climbed 21.5 percent to 740.8 billion won over the same period.

Steady growth in the pharmaceutical business and a narrowing of losses at subsidiary SK Bioscience supported the improvement. The inclusion of results from SK Multi-Utility's combined heat and power plant, which began commercial operations in November last year, also contributed to the sales increase.

However, SK Chemicals' standalone operations continued to feel the strain of difficult industry conditions. On a separate basis, third-quarter operating profit fell 45 percent year-on-year to 16.4 billion won, hurt by rising raw material costs and exchange rate volatility.

SK Plasma, a specialist in blood plasma products, also contributed to the earnings improvement, posting third-quarter operating profit of 5.4 billion won. Domestic and export sales both grew, and revenue from a technology transfer agreement with Turkey was also recognized in the quarter.

Alongside the subsidiary earnings improvements, SK Discovery has been reinforcing its financial structure through portfolio restructuring.

This year, SK Gas and SK Chemicals raised approximately 1.6 trillion won by monetizing minority stakes in their power generation subsidiaries, selling partial interests while retaining operational control.

As a result, SK Discovery's consolidated cash and cash equivalents at the end of the third quarter stood at 3.85 trillion won, up 1.4 trillion won from the end of last year. Over the same period, its debt-to-equity ratio fell 11 percentage points, from 138 percent to 127 percent.

The company said the funds raised have expanded its financial capacity to both strengthen the competitiveness of existing businesses and identify new growth opportunities.

SK Discovery is also pursuing subsidiary mergers to streamline its business structure. SK Gas completed the absorption merger of SK Advanced, a subsidiary engaged in propane dehydrogenation operations, on Nov. 4. The move integrates the supply chain from propane procurement through propylene production, with the aim of cutting costs and improving operational efficiency.

The company will continue its shareholder return policy, planning to buy back and retire an additional 60 billion won worth of treasury shares over the three years from this year through 2028. It has also committed to paying an annual dividend of at least 1,700 won per common share.

Meanwhile, SK Discovery appointed Yoon Byung-seok, president and chief executive of SK Gas, as its new president on Oct. 30. Yoon is credited with expanding SK Gas's business scope from its traditional LPG focus into LNG and power generation, and is expected to lead SK Discovery's efforts to identify new growth businesses and upgrade its portfolio going forward.