SK Group Doubles Cash Generation on Semiconductor Gains... Energy Sector Increases Borrowing

[Korea Financial Times, Gwak Horyung] SK Group’s cash generation capacity has rebounded for the first time in three years, yet Chairman Chey Tae-won remains highly vigilant about the current crisis. From the beginning of the new year, Chairman Chey emphasized, “What we need now is the courage to take action despite knowing the difficulties,” and stressed, “We must strengthen our fundamental competitiveness through operational improvements.” This is because the accounting figures are merely an optical illusion created by the semiconductor business, while the sluggish performance of the energy sector continues.

According to the Korea Ratings data package, SK Group’s consolidated EBITDA margin reached 23.8% in 2024, nearly doubling from 12.3% in 2023 in just one year.

The EBITDA margin is the ratio of EBITDA to sales revenue. While similar to the operating profit margin, it reflects profitability excluding depreciation, interest expenses, and taxes, thus indicating the actual cash-generating capability.

SK Group’s main concern is the pronounced reliance on semiconductors. The EBITDA margin of semiconductor affiliates such as SK hynix and SK siltron surged from 19.5% in 2023 to 53.9% in 2024. In contrast, the EBITDA margin of the energy affiliates, which account for the largest portion of sales, declined from 6.5% to 4.7% over the same period.

SK innovation, which accounts for 81% of sales among SK’s energy affiliates, is experiencing poor performance across all major business segments, including refining, chemicals, and batteries. As a result, even though its cash generation capacity is weakening, it faces a structural burden to continue large-scale investments such as battery facility expansions.

Consequently, dependence on external financing has increased, leading to a vicious cycle of expanding borrowings.

In fact, SK innovation’s consolidated total borrowings surged by approximately 54%, from KRW 30.535 trillion in 2023 to KRW 47.129 trillion in 2024.
The merger of SK innovation with SK E&S, which has strong cash generation capacity, in November last year was also a measure to overcome its financial crisis. Subsequently, in February this year, three SK innovation affiliates—SK on, SK Enterm, and SK International Trading—also underwent mergers. However, with SK on expected to remain in the red this year due to the prolonged EV market downturn, concerns are rising that additional support measures may be necessary.



Gwak Horyung (horr@fntimes.com)