S&P cuts SK Innovation, SK Geo Centric

S&P said it lowered its ratings for SK Innovation Co. Ltd. to BB+ from BBB-.

“SKI's debt leverage will likely stay higher for longer than we anticipated. We believe the company's debt leverage will not fall below 4x before the end of 2025. This is owing to a recent slowdown in demand for EV batteries and higher capex in 2024. We forecast the adjusted debt-to-EBITDA ratio will be 5.2x in 2024 and 4.3x in 2025, with adjusted debt reaching Korean won (KRW) 28 trillion by 2025 from KRW 23 trillion in 2023 and KRW 19 trillion in 2022,” the agency said in a press release.

S&P said SKI projects a recovery for EV battery volumes in the second half of 2024, but the agency sees risks to a recovery in 2024.

“Meanwhile, SKI's refining and chemical business will likely see some profit improvement in 2024, considering strong refining margins in the first quarter of 2024 and additional profit contribution from an exploration and production (E&P) project in China,” the agency said.

The outlook remains stable.

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