S&P Revises SK Innovation Outlook to Stable on Refining Strength, Deleveraging

S&P Global Ratings has revised its outlook on South Korean energy and chemical company SK Innovation Co. Ltd. (KRX:096770) to stable from negative, while affirming its 'BBB-' long-term issuer credit rating. The agency pointed to expectations for strong profitability and ongoing deleveraging efforts through asset sales as the primary drivers for the change.

Rationale for the Upgrade

The ratings agency highlighted the strong performance of SK Innovation's core businesses, which generated approximately KRW7.2 trillion in EBITDA in the first half of 2026. This was supported by solid refining margins, high oil prices, and tight supply in the lubricant market, according to S&P.

S&P forecasts that SK Innovation's full-year EBITDA will reach KRW11.0 trillion in 2026, a substantial increase from KRW3.9 trillion in 2025. The agency projects this will moderate to KRW7.6 trillion in 2027.

Balance Sheet Improvement

A key factor in the outlook revision is the company's progress in reducing its debt load. S&P noted that SK Innovation is strengthening its balance sheet through a series of asset disposals, including:

Ad

• A KRW1.2 trillion capital reduction from joint venture investments in China and Southeast Asia.
• An expected KRW200 billion from the sale of assets by its chemical subsidiary, SK Geo Centric Co. Ltd.

As a result of higher earnings and debt reduction, S&P forecasts SK Innovation’s adjusted debt-to-EBITDA ratio will improve significantly to about 3.2x in 2026 from 9.1x in 2025. While the ratio is expected to rise to 4.3x in 2027 due to lower EBITDA, it would remain well below the agency's downgrade trigger of 5.5x.

Lingering Headwinds

Despite the positive outlook for the refining division, S&P noted persistent challenges in other segments. The company's electric vehicle (EV) battery business is projected to remain loss-making in 2027, following a modest profit in 2026 that was supported by a one-time payment from Ford Motor Co.

Furthermore, the chemical business continues to face headwinds from industry-wide supply and demand imbalances, with the ratings agency expecting only marginal improvements over the next one to two years.