SK Inno,’money scream’ to accumulate provisions for lawsuits

As the US International Trade Commission (ITC) acknowledged infringement of trade secrets for electric vehicle batteries and decided to ban imports for 10 years, it became difficult for SK Innovation to avoid accumulating trillions of won in litigation provisions this year.

SK Innovation recorded a deficit last year due to the impact of Corona 19, and debt has increased significantly due to investment in battery facilities in recent years. According to an analysis, SK Innovation’s financial soundness can be greatly shaken by the accumulation of additional provisions.

According to the battery industry on the 15th, SK Innovation is expected to accumulate several trillion won of litigation provisions within the first quarter as early as possible.

This is because on the 10th (local time), as the US ITC joined LG Energy Solutions in a lawsuit for infringing battery trade secrets, SK Innovation could no longer postpone recognizing related risks. In order to operate SK Innovation’s first and second plants in Georgia, USA, without problems in the future, it is necessary to hurry to negotiate with LG Energy Solutions.

The problem is that in a situation where SK Innovation’s financial soundness has deteriorated significantly, provisions worth trillions of won can be a huge burden. SK Innovation invested more than 4 trillion won in investment in battery factories last year alone.

As a result, the company’s debt was 23.91 trillion won as of the end of last year, an increase of 1.687.8 billion won (7.92%) from 21,321.3 billion won in 2019. The debt-to-equity ratio was 149%, an increase of 71.7 percentage points from 77.3% at the end of 2017.

Sales and profitability are also rapidly deteriorating due to the impact of Corona 19. SK Innovation recorded 34.16 trillion won in sales last year, down 30.7% from 49,306.9 billion won in 2019. During the same period, it could not avoid a turnaround from operating profit of 1,113.6 billion won to 2,568.8 billion won of operating loss.

An industry insider said, “SK Innovation has not accumulated any provisions related to litigation so far, but as the final ruling is issued, we will have no choice but to discuss related issues soon.” Even in order to enhance competitiveness, there is a need for an immediate conclusion through rational discussions between the two companies.