SK Group set for portfolio restructuring amid mounting financial burdens

SK Group Chairman Chey Tae-won delivers a keynote speech during a  meeting with a group of Korean and Japanese businesspeople at a hotel in Tokyo, May 14. Yonhap

SK Group is on track to carry out major portfolio restructuring to alleviate the escalating financial burden stemming from unprofitable affiliates and to optimize management efficiency, according to analysts, Friday.The nation’s second-largest conglomerate by market capitalization entered belt-tightening mode this year, as global economic uncertainties show no clear signs of fading away anytime soon. In response, the company has placed its management focus on maximizing business efficiency of its major affiliates, after some of them were hit by earnings shocks in the aftermath of multiple external risk factors – such as prolonged high interest rates and industrial slowdown.SK On, the battery affiliate of SK Innovation, reported an operating loss of 331.5 billion won ($244 million) in the first quarter, widening the deficit from a quarter earlier. This was attributable to sluggish battery demand – triggered after the global electric vehicle (EV) industry entered a chasm phase.Global credit rating agencies are on track to downgrade the ratings for the mother firm of cash-strapped SK On. S&P Global Ratings recently downgraded SK Innovation’s rating to BB+ from BBB-.

SK Group runs a total of 219 affiliates as of May 1, up 21 from a year earlier. The figure is the largest among the nation’s top ten conglomerates, so chances are the group may downscale the figure, as part of efforts to ensure its management efficiency.SK Group is scheduled to check on its portfolio rebalancing strategy next month, and come up with its future management direction.The conglomerate is already in the process of selling non-core businesses. SK Networks is in talks to sell SK Rent-a-Car, a car rental business, to an overseas private equity firm.“SK Group’s debt amounted to 87 trillion won in 2023 due to large-scale investment in its battery business,” Chang Soo-myung, an analyst at Korea Investors Service, said. “Chances are the figure widens further this year, as the group moves to make additional investment in its semiconductor and battery businesses.”The analyst pointed out that SK Group has failed to generate meaningful outcomes for its investment in eco-friendly energy sectors.“The group’s major investment has not created any tangible results so far,” the analyst said. “Any preemptive investment comes as a burden to the group at a time when demand for the investment areas remains insufficient.”Other analysts also raised concerns as to the lingering financial burden from SK Group.“SK Group will continue to suffer from a high level of debt burdens, as its investment returns are not robust enough to offset the burdens,” Shin Ho-yong, an analyst at NICE Investors Service, said. “But the group-wide ratings risk has been alleviated from a year earlier, after its chip business achieved a major earnings rebound this 슬롯게이밍 year.”

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