Stock Markets September 11, 2026 10:55 AM

S&P Moves SK Innovation Outlook to Stable Citing Refining Strength and Asset Sales

Ratings agency affirms BBB- rating while projecting a sharp EBITDA rebound in 2026 and improved leverage after planned asset disposals

By Marcus Reed
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S&P Global Ratings shifted SK Innovation's outlook from negative to stable and kept the company's BBB- long-term issuer credit rating, pointing to a forecasted surge in 2026 earnings driven by refining margins and lubricant tightness, as well as planned asset disposals that should reduce debt. The agency expects EBITDA to rise markedly in 2026 before normalizing in 2027, and foresees an improved adjusted debt-to-EBITDA ratio that remains below its downside trigger.

S&P Moves SK Innovation Outlook to Stable Citing Refining Strength and Asset Sales
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Key Points

  • S&P Global Ratings changed SK Innovation's outlook to stable from negative and affirmed its BBB- long-term issuer credit rating, citing projected strong profits in 2026-2027 and asset disposals to reduce debt.
  • SK Innovation reported about KRW7.2 trillion of EBITDA in H1 2026, driven by robust refining margins, constrained lubricant supply after a competitor's Qatar plant damage, and support from high oil prices tied to the Middle East war.
  • Planned and completed asset disposals - including a KRW1.2 trillion capital reduction from JV investments and about KRW200 billion from SK Geo Centric sales - alongside potential use of city gas assets to repay KRW3.1 trillion of preferred shares, underpin a forecasted improvement in adjusted debt-to-EBITDA to about 3.2x in 2026.

S&P Global Ratings revised its outlook on SK Innovation Co. Ltd. to stable from negative while maintaining the company’s BBB- long-term issuer credit rating. The agency highlighted expected strong earnings in 2026-2027 combined with ongoing asset disposals as key factors that should help lower SK Innovation’s debt burden.

In the first half of 2026 SK Innovation recorded EBITDA of about KRW7.2 trillion. S&P attributed that performance to firm refining margins and constrained lubricant supply following damage to a competitor’s production facility in Qatar. Higher oil prices related to the Middle East war further supported the refining segment’s profitability.

S&P Global Ratings projects EBITDA for the full year 2026 at KRW11.0 trillion, a significant increase from KRW3.9 trillion in 2025. The agency expects EBITDA to moderate to KRW7.6 trillion in 2027 as the one-off drivers ease.

On the balance sheet side, SK Innovation completed a capital reduction of roughly KRW1.2 trillion in 2026 stemming from joint venture investments in China and Southeast Asia, with proceeds expected to be repatriated to the parent company in the third quarter. In addition, chemical subsidiary SK Geo Centric Co. Ltd. anticipates receiving about KRW200 billion in the same quarter through the sale of subsidiaries and land assets.

Management may also deploy city gas assets to redeem KRW3.1 trillion of redeemable convertible preferred shares in early 2027. When incorporating these planned and completed disposals, S&P forecasts the company’s adjusted debt-to-EBITDA ratio will improve to about 3.2x in 2026, down from 9.1x in 2025. The agency expects the ratio to rise to 4.3x in 2027 as EBITDA declines, but still remain comfortably under its downside trigger of 5.5x.

In calculating adjusted debt, S&P included approximately KRW1.7 trillion of derivative liabilities tied to price return swaps with financial investors.

S&P’s outlook also addresses individual business-line performance. The EV battery division is expected to post a modest profit in 2026, aided by a one-time compensation payment from Ford Motor Co. in the second quarter, but the agency sees the battery business likely returning to losses in 2027. The chemical segment faces industry supply-demand imbalances and is projected to see only marginal improvement over the next one to two years.

Overall, the ratings agency’s reassessment reflects near-term profit strength in refining and the impact of asset monetization on leverage, while flagging ongoing vulnerabilities in batteries and chemicals that could temper results beyond 2026.

Risks

  • EV battery business is expected to be loss-making again in 2027 after a one-time boost in 2026, posing downside risk to consolidated earnings and margins - impacting automotive supply chains and battery sector investors.
  • The chemical business faces supply-demand imbalances with only marginal improvement expected over the next one to two years, which could weigh on cash flow and returns for the chemicals sector.
  • S&P projects EBITDA will decline in 2027, raising adjusted leverage to 4.3x from 3.2x in 2026; while still below the 5.5x downside trigger, a weaker-than-expected recovery or delayed asset disposals could increase credit risk for SK Innovation and affect credit markets.

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