SK On, SK Enmove to merge for stable cash flow amid EV demand dip

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SK On, SK Enmove to merge for stable cash flow amid EV demand dip

Published: 30 Jul. 2025, 18:24

SARAH CHEA
[email protected]

Audio report: written by reporters, read by AI

SK On CEO Lee Seok-hee announces the merger of SK On and SK Enmove during a press conference at the company’s headquarters in central Seoul on July 30. [SK INNOVATION]

SK On will be merged with SK Enmove, a cash cow subsidiary specializing in lube base oil, to ensure reliable cash flow to support the cash-strapped battery maker’s intensive investments in the wake of a deceleration in market demand.

The two companies and SK Innovation, the parent company, approved the merger at a ratio of one to 1.6616742 during a board meeting on Wednesday.

A merged entity is planned for Nov. 1.

The merger follows the consolidation of SK Enterm and SK Trading International last November, two profit-generating affiliates deployed to shore up SK On, whose net debt had surpassed 23 trillion won ($16.6 billion) as of the first quarter, with cumulative losses exceeding 3 trillion won.

“Following the merger, SK On expects an immediate improvement in its financial structure this year, with an estimated capital increase of 1.7 trillion won and annual earnings before interest, taxes, depreciation and an amortization [ebitda] boost of 800 billion won,” said SK On CEO Lee Seok-hee during a press conference held Wednesday at the company’s headquarters in central Seoul.

“The initial public offering [IPO] of the new entity is not currently under consideration," Lee added.

Visitors look at SK On's battery products at the InterBattery 2025 at Coex, southern Seoul, on March 5. [YONHAP]

As a latecomer to the EV battery market, SK On entered the sector with aggressive capital investments of around 20 trillion won so far. However, due to weakening demand for EVs, it has never succeeded in posting an annual profit since its launch in 2021. Last year alone, it reported an operating loss of 1.127 trillion won.

As of the first quarter, SK On’s debt-to-equity ratio stood at 251 percent — far exceeding that of its market competitors LG Energy Solution’s 99.23 percent and Samsung SDI’s 89.02 percent.

Meanwhile, SK Enmove is a reliable cash cow for SK Innovation, which posted 5.095 trillion won in revenues and 687.5 billion won in operating profit.

SK said the merger is also expected to generate synergies across EV-related businesses. Beyond supplying lubricants for EVs, SK Enmove has been expanding into specialized thermal management solutions for EVs, including automotive refrigerants and heating and air conditioning systems.

Jang Yong-ho, executive president of SK Innovation, announces the merger of SK On and SK Enmove during a press conference at the company’s headquarters in central Seoul on July 30. [SK INNOVATION]

The company is also developing immersion cooling technology aimed at enhancing the safety and performance of EV batteries and energy storage systems (ESS) — with potential applications in future fields such as AI data centers.

"By combining the two's capabilities and technical prowess, it will solidify SK’s position in the field of electrification and secure a distinct competitive edge,” said Jang Yong-ho, executive president of SK Innovation.

SK Innovation on Wednesday also announced a plan to raise a total of 8 trillion won in capital this year, which includes a 2 trillion won third-party rights offering by SK Innovation, a 700 billion won perpetual bond issuance and a 2 trillion won third-party rights offering by SK On, and a 300 billion won rights offering by SK Innovation’s battery materials affiliate SK IE Technology.

“Over the past five years, SK Innovation’s stock price has steadily declined, driven by deteriorating profitability and weakening financial health,” Jang added.

“Reconstructing the financial structure through mergers or offloading noncore assets is not a choice but a necessity to reverse this trend,” he added. “We plan to reduce debt by more than 1.5 trillion won this year through this.”

BY SARAH CHEA [[email protected]]