SK Gas absorbs subsidiary after ₩460B in losses over four years
What's the deal? SK GasDealroom has a profile for this one. Try Dealroom → will merge its wholly owned petrochemical subsidiary SK AdvancedDealroom has a profile for this one. Try Dealroom → into itself, dissolving the loss-making unit and keeping SK Gas as the surviving entity. The board approved the deal on August 26. No new shares are being issued, so existing shareholders' stakes stay unchanged.
What does SK Advanced do? It runs a propane dehydrogenation (PDH) business, producing 600,000 tons of propylene annually at its Ulsan plant. Propylene is a base material for polypropylene, used in car parts, appliances, and packaging. SK Gas imports the propane and supplies it to the unit.
Why now? Once a stable earner, SK Advanced has posted four straight years of operating losses — 129 billion won in 2022, 82.5 billion won in 2023, 116.1 billion won in 2024, and 140 billion won last year — as Chinese firms expanded PDH capacity and flooded the market. Cumulative losses topped 460 billion won.
How bad are the numbers? The subsidiary's debt ratio jumped from 97.6% at the end of 2022 to 406.5% by the end of March. Of its 533.7 billion won in total borrowings, 89% were short-term debts due within a year. Korea RatingsDealroom has a profile for this one. Try Dealroom → cut its bond rating from BBB+ to BBB in June.
What changes? SK Gas will centralize propane procurement, propylene production, sales, and fund management under one entity. It says adjusting volumes and plant utilization to market conditions, plus cutting duplicate administrative costs, will improve efficiency.
The set-up: Before merging, SK Gas bought out foreign shareholders — a 25% stake from a Kuwaiti state oil unit in February and a 30% stake from Saudi shareholders in April — ending a decade-long tripartite joint venture. The move is part of a broader restructuring; in June, SK Gas sold a 49% stake in power plant Ulsan GPSDealroom has a profile for this one. Try Dealroom → for 1.2242 trillion won.
What could go wrong? SK Advanced briefly turned profitable in the first quarter, posting a 5.3 billion won operating profit after Middle East conflict cut rival output. But supply pressure could return: Chinese expansions continue, and S-OilDealroom has a profile for this one. Try Dealroom →'s Shaheen project, set to add 770,000 tons of propylene annually, starts up in the second half of this year.
The signal: SK Gas is monetizing profitable power assets while folding in a struggling petrochemical unit — a defensive consolidation as Chinese oversupply reshapes Asia's propylene market.
Read more: chosun.com
Image credit: sk advanced
