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UPDATE 2-SK Innovation sees refining margins improving; to split off battery unit

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(Adds company's statement, background)

By Heekyong Yang and Joyce Lee

SEOUL, Aug 4 (Reuters) - SK Innovation Co Ltd, the owner of South Korea's top refiner SK Energy, said on Wednesday its expects refining margins to gradually improve in the second half as COVID-19 retreats and demand rebounds, and confirmed plans to make its battery business a stand-alone unit.

The company posted an operating profit of 506 billion won ($441 million) in the April-June quarter, compared with an operating loss of 456 billion won in the same period a year earlier.

SK Innovation said it plans to separate out its battery business and oil and gas production business into individual units by October. The new entities will continue to be wholly owned by SK Innovation.

"These split-offs are meant to preemptively strengthen fundamental competitiveness by building a management system suitable for the characteristics of each business," Kim Jong Hoon, SK Innovation's board chairman said in a statement.

In July, SK Innovation said it was considering separating and listing its growing battery business unit, which supplies electric car batteries to Volkswagen and Ford Motor Co among others, to better secure resources as the global EV market continues to grow.

The unit, which is aiming to turn profitable next year, accounted for nearly 6% of the company's revenue in the second quarter.

SK Innovation's battery business rival LG Energy Solution Ltd (LGES), wholly owned by LG Chem Ltd's from which it was carved out last year, plans to go public this year.

LGES counts Tesla Inc General Motors Co, Hyundai Motor Co among its customers.

Revenue rose 56% to 11.1 trillion won from a year earlier. That compares with the 11 trillion won forecast of analysts in the Refinitiv SmartEstimate.

SK Innovation, which has a total refining capacity of 1.115 million barrels per day (bpd) at plants in Ulsan and Incheon, said it operated it facilities at 66% of capacity on average in the quarter, down from 77% during the same period a year earlier, according to the company statement.

Last week, South Korea's third-largest refiner S-Oil Corp said that refining margins are expected to rebound in the third quarter, driven by high demand for transport fuels because of an increase in global economic activities and mobility.

($1 = 1,148.5800 won) (Reporting by Heekyong Yang and Joyce Lee; Editing by Stephen Coates and Richard Pullin)

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