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Moody's Investors Service on Wednesday changed SK Innovation Co.'s rating outlook to negative from stable due to the firm's large leveraged spending and dividends.
Moody's holds a Baa1 rating for SK Innovation, South Korea's biggest refiner by sales.
"The change in SK Innovation's outlook to negative reflects our expectation that the company's financial metrics will deteriorate significantly over the next 1-2 years, mainly because of large debt-funded capital spending," Moody's Vice President and Senior Credit Officer Yoo Wan-hee said in a statement.
The company's elevated dividend payments also constrain its capability to contain debt increases amid a weaker operating environment, the statement said.
Moody's expected SK Innovation's adjusted net debt to jump to around 7.4 trillion won (US$6.08 billion) by the end of 2019 from
4.5 trillion won a year earlier due to its significant investments in car and lithium-ion battery plants and continued high dividend payouts, it said.
The ratings firm warned the debt will increase further in 2020 in the absence of deleveraging measures or a reduction in dividends.
In the January-June period, SK Innovation's net profit plunged
61 percent to 380.5 billion won from 985.4 billion won a year earlier. Operating profit fell 47 percent on-year to 828.6 billion won on sales of 25.95 trillion won, a 1.4 percent on-year gain.
