Sinopec’s Profit for 1H2018 Up 52% with Dividend Payout Surges 60%

BEIJING, Aug. 26, 2018 /PRNewswire/ -- China Petroleum & Chemical Corporation ("Sinopec" or the "Company")(HKEX: 386; SSE: 600028; NYSE: SNP) today announced its interim results for the six months ended 30 June 2018.

Financial Highlights:

• In accordance with the International Financial Reporting Standards (IFRS), the Company's operating profit reached RMB 61.6 billion, increased by 56.6% year on year. Profit attributable to equity shareholders of the Company was RMB 42.4 billion, surged by 51.8% year on year. Basic earnings per share were RMB 0.350 (1H2017: RMB 0.231).
• In accordance with China Accounting Standards for Business Enterprises ("ASBE"), the Company's operating income reached RMB 1,300 billion. Operating profit was RMB 67.9 billion, surged by 51.3% year on year. Net profit attributable to the equity shareholders of the Company was RMB 41.6 billion, up by 53.6% year on year. Basic earnings per share were RMB 0.344 (1H2017: RMB 0.224).
• In accordance with IFRS, the Company's liability-to-asset ratio was 47.1%, reflecting a solid financial position. The Company's cash and cash equivalents (including time deposits) was RMB 205.2 billion, maintaining a healthy cash flow level.
• The Board of Directors declared an interim dividend of RMB 0.16 per share, up by 60.0% year on year.

Business Highlights:

In the first half of 2018, global economy recorded slow recovery, while China economy maintained a stable performance and secured progress in its economic development with gross domestic product (GDP) grew by 6.8%. While the domestic demand for oil products maintained steady growth, the market witnessed strong competition because of abundant supply. According to the statistics of NDRC, domestic consumption of refined oil products increased by 5.7% compared with the first half of 2017, among which gasoline consumption increased by 4.6%, consumption growth for kerosene and diesel was 10.9% and 5.6%, respectively. Domestic demand for natural gas recorded higher growth rate. Domestic consumption of major chemicals maintained significant growth with consumption of ethylene continued to report robust growth, and gross margin for chemical products remained at a high level.

• Exploration and Production: the Company promoted efficient exploration and effective production to increase proved reserves, reduced costs and expenses and achieved superior results in its upstream business. In exploration, the Company's continuing efforts in exploration paid off with major discoveries in a number of regions. In development, the Company adopted a profit oriented approach, in resumption of crude oil production. The Company also accelerated natural gas development by enhancing production-supply-storage-marketing system building to realise synergy along the entire value chain. In the first half of 2018, this segment recorded an Earnings Before Interest and Tax ("EBIT") of RMB 677 million.
• Refining: the Company maintained high operational utilisation rates of refining facilities. Refined oil products mix has been optimized to address market demand changes, more high value-added products were produced. The Company actively promoted refined oil products quality upgrading and optimised crude oil sourcing to lower feedstock cost. The advantage of centralised marketing was given full play. In the first half of 2018, this segment recorded an EBIT of RMB 39.4 billion, surged by 32.3% year on year.
• Marketing and Distribution: the Company took full advantages of its integrated distribution network to actively respond to competitive market conditions, and achieved good operational results. The Company intensified its efforts to explore more markets, expanded retail scale, and achieved sustained growth in total domestic sales volume. The domestic sales volume of refined oil was 88.45 million tonnes, up by 1.4% year on year. In the first half of 2018, the operating revenues and profit of non-fuel business were up 15.8% and 32.0%, respectively. This segment recorded an EBIT of RMB 18.3 billion, surged by 1.6% year on year.
• Chemicals: adhering to the "basic and high-end" development concept to adjust our feedstock structure and lower cost. The Company optimised product mix by enhancing the dynamic optimisation of facilities and product chains to provide more products needed by the market. The Company strengthened the integration among production, marketing, R&D, and application, and intensified efforts on R&D, production and sales of high value-added products. In the first half of 2018, this segment recorded an EBIT of RMB 18.9 billion, up by 14.5% year on year.

Mr. Dai Houliang, Chairman of Sinopec, said, "During the first half of 2018, we carried out businesses in a practical manner and fully realised the strengths of our integrated value chain. We secured stable and higher-quality growth of the Company along with improved performance. Looking into the second half of 2018, we expect China's economy to maintain steady growth and the demand for refined oil products and petrochemicals to increase steadily with more robust demand for high-end products. Along with the adjustments of China's energy structure, demand for natural gas will maintain robust growth. The Company will continue to focus on growth pattern upgrading, insist on specialized development, market-oriented operation, optimised global presence and integrated planning to enhance efficiency. This will strengthen our core competence and extending our value chain to middle-end and high-end, aiming to deliver better operating results and give back to our country, shareholders, employees, customers and the society."

Business Review

Exploration and Production

In the first half of 2018, capturing the recovery of crude oil price, the Company promoted efficient exploration and effective production to increase proved reserves, reduced costs and expenses and achieved good results. Our continuing efforts in exploration paid off with new oil and gas discoveries in Sichuan Basin, Tarim Basin, and Yin'e Basin. In development, we adopted a profit-oriented approach in resumption of crude oil production.) We also accelerated natural gas development by enhancing production-supply-storage-marketing system building to realise synergy along the entire value chain. Production in the first half of 2018 was 224.59 million barrels of oil equivalent, of which domestic crude production was 123.68 million barrels, overseas crude production was 19.95 million barrels, and total gas production was 476.2 billion cubic feet, increased by 5.3% compared to the same period of last year.

In the first half of 2018, operating revenues of the segment were RMB 87.9 billion, representing an increase of 18.6% year on year. This was mainly the increase of crude oil and natural gas prices as well as expansion of scale of natural gas and LNG business over the same period of 2017. In the first half of 2018, the oil and gas lifting cost was RMB 768 per tonne, representing an increase of 0.1% year on year. In the first half of 2018, the operating loss of the segment was RMB 0.4 billion, representing a decrease of RMB 17.9 billion compared with the same period of last year. This was mainly because the segment seised the opportunity of crude oil price recovery to promote efficient exploration and effective production and reduce costs and expenses and achieved good results.

 

Refining

In the first half of 2018, with the market-oriented approach, we optimised product mix to produce more gasoline and jet fuel, and the diesel-to-gasoline ratio further decreased. We actively promoted the GB VI refined oil products quality upgrading. Export of refined oil products was increased to help maintain high utilisation of refining facilities. Crude oil sourcing and allocation optimisation continued to lower our feedstock cost. We comprehensively optimised our production plans to ensure safe and reliable operations. The advantage of centralised marketing was given full play, and profitability of LPG, asphalt, and sulphur maintained at a high level. In the first half of 2018, we processed 121 million tonnes of crude oil, and produced 76.37 million tonnes of refined oil products, with production of gasoline and kerosene up by 5.7% and 9.4% respectively from levels in the first half of 2017.

In the first half of 2018, operating revenues of the segment were RMB 593.3 billion, representing an increase of 21.5% year on year. This was mainly attributable to increased prices of refined oil products, and the high utilisation rate maintained by the Company by proactively confronting with the over-supplied market.

In the first half of 2018, the refining margin was RMB 544.1 per tonne, up by RMB 70.4 per tonne, representing an increase of 14.9% year on year, which was mainly because the Segment put great efforts to reduce crude oil purchasing cost and enhanced product mix by optimising operation schedule according to market demand. The Segment constantly optimised product mix, increased export of refined oil products, optimised crude oil sourcing to lower feedstock cost and achieved good result. In the first half of 2018, the segment realised an operating profit of RMB 38.9 billion, up by RMB 9.5 billion, representing an increase of 32.5% year on year.

 

Marketing and Distribution

In the first half of 2018, confronted with fierce competition, the Company brought our advantages in distribution network into full play, and achieved good operational results. We coordinated internal and external resources, intensified efforts to explore more markets, expanded retail scale, and achieved sustained growth in total domestic sales volume. We proactively promoted precision marketing and differentiated marketing, and improved our marketing network to reinforce existing advantages. The total sales volume of refined oil products in the first half of 2018 was 96.48 million tonnes, of which domestic sales accounted for 88.45 million tonnes, up by 1.4% year on year. We strengthened development of key convenience store goods and proprietary brand to promote a rapid growth of non-fuel business.

In the first half of 2018, the operating revenues of the segment were RMB 668.3 billion, increased by 10.3% year on year. This was mainly due to the increasing refined oil products prices and gasoline sales volume. In the first half of 2018, the segment brought our advantages in integrated business and distribution network into full play, enhanced efforts to optimise internal and external resources, actively responded to market rebalancing, expanded markets, balanced profits and volume and achieved good result. In the first half of 2018, the segment's operating profit was RMB 17.2 billion, up by RMB 0.6 billion, representing an increase of 3.7% year on year.

 

Chemicals

In the first half of 2018, we constantly fine-tuned chemical feedstock mix to further lower costs, optimised product mix by enhancing the dynamic optimisation of facilities and product chains to provide more products needed by the market. We strengthened the integration among production, marketing, R&D, and application, and intensified efforts on R&D, production and sales of high value-added products, with the ratio of specialty products of synthetic resin reached 64.0% and our differential ratio of synthetic fibre reached 90.3%. Ethylene production for the first half of 2018 was 5.786 million tonnes, up by 3.2% year on year. We coordinated internal and external resources, implemented precision marketing and further expanded the market, with total chemical sales volume increased by 14.1% from the corresponding period in 2017 to 42.56 million tonnes.

In the first half of 2018, operating revenues of the chemicals segment were RMB 256.3 billion, representing an increase of 23.0% year on year, which was mainly due to increased petrochemical products sales volume and prices year on year as the Company seised market opportunities to expand market, promote sales and optimise structure. In the first half of 2018, the segment seized the opportunity of good margin, continued the 'basic and high-end' chemical business development concept, strengthened the integration among production, sales, R&D and application, further promoted optimisation of feedstock, product and facilities to lower feedstock cost, increase high value added products' proportion and achieved good result. The segment's operating profit in the first half of 2018 was RMB 15.8 billion, up by RMB 3.6 billion, representing an increase of 29.7% year on year.

 

Safety Management and Environmental Protection

The Company prioritised safe production and intensified safety supervision. In the first half of this year, we promote the construction of tiered risk control and operation hazard identification, prevention and rectification system. We advanced safety control of contractors and on-site operation, enhanced process safety of chemicals business, security and staff healthy management, and further consolidated the foundation of safe production at operational level. Above all, we achieved safe production and operations.

The Company actively implemented its green and low-carbon strategy and launched "Green Enterprise Campaign". We effectively carried out pollution prevention and control and constantly pushed forward energy efficiency improvement. We also accelerated carbon asset management and made great progress in energy and environment work.

Capital Expenditures

Focusing on quality and return on investment, the Company continuously optimised its investment projects. In the first half of 2018, total capital expenditures were RMB 23.687 billion. Capital expenditures for the exploration and production segment were RMB 10.762 billion, mainly for oil and gas capacity building, Wen 23 Gas Storage Project, Erdos-Anping-Cangzhou Gas Pipeline Project, the first phase of Xinjiang Coal Gas Pipeline Project as well as overseas projects. Capital expenditures for the refining segment were RMB 4.61 billion, mainly for the Zhongke integrated refining and chemical project, product mix optimisation of Zhenhai, Maoming and Tianjin, and GB VI gasoline and diesel quality upgrading projects. Capital expenditures for the marketing and distribution segment were RMB 5.373 billion, mainly for constructing refined oil products depots, pipelines and service stations and revamping of underground oil tanks, as well as other safety and environmental protection hazard removal projects. Capital expenditures for the chemicals segment were RMB 2.635 billion, mainly for integrated refining and chemical projects of Zhongke and ulei, high-efficiency and environmental friendly aromatics project in Hainan and Zhong'an United Coal Chemical project. Capital expenditures for corporate and others were RMB 307 million, mainly for R&D facilities and information technology application projects.

Business Prospects

Looking into the second half of 2018, we expect China's economy to maintain steady growth and the demand for refined oil products and petrochemicals to increase steadily with more robust demand for high-end products. Along with the adjustments of China's energy structure, demand for natural gas will maintain robust growth. For the second half of 2018, the uncertainty of international crude oil prices will increase due to trade frictions and geopolitical tensions.

Confronted with the present situation, the Company will integrate reform, management, innovation and development, to fully improve operational performances, expand markets, reduce costs, prevent risks and realise structural adjustments. Our focuses are on the following aspects:

For Exploration and Production, we will continue to advance high-efficiency exploration, profitable production and cost reduction. In crude oil development, we will accelerate profitable development of new oilfields and resumed production of suspended wells, deepen the structural adjustments of mature fields, and increase yields of profitable crude oil. In natural gas development, we will advance key projects for capacity construction, enhance the efficiency and quality of developed gas fields, as well as promote synergy of production, supply, storage and marketing to push forward the development of natural gas. In the second half of 2018, we plan to produce 146 million barrels of crude oil, of which domestic production will account for 125 million barrels and overseas production will account for 21 million barrels. We plan to produce 497.8 billion cubic feet of natural gas during the period.

For Refining, with efficiency-oriented approach, we will optimise our production plans based on market demand to consolidate our competitive advantages in refining business. We will continue to adjust our product mix by further lowering the diesel-to-gasoline ratio and increasing the production of gasoline, jet fuel and light chemical feedstock. We will complete GB VI refined oil products upgrading project as scheduled. We will fully optimise operations and ensure safe and stable production, and we plan to process 121 million tonnes of crude oil in the second half of the year.

For Marketing and Distribution, we will intensify our marketing strategy of balancing profit and volume by optimising resources allocation and operational efficiency. We will make efforts to expand retail scale through implementing precision marketing as well as differentiated marketing. We will further improve our marketing network to reinforce existing advantages and enhance the ability of exporting refined oil products. We will push forward the construction and operation of natural gas stations and expand natural gas market for automobiles. We will take the advantage of "Internet +" marketing strategy and accelerate the development and marketing of proprietary brand and products to advance the growth of non-fuel business. In the second half, we plan to sell 90.50 million tonnes of refined oil products in the domestic market in the second half of 2018.

For Chemicals, we will focus on the "basic and high-end" development concept to adjust our feedstock structure and lower cost. We will fine-tune our product slate, improve the coordination among mechanism combining production, marketing, research and application, advance new product development, promotion and application, and deliver more high-end products. We will put more emphasis on the dynamic optimisation of facilities and product chains and improving the utilisation and production scheduling based on market demands. Meanwhile, we will promote the precision marketing and services, improve customer services and provide total solutions and value-added services. We plan to produce 5.734 million tonnes of ethylene in the second half of 2018.

In the second half of the year, the Company will continue to focus on growth pattern upgrading, insist on specialized development, market-oriented operation, optimised global presence and integrated planning to enhance efficiency and deliver superior operating results.

 

 

 

 

The following table sets forth the operating revenues, operating expenses and operating profit/(loss) by each segment before elimination of the inter-segment transactions for the periods indicated, and the percentage changes between the first half of 2018 and the first half of 2017.

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