August 26, 2018 - 11:29 AM EDT
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Sinopec's Profit for 1H2018 Up 52% with Dividend Payout Surges 60%

Achieves Growth across All Four Core Business Segments Dividend Payout Reaches Record High of RMB19.37 billion

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.

Exploration and Production: Summary of Operations


Six-month period ended 30 June

Changes

2018

2017

(%)

Oil and gas production (mmboe)

224.59

221.38

1.4

Crude oil production (mmbbls)

143.63

145.98

(1.6)

China

123.68

123.16

0.4

Overseas

19.95

22.82

(12.6)

Natural gas production (bcf)

476.20

452.12

5.3

 

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.

Refining: Summary of Operations

Unit: Million Tonnes


Six-month period ended 30 June

Changes

2018

2017

(%)

Refinery throughput

120.72

117.79

2.5

Gasoline, diesel and kerosene production

76.37

74.11

3.0

Gasoline

30.04

28.41

5.7

Diesel

32.09

32.67

(1.8)

Kerosene

14.25

13.03

9.4

Light chemical feedstock production

19.34

18.94

2.1

Note: Includes 100% of production of domestic joint ventures.

 

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.

Marketing and Distribution: Summary of Operations   

Unit: Million Tonnes


Six-month period ended 30 June

Changes

2018

2017

(%)

Total sales volume of refined oil products

96.48

98.55

(2.1)

Total domestic sales volume of refined oil
products

88.45

87.22

1.4

Retail

59.28

58.68

1.0

Direct sales and Wholesale

29.16

28.54

2.2

Annualised average throughput per station
(tonne/station)

3,870

3,832

1.0



As of 30 June
2017

As of 31
December 2016

Change from
the end of last
year(%)

Total number of Sinopec-branded service stations

30,645

30,633

0.04

Number of Company-operated stations

30,639

30,627

0.04

Number of convenience stores

26,424

25,775

2.5

 

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.

Major Chemical Products: Summary of Operations

Unit: 1,000 tonnes


Six-month period ended 30 June

Changes

2018

2017

(%)

Ethylene

5,786

5,609

3.2

Synthetic resin

8,068

7,802

3.4

Synthetic fiber monomer and polymer

4,601

4,659

(1.2)

Synthetic fiber

603

616

(2.1)

Synthetic rubber

405

412

(1.7)

Note: Includes 100% of production of domestic joint ventures.

 

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.

 

Appendix: Key financial data and indicators


FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH ASBE


Principal accounting data

Items

Six-month periods ended 30 June

Changes

over the same
period of the
preceding year
(%)

2018

RMB million

2017

RMB million

Operating income

1,300,252

1,165,837

11.5

Net profit attributable to equity
shareholders of the Company

41,600

27,092

53.6

Net profit attributable to equity
shareholders of the Company

after deducting extraordinary
gain/loss items

39,791

26,099

52.5

Net cash flows from operating
activities

71,620

60,847

17.7


At 30 June 2018

RMB million

At 31 December 2017

RMB million

Change from
the end of last year
(%)

Total equity attributable to equity
shareholders of the Company

721,193

727,244

(0.8)

Total assets

1,617,304

1,595,504

1.4


Principal financial indicators

Items

Six-month periods ended 30 June

Changes

over the same
period of the
preceding year
(%)

2018

RMB

2017

RMB

Basic earnings per share

0.344

0.224

53.6

Diluted earnings per share

0.344

0.224

53.6

Basic earnings per share after deducting
extraordinary gain/loss items

0.329

0.216

52.5

Weighted average return on net assets (%)

5.74

3.79

1.95 percentage
points

Weighted average return on net assets after
deducting extraordinary gain/loss items (%)

5.49

3.65

1.84 percentage
points

 

 

FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH IFRS


Principal accounting data

Items

Six-month periods ended 30 June

Changes

over the same
period of the
preceding year
(%)

2018

RMB million

2017

RMB million

Operating Profit

61,576

39,309

56.6

Profit attributable to owners of the
Company

42,386

27,915

51.8

Net cash generated from operating
activities

71,620

60,847

17.7


At 30 June 2018

RMB million

At 31 December 2017

RMB million

Changes from the
end of last year
(%)

Total equity attributable to owners of the
Company

720,113

726,120

(0.8)

Total assets

1,617,304

1,595,504

1.4


Principal financial indicators

Items

Six-month periods ended 30 June

Changes

over the same
period of the
preceding year
(%)

2018

RMB

2017

RMB

Basic earnings per share

0.350

0.231

51.8

Diluted earnings per share

0.350

0.231

51.8

Return on capital employed (%)

6.48

4.39

2.09 percentage
points

 

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.


Six-month periods ended 30 June

Changes

2018

2017

RMB million

(%)

Exploration and Production Segment




Operating revenues

87,924

74,109

18.6

Operating expenses

88,336

92,443

(4.4)

Operating (loss)/profit

(412)

(18,334)

-

Add: Share of profits/(losses) from associates and joint ventures

1,087

875

24.2

Add: Investment income/(loss)

2

48

(95.8)

EBIT

677

(17,411)

-

Refining Segment




Operating revenues

593,327

488,172

21.5

Operating expenses

554,395

458,779

20.8

Operating profit

38,932

29,393

32.5

Add: Share of profits from associates and joint ventures

487

409

19.1

Add: Investment income/(loss)

12

10

20.0

EBIT

39,431

29,812

32.3

Marketing and Distribution Segment




Operating revenues

668,325

605,960

10.3

Operating expenses

651,139

589,394

10.5

Operating profit

17,186

16,566

3.7

Add: Share of profits from associates and joint ventures

1,125

1,416

(20.6)

Add: Investment income

11

48

(77.1)

EBIT

18,322

18,030

1.6

Chemicals Segment




Operating revenues

256,268

208,429

23.0

Operating expenses

240,504

196,272

22.5

Operating profit

15,764

12,157

29.7

Add: Share of profits from associates and joint ventures

3,137

4,242

(26.0)

Add: Investment income

13

115

(88.7)

EBIT

18,914

16,514

14.5

Corporate and others




Operating revenues

585,443

488,015

20.0

Operating expenses

589,897

487,276

21.1

Operating profit

(4,454)

739

-

Add: Share of profits from associates and joint ventures

782

709

10.3

Add: Investment income

802

65

1,133.8

EBIT

(2,870)

1,513

(289.7)

Elimination of inter-segment

profit/(loss)

(5,440)

(1,212)

-

 

About Sinopec Corp.

Sinopec Corp. is one of the largest integrated energy and chemical companies in China. Its principal operations include the exploration and production, pipeline transportation and sale of petroleum and natural gas; the sale, storage and transportation of petroleum products, petrochemical products, coal chemical products, synthetic fibre and other chemical products; the import and export, including an import and export agency business, of petroleum, natural gas, petroleum products, petrochemical and chemical products, and other commodities and technologies; and research, development and application of technologies and information.

Sinopec Corp. sets 'fueling beautiful life' as its corporate mission, puts 'people, responsibility, integrity, precision, innovation and win-win' as its corporate core values, pursues strategies of value-orientation, innovation-driven development, integrated resource allocation, open cooperation, and green and low-carbon growth, and strives to achieve its corporate vision of building a world leading energy and chemical company.

Disclaimer

This press release includes "forward-looking statements". All statements, other than statements of historical facts that address activities, events or developments that Sinopec Corp. expects or anticipates will or may occur in the future (including but not limited to projections, targets, reserve volume, other estimates and business plans) are forward-looking statements. Sinopec Corp.'s actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to the price fluctuation, possible changes in actual demand, foreign exchange rate, results of oil exploration, estimates of oil and gas reserves, market shares, competition, environmental risks, possible changes to laws, finance and regulations, conditions of the global economy and financial markets, political risks, possible delay of projects, government approval of projects, cost estimates and other factors beyond Sinopec Corp.'s control. In addition, Sinopec Corp. makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements.

 

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Cision View original content:http://www.prnewswire.com/news-releases/sinopecs-profit-for-1h2018-up-52-with-dividend-payout-surges-60-300702434.html

SOURCE China Petroleum & Chemical Corporation


Source: PR Newswire (August 26, 2018 - 11:29 AM EDT)

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