Sinopec’s busi­ness swings back to profit

Com­pany posted 213m yuan in op­er­at­ing in­come from re­finer­ies

China Daily (Hong Kong) - - BUSINESS - By GAO CHANGXIN in Hong Kong gaochangxin@chi­

China Pe­tro­leum & Chem­i­cal Corp’s re­fin­ery busi­ness swung back to profit in the first half, ben­e­fit­ing from a govern­ment re­form that al­lows do­mes­tic fuel prices to be linked more closely with in­ter­na­tional prices.

Sinopec squeezed out 213 mil­lion yuan ($34.8 mil­lion) op­er­at­ing in­come from its re­fin­ing busi­ness in the Jan­uary-June pe­riod, bounc­ing back from an 18.5 bil­lion yuan loss in the same pe­riod last year.

Over­all, profit rose by 24 per­cent year-on-year to 30.3 bil­lion yuan, up from 24.5 bil­lion yuan a year ear­lier. Still, that is slightly lower than the 31 bil­lion yuan aver­age es­ti­mate of seven an­a­lysts com­piled by Bloomberg.

Sinopec’s re­port wraps up that of China’s big- three oil com­pa­nies, which as a whole posted growth but are still seek­ing some ef­fects from China’s eco­nomic slow­down.

Sinopec’s re­fin­ing profit was even big­ger in the first quar­ter, at around 22 bil­lion yuan. But an $8 dive in the global oil price in the sec­ond quar­ter erased much of the profit.

Chair­man Fu Chengyu said that earn­ings from the re­fin­ing busi­ness will be even bet­ter in the sec­ond half, as the com­pany has al­ready fin­ished de-stock­ing high-price in­ven­tory in the sec­ond quar­ter and more ben­e­fits will come from the price re­form.

“We have full con­fi­dence that the sec­ond half will be bet­ter than the first,” Fu said in a news brief­ing in Hong Kong on Mon­day.

Sinopec shares were up 1.92 per­cent, or HK$0.11, on Mon­day, in Hong Kong trad­ing, to HK$5.83 (75 US cents) a share. Sinopec pro­posed an in­terim div­i­dend of 0.09 yuan a share, down 10 per­cent from the year­ago pe­riod.

In March, Bei­jing in­tro­duced a new pric­ing mech­a­nism in the do­mes­tic fuel mar­ket, short­en­ing the win­dow for re­tail fuel-price ad­just­ments to 10 days from 22 days. It also ad­justed the va­ri­eties of crude


against which do­mes­tic oil prod­ucts are priced.

Ear­lier this year, Sinopec spun off its unit Sinopec En­gi­neer­ing (Group) Co Ltd via a sep­a­rate IPO in Hong Kong, as part of its struc­tural re­form.

Fu said there will be more spinoffs in the fu­ture, but no planned timetable for such ac­tions.

Sinopec has re­cal­i­brated its cap­i­tal ex­pen­di­ture strat­egy, to be in tan­dem with the na­tion’s on­go­ing eco­nomic trans­for­ma­tion from quan­tity to qual­ity. In com­ing years, cap­i­tal ex­pen­di­ture on sim­ple scale ex­pan­sion will be trimmed down, ac­cord­ing to Fu.

Sinopec is the last of China’s big- three oil com­pa­nies to re­port first- half earn­ings. Prof­its at PetroChina rose 5.6 per­cent in the first half, while CNOOC saw a 7.9 per­cent in­crease in earn­ings dur­ing the same pe­riod.

Both Sinopec and PetroChina re­ported weaker de­mand for diesel, closely as­so­ci­ated with in­dus­trial pro­duc­tion. China’s growth slowed to 7.5 per­cent in the sec­ond quar­ter, down from 7.7 per­cent in the first quar­ter this year and 7.9 per­cent in the fourth quar­ter of 2012.

PetroChina’s re­fin­ing busi­ness also im­proved, scal­ing back losses. The busi­ness lost 7.8 bil­lion yuan in the first half, 15.5 bil­lion less than the same pe­riod last year.

CNOOC has no re­fin­ing busi­ness.

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