Sinopec Announces 1H2019 Results Further Realises the Advantage of Integrated Operations
BEIJING,Aug. 27,2019 -- 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 2019.
Financial Highlights:
In accordance with the International Financial Reporting Standards (IFRS),the Company's operating income reached RMB 1,500 billion,maintaining business scale growth. Operating profit reached RMB 49.1 billion,decreased by 20.2% year on year. Profit attributable to equity shareholders of the Company was RMB 32.2 billion,down by 24.0% year on year. Basic earnings per share were RMB 0.266 (1H2018: RMB 0.350).
In accordance with China Accounting Standards for Business Enterprises ("ASBE"),the Company's operating profit was RMB 49.2 billion,down by 27.6% year on year. Net profit attributable to the equity shareholders of the Company was RMB 31.3 billion,down by 24.7% year on year. Basic earnings per share were RMB 0.259 (1H2018: RMB 0.344).
In accordance with IFRS,the Company's liability-to-asset ratio was 52.4%. Excluding the impacts from new leasing rules,liability-to-asset ratio maintained at stable level,reflecting a solid financial position. The Company's cash and cash equivalents (including time deposits) was RMB 163.1 billion,maintaining a healthy cash flow level.
The Board of Directors declared an interim dividend of RMB 0.12 per share.
Business Review
In the first half of 2019,recovery of theglobal economy slowed down,while China'seconomy maintained an overall stablegrowth securing progress in its economicdevelopment with gross domestic product(GDP) up by 6.3%. The domestic demandfor natural gas kept a high growth rate,upby 10.8% year on year. While the domesticdemand for refined oil products maintainedsteady growth,the market witnessed strongcompetition with abundant supply. The domestic demand for major chemicals increased rapidly. In the first half of 2019,international crude oil prices fluctuated with an upward trend first,and then slided rapidly. The average spot price of Platts Brent for the first half of 2019 was USD 65.95 per barrel,down by 6.6% year on year.
Exploration and Production
In the first half of 2019,the Company fully implemented the action plan of redoubling efforts in oil and gas exploration and production. Good results were obtained through efforts in maintaining oil production,increasing gas output and reducing cost while promoting an integrated value chain of natural gas business including production,supply,storage and marketing. In exploration,we continued to push forward high quality exploration and reinforced preliminary exploration in new areas as well as integrating evaluation for key exploration and production projects to increase reserves,which led to new oil and gas discoveries in Jiyang Depression,Sichuan Basin and Ordos Basin,etc. In development,we strengthened the capacity buildingof profitable oil production and promoted effective and rapid growth of natural gas. Capacity buildings in Fuling,Weirong,West Sichuan Depression and Dongsheng gas fields were accelerated with production and distribution optimised to promote a coordinated growth along the value chain. Production of oil and gas in the first half of 2019 was 226.63 million barrels of oil equivalent,up by 0.9% year on year,of which domestic crude production increased slightly to 124.05 million barrels,overseas crude production 17.63 million barrels,and total gas production 509.5 billion cubic feet,an increase of 7.0% compared to the same period of last year.
In the first half of 2019,operating revenues of the segment were RMB 103.8 billion,representing an increase of 18.1% year on year. This was mainly due to the increase in sales prices and sales volume of natural gas and LNG. In the first half of 2019,the oil and gas lifting cost was USD 16.5 per tonne,representing a decrease of 2.6% year on year. In the first half of 2019,this segment recorded an Earnings Before Interest and Tax ("EBIT") of RMB 8.0 billion,a surge of1,078.3% year on year. Operating profit of the segment was RMB 6.2 billion,increasingsignificantly as compared with the same period of last year. This was mainly because the segment enhanced fine development of oilfield,made efforts to increase production of natural gas,strengthened cost control,and effectively improved profitability.
Exploration and Production: Summary of Operations
Six-month period ended 30 June
Changes
2019
2018
(%)
Oil and gas production (mmboe)
226.63
224.59
0.9
Crude oil production (mmbbls)
141.68
143.63
(1.4)
China
124.05
123.68
0.3
Overseas
17.63
19.95
(11.6)
Natural gas production (bcf)
509.50
476.20
7.0
Refining
In the first half of 2019,with a market-oriented approach,we brought the advantage of integrated operations into full play,and continued to optimise product mix to produce more gasoline,jet fuel and chemical feedstock. Production of high-value-added products further increased,and diesel-to-gasoline ratio declined to 1.03. New projects and structural adjustment projects were implemented in an orderly manner. We moderately increased the export of refined oil products and expanded the market of kerosene to keep a relatively high utilization rate. We implemented and constantly optimised the quality upgrading plan for new spec bunker fuel. In the first half of 2019,we processed 124 million tonnes of crude oil,up by 2.7% year on year,and produced 78.94 million tonnes of refined oil products,up by 3.4% year on year,with production of gasoline and kerosene up by 4.3% and 7.9%,respectively.
In the first half of 2019,operating revenues of the segment were RMB 597.8 billion,representing an increase of 0.8% year on year. This was mainly because facing strong market competition,the company brought the advantage of integrated operations into full play,maintained high utilisation rate,and increased sales volume.
In the first half of 2019,the refining margin was RMB 382 per tonne,and decreasedby RMB 162 per tonne,representing a decrease of 29.8% year on year,which was mainly due to the increase of crude oil procurement costs resulting from rising premium on crude oil prices,rising overseas shipping insurance premiums and depreciation of the RMB exchange rate,as well as the significant weaker margin of naphtha,liquefied petroleum gas and other petroleum refining products compared with a year ago. In the first half of 2019,this segment recorded an EBIT of RMB 18.6 billion. Operating profit of the segment was RMB 19.1 billion.
Refining: Summary of Operations
Unit: Million Tonnes
Six-month period ended 30 June
Changes
2019
2018
(%)
Refinery throughput
123.92
120.72
2.7
Gasoline,diesel and kerosene production
78.94
76.37
3.4
Gasoline
31.33
30.04
4.3
Diesel
32.24
32.09
0.5
Kerosene
15.37
14.25
7.9
Light chemical feedstock production
20.04
19.34
3.6
Note: Includes 100% of production of domestic joint ventures.
Marketing and Distribution
In the first half of 2019,confronted with strong competition,the Company aimed to achieve a balance between sales volume and profits. We brought our advantages of integrated business and distribution network into full play,coordinated internal and external resources,and intensified efforts to explore more markets,thus,achieved sustained growth in both total domestic sales volume and retail scale. We adopted a flexible and targeted marketing strategy and upgraded our distribution network to reinforce existing advantages. We continuously explored overseas market in refined oil products,and expanded the scale of international trade. Total sales volume of refined oil products in the first half of 2019 was 126.91 million tonnes,up by 9.6% year on year,of which domestic sales volume was 91.77 million tonnes,up by 3.8% year on year. We strengthened the cultivation of self-owned brands and supply chain management,to enhance the profitability of non-fuel business.
In the first half of 2019,the operating revenues of the segment were RMB 691.8 billion,upby 3.5% year on year. This was mainly due to refined oil products sales volume growth. In the first half of 2019,the operating revenues of non-fuel business was RMB 16.7 billion,and the profit of nonfuel business was RMB 1.9 billion,representing an increase of 11.8% compared with the same period of 2018. In the first half of 2019,this segment recorded an EBIT of RMB 16.4 billion. Operating profit of the segment was RMB 14.7 billion. This was mainly attributed to the strong competition in the domestic refined oil market and the narrowing of retail spread.
Marketing and Distribution: Summary of Operations
Unit: Million Tonnes
Six-month period ended 30 June
Changes
2019
2018
(%)
Total sales volume of refined oil products
126.91
115.75
9.6
Total domestic sales volume of refined oil
products
91.77
88.45
3.8
Retail
60.06
59.28
1.3
Direct sales and Wholesale
31.72
29.16
8.8
Annualised average throughput per station
(tonne/station)
3,916
3,870
1.2
As of 30 June
2019
As of 31
December 2018
Change from
the end of last
year (%)
Total number of Sinopec-branded service
stations
30,674
30,661
0.04
Number of Company-operatedstations
30,668
30,655
0.04
Number of convenience stores
27,362
27,259
0.38
Chemicals
In the first half of 2019,the Company adhered to the development philosophy of "basic plus high-end" and sharpened market competitiveness through effective supply. We constantly fine-tuned chemical feedstock mix to further lower costs. We optimized product slate and increased high end products output. The ratio of new and specialty products of synthetic resin reached64.6%,the ratio of high-value-added products of synthetic rubber reaching 28.2%,and differential ratio of synthetic fibre reaching 90.2%. By enhancing the dynamic optimisation of facilities and product chain,and improving the utilisation and production scheduling based on market demand,we actively promoted a number of key projects and acceleratedthe construction of advanced production capacity. Ethylene production for the first half of 2019 was 6.16 million tonnes,up by 6.5% year on year. We enhanced the integration among production,marketing,R&D and application,promoted targeted marketing and service,and further expanded the market to enhance profitability. Total chemical sales volume for the first half amounted to 48.69 million tonnes,up by 14.4% from the corresponding period in 2018.
In the first half of 2019,operating revenues of the chemicals segment were RMB 260.5 billion,representing an increase of 1.6% year on year,which was mainly due to the expansion of chemical business scale. In the first half of 2019,this segment recorded an EBIT of RMB 13.8 billion. Operating profit of the segment was RMB 11.9 billion. This was mainly due to the strong competition of chemical market because of oversupply,which reduced the gross margin.
Major Chemical Products: Summary of Operations
Unit: 1,000 tonnes
Six-month period ended 30 June
Changes
2019
2018
(%)
Ethylene
6,160
5,786
6.5
Synthetic resin
8,429
8,068
4.5
Synthetic fiber monomer and polymer
5,030
4,601
9.3
Synthetic fiber
633
603
5.0
Synthetic rubber
529
405
30.6
Note: Includes 100% of production of domestic joint ventures.
Health,Safety,Security and Environment
The Company constantly promoted the HSSE system in the first half of 2019 and implemented the concept of "Comprehensive Health" by integrating the management of occupational,physical and mental health of our employees. Stringent rules were set to control risks and supervise the safety and operations of contractors,and strict measures were taken to manage and control major safety risks and eliminate significant safety hazards,all contributing to the stable and safe production performance. We upgraded our capacity in all-dimensionalrisk prevention and control as well as emergency response,further enhancing security management. We actively practiced green and low carbon growth strategy,enhanced coordinated management of energy and environment,and further promoted the Green Enterprise Campaign and the Energy Efficiency Upgrading Plan. We reinforced carbon asset management and pollution prevention and treatment. Energy management and environmental protection work continued to yield good results on all fronts. In the first half of the year,the comprehensive energy consumption of the Company was flat with the same period of last year. Industrial fresh water usage was down by 1.1% year on year. COD of discharged waste water went down by 2.2% year on year and SO2 emissionsdown by 4.0% year on year. All solid waste was properly treated.
Capital Expenditures
Focusing on quality and return on investment,the Company continuously optimised its investment projects. In the first half of 2019,total capital expenditures were RMB 42.878 billion. Capital expenditures for the exploration and production segment were RMB 20.064 billion,mainly for oil capacity building in Shengli and Northwest oilfields,shale gas capacity building in Fuling and Weirong,and natural gas pipeline and storage as well as overseas projects. Capital expenditures for the refining segment were RMB 8.779 billion,mainly for the Zhongke integrated refining and chemical project,product mix optimisation of Tianjin,Zhenhai,Luoyang and Maoming. Capital expenditures for the marketing and distribution segment were RMB 8.071 billion,mainly for constructing refined oil products depots,pipelines and service stations. Capital expenditures for the chemicals segment were RMB 5.674 billion,mainly for integrated refining and chemical projects of Zhongke,Zhenhai and Wuhan. Capital expenditures for corporate and others were RMB 290 million,mainly for R&D facilities and information technology projects.
Business Prospects
Looking ahead to the second half of 2019,the international economy is expected to show a slower growth rate in the midst of a complex and uncertain global political and economic environment. As China will keep prioritising supply-side structural reform and advancing high quality development,continued growth of China's economy will further drive up the domestic demand for refined oil products and petrochemicals with a trend of demand forhigh end products. Along with the adjustment of China's energy structure,the domestic demand for natural gas will maintain strong growth.
Confronted with the present situation,the Company will stay committed to the overall guidelines of seeking steady progress,pursue new concepts of development to fully optimise operations,expand markets,reduce costs,control risks,and realize growth. Our focuses are on the following aspects:
For Exploration and Production,we will fully implement the action plan of redoubling efforts in oil and gas exploration and development,promote efficient exploration and profit-oriented production,and increase proved reserves to enhance sustainable development. In crude oil development,efforts will be made in promoting the capacity building of Shunbei and Shengli offshore blocks,improving refined reservoir characterisation and development of mature fields,and increasing reserve development rate and recovery rate through technology optimisation and scaled application. In natural gas development,we will accelerate the capacity construction of key areas as Western Sichuan and Hangjinqi,optimise the integrated system of natural gas production,storage and marketing,so as to achieve rapid and efficient development of the gas business. In the second half of 2019,we plan to produce 142 million barrels of crude oil,among which,domestic and overseas production will be 125 million barrels and 17 million barrels respectively,and 507 billion cubic feet of natural gaswill be produced.
For Refining,we will strengthen crude oil procurement and inventory and transportation management to improve the high-efficiency operation of the value chain and synergised profit-making ability,and promote the refining value chain based on the integrated advantage. We will accelerate the advanced capacity building,andfacilitate differentiated development for refineries to improve competitiveness in the market. We will further promote the application of technology for optimising refinery process,and adjust product mix based on the market. The quality upgrading plan for new spec bunker fuel will be improved to reduce production costs. In the second half of 2019,we plan to process 124 million tonnes of crude oil.
For Marketing and Distribution,we will stick toour strategy of balancing volume and profit,continue to optimise resources allocation,expand market,and increase operational profits. We will make efforts to expand total sales volume and retail scale through implementing targeted marketing. We will further improve our marketing network to reinforce existing advantages. We will accelerate exploring the e-vehicle charging and battery swapping business,and push forward the construction of hydrogen refueling stations. We will accelerate the development and marketing of self-owned brand products,improve the new business model of "Internet + service stations + conveniencestores + comprehensive services" to advance the growth of non-fuel business. In the second half of 2019,we plan to sell 91.12 million tonnes of refined oil products in the domestic market.
For Chemicals,we will focus on the "basic plus high-end" development concept,speed up advantageous and advanced capacity building,strengthen transformation and upgrading,and upgrade our competitiveness and profit-making ability. We will fine-tune our feedstock slate,aim to maximise profit,diversify feedstock procurement channels,and reduce cost. We will further adjust product slate,and coordinate production,research,and application to raise the proportion of high-end products. We will make further adjustments to the structure of plants,enhance the dynamic optimization of plants and product chains and improve the utilisation and production scheduling. Meanwhile,we will carry out more thorough research on the market,promote precision marketing,integrate online and offline marketing,proactively develop market and expand sales,and keep increasing our market share. We plan to produce 6.04 million tonnes of ethylene in the second half of 2019.
In the second half of the year,the Company will continue to follow specialized development,market-oriented operation,and internationalisation and overall coordination to promote high-quality development and deliver good operating results.
Appendix: Keyfinancial data and indicators
FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH ASBE
Principal accounting data
Items
Six-month period ended 30 June
Changes
over the same
period of the
preceding year
(%)
2019
RMB million
2018
RMB million
Operating income
1,498,996
1,300,252
15.3
Net profit attributable to equity
shareholders of the Company
31,338
41,600
(24.7)
Net profit attributable to equity
shareholders of the Company
after deducting extraordinary
gain/loss items
30,451
39,791
(23.5)
Net cash flows from operating
activities
32,918
71,620
(54.0)
At 30 June 2019
RMB million
At 31 December 2018
RMB million
Change from the
end of last year
(%)
Total equity attributable to equity
shareholders of the Company
724,495
718,355
0.9
Total assets
1,824,845
1,592,308
14.6
Principal financial indicators
Items
Six-month period ended 30 June
Changes
over the same
period of the
preceding year
(%)
2019
RMB
2018
RMB
Basic earnings per share
0.259
0.344
(24.7)
Diluted earnings per share
0.259
0.344
(24.7)
Basic earnings per share after deducting
extraordinary gain/loss items
0.252
0.329
(23.4)
Weighted average return on net assets (%)
4.28
5.74
(1.46) percentage
points
Weighted average return on net assets
after deducting extraordinary gain/loss
items (%)
4.16
5.49
(1.33) percentage
points
FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH IFRS
Principal accounting data
Items
Six-month period ended 30 June
Changes
over the same
period of the
preceding year
(%)
2019
RMB million
2018
RMB million
Operating Profit
49,138
61,576
(20.2)
Profit attributable to owners of the
Company
32,206
42,386
(24.0)
Net cash generated from operating
activities
32,620
(54.0)
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
723,452
717,284
0.9
Total assets
1,308
14.6
Principal financial indicators
Items
Six-month period ended 30 June
Changes
over the same
period of the
preceding year
(%)
2019
RMB
2018
RMB
Basic earnings per share
0.266
0.350
(24.0)
Diluted earnings per share
0.266
0.350
(24.0)
Return on capital employed (%)
4.92
6.48
(1.56) 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 2019 and the first half of 2018.
Six-month period ended 30 June
Changes
2019
2018
RMB million
(%)
Exploration and Production Segment
Operating revenues
103,804
87,924
18.1
Operating expenses
97,561
88,336
10.4
Operating profit/(loss)
6,243
(412)
-
Add: Share of profits/(losses) from
associates and joint ventures
1,736
1,087
59.7
Add: Investment (loss)/income
(2)
2
-
EBIT
7,977
677
1,078.3
Refining Segment
Operating revenues
597,797
593,327
0.8
Operating expenses
578,707
554,395
4.4
Operating profit
19,090
38,932
(51.0)
Add: Share of (loss)/profits from
associates and joint ventures
(509)
487
-
Add: Investment income/(loss)
25
12
108.3
EBIT
18,606
39,431
(52.8)
Marketing and Distribution Segment
Operating revenues
691,842
668,325
3.5
Operating expenses
677,133
651,139
4.0
Operating profit
14,709
17,186
(14.4)
Add: Share of profits from associates
and joint ventures
1,670
1,125
48.4
Add: Investment income
51
11
363.6
EBIT
16,430
18,322
(10.3)
Chemicals Segment
Operating revenues
260,488
256,268
1.6
Operating expenses
248,593
240,504
3.4
Operating profit
11,895
15,764
(24.5)
Add: Share of profits from associates
and joint ventures
1,873
3,137
(40.3)
Add: Investment income
9
13
(30.8)
EBIT
13,777
18,914
(27.2)
Corporate and others
Operating revenues
770,161
585,443
31.6
Operating expenses
772,716
589,897
31.0
Operating profit
(2,555)
(4,454)
-
Add: Share of profits from associates
and joint ventures
1,105
782
41.3
Add: Investment income
148
802
(81.5)
EBIT
(1,302)
(2,870)
-
Elimination of inter-segment
profit/(loss)
(244)
(5,440)
-
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.
