Sinopec Shanghai estimates interim loss at 27m yuan
Sinopec Shanghai Petrochemical, a refining and petrochemical unit of China Petroleum and Chemical (Sinopec), expects to post a half-year loss of 27 million yuan.
While the latest estimate is worse than the 'substantial drop' in interim profit the firm predicted in late April, it reflected an improvement in the second quarter as it posted a much larger loss of 154.3 million yuan for the first quarter.
Sinopec Shanghai's earnings have been hurt by the government's control on refined oil prices amid a sharp rise in the cost of crude oil, its main raw material.
Company secretary Zhang Jingming attributed the second-quarter improvement largely to cost cutting and management efficiency. 'We have put a lot of effort in crude cost procurement, energy and material consumption reduction to lower costs,' he said.
A 12.3 per cent rise in ex-factory diesel price and a 10.6 per cent increase in petrol price in late May also helped the bottom line, said Mr Zhang. He said profitability of the chemical unit did not improve in the second because of high material costs and softened demand.
Sinopec Shanghai outperformed China's worsening refining industry whose 18.7 billion yuan loss for the second quarter was double the 9.7 billion yuan loss in the first quarter, according to a report by brokerage Shenyin Wanguo.
Shenyin Wanguo said a mainland refiner would lose US$3 for every barrel of oil it refines. It also expected increases in refined oil prices before October.
Sinopec Shanghai is scheduled to announce its interim results on August 29. Its share price fell 1 per cent to HK$3.93 yesterday, bucking a 1.75 per cent gain in the benchmark Hang Seng Index.
There was renewed speculation on Tuesday that Sinopec Shanghai would be privatised by Sinopec after a mainland newspaper said it could happen next month. Mr Zhang dismissed the rumours.
The firm was caught in a controversy in June when contrasting trading suspension policies of the Hong Kong and Shanghai exchanges allowed its H shares to trade for 49 minutes amid sharp price fluctuations and hefty volume while its A shares were suspended. The unusual trading was spurred by a mainland media report on an imminent privatisation which the firm denied later.
Meanwhile, a Daiwa Securities report estimated Sinopec and rival PetroChina might have seven billion yuan to 15 billion yuan in refining losses in the first half.