Sinopec Engineering reaffirms order goal despite 22.6pc interim profit fall amid oil downturn
Sinopec Engineering, a major builder of oil refineries and chemical plants in China and abroad, reaffirmed its confidence in meeting its full year new order intake target after posting a 22.6 per cent fall in interim profit.
The state-backed company, a unit of oil giant China Petrochemical, the parent of listed China Petroleum & Chemical (Sinopec), recorded a net profit of 834.9 million yuan (US$108 million) for the first six months, down from 1.08 billion yuan in the same period last year, it said in a filing to Hong Kong’s bourse on Monday.
“Under the influence of persistent low international crude oil price over the past two years and the shrinking investment in the oil refining and chemical industry, the group continued to face a lot of downward pressure on its performance in the first half of 2017,” it said.
The interim profit is the lowest it has reported since the company was listed in 2013, and amounted to 37.5 per cent of the full year estimate by 10 analysts polled by Bloomberg.
It posted interim profits of between 1.71 billion yuan and 2.21 billion yuan between 2012 and 2015.
An interim dividend of 5.6 fen per share was proposed, down 22.2 per cent from 7.2 fen last year.
First-half revenue slid 22.4 per cent year on year to 13.76 billion yuan.
Overseas revenue made up 43.6 per cent of total revenue in the first half - a historical high, up from 35.2 per cent in the year-earlier period, as the firm won more business from nations along the new silk road and maritime silk road where Beijing is encouraging trading and investment activities.
Despite the lacklustre first half results, the company said it received new orders worth 17.8 billion yuan in the first half, up 111.6 per cent year-on-year and mostly from non Sinopec associated customers in China.
“We are confident of meeting our full year target to book 38 billion yuan of new orders on the back of an expected resurgent order flow from our sister companies,” company secretary Sang Jinghua said.
First-half overseas new orders amounted to only US$192 million, well behind its full-year target of US$1.5 billion.
President Xiang Wenwu told reporters this was due to the decision to pull out of a bidding war with a rival for a €1.1 billion (US$1.3 billion) project in Russia in order to reduce its own financial risk, as well as a delay in the tendering of a US$1 billion project in the Middle East as it took longer than expected to iron out financing arrangements.
“This will not change our confidence in bagging this Middle East project,” he said.
Vice chairman Lu Dong said the firm expects to win more than 20 per cent of the 200 billion yuan that sister firm Sinopec plans to spend on expanding and upgrading four refining and petrochemical hubs in eastern and southern China by 2020.
A contract is expected to be signed by the end of the year for one of the hubs, in western Guangdong province, said chairman Ling Yiqun.
The company’s order backlog rose 4.5 per cent to 92.2 billion yuan as of June 30 from December 31 last year. µ
Sinopec Engineering closed 4.9 per cent higher at HK$7.33 on Monday compared to a 0.4 per cent gain in the Hang Seng Index.