China Petroleum & Chemical Corp (Sinopec) saw its net profit slide 9.4 per cent in the third quarter but benefited from government-mandated fuel price rises to beat analysts' estimates.
Sinopec, the country's biggest oil producer and Asia's largest refiner, said its net profit in the quarter to September reached 18.3 billion yuan (HK$22.7 billion), down from 20.2 billion yuan a year earlier, according to the company's filing with the Hong Kong stock exchange yesterday.
A report by Mirae Asset Securities said domestic petrol and diesel price increases in the past two months "helped Sinopec mitigate the downstream refining loss in the second half".
With its margins bolstered by those price adjustments, Sinopec's net profit last quarter bested the median estimate of 14.9 billion yuan in a survey of nine analysts compiled by Bloomberg.
Domestic refining losses were largely blamed for a 41.6 per cent drop in first-half net profit to 24.5 billion yuan, which was the company's lowest interim profit since 2008.
The central government has put a cap on domestic fuel prices to help contain inflation. That has resulted in the cost of buying crude oil imports far outpacing domestic prices for refinery products.
Sinopec said: "The domestic demand for oil products and chemical products continued to rise, though at a slower rate."
The Beijing-based company's capital expenditure totalled 83.4 billion yuan in the January-September period, of which 35 billion yuan was used on exploration and production.
"In the first three quarters, our oil and gas production reached 318 million barrels of oil equivalent, representing a year-on-year growth of 4.92 per cent," it said.
Of that output, crude oil production rose 2.3 per cent to 245 million barrels and natural gas production grew 14.7 per cent to 438.4 billion cubic feet.
"We are confident that the worst has passed [for Sinopec] and the fourth quarter could hold positive earnings surprises," said Mirae Asset, which has a "buy" recommendation on the stock.
It said a new government leadership might "examine the domestic [fuel] pricing system to restore fair profits to the [oil] refiners amid sustained high crude oil import costs".