Shanghai Petrochemical has planned capital expenditure of 6.5 billion yuan (about HK$6 billion) that will bolster sales more than 30 per cent in three years, according to vice-chairman Xu Kaicheng. Mr Xu said the firm had budgeted 1.5 billion to 1.8 billion yuan for spending this year on its Phase IV expansion and upgrade project, and about two billion yuan for next year and for 2002. 'When it is completed, we will become a world-class petrochemical company,' he said. The project will be 60 per cent financed through internal resources and the remainder by bank financing. He said the firm's parent, China Petrochemical (Sinopec), had transferred its 55.5 per cent stake in the firm into listing vehicle Sinopec, ahead of its planned flotation later this year. Sinopec has a registered capital of 68.8 billion yuan and turnover of about 200 billion yuan, he added. 'Sinopec has put its core businesses into the listing vehicle, including the four H shares,' he said. They are Shanghai Petrochemical, Sinopec Zhenhai Refining, Yizheng Chemical Fibre and Beijing Yanhua Petrochemical. Shanghai Petrochemicals' 74.1 per cent net profit growth to 414.3 million yuan for the six months to June 30 was better than some analysts' expectations. They were surprised at the rate at which the firm's product prices and output have risen. The output and product prices increases have offset higher crude oil costs. In the first-half, the firm processed three million tonnes of crude oil, 21.6 per cent higher than the previous corresponding period, while prices of its refined products rose a weighted average of about 30 per cent. Average crude oil processing costs rose 74.3 per cent year on year to 1,637 yuan per tonne during the period. An analyst with a European securities firm said improvement in production flow and technology upgrades resulted in the greater-than-expected production-volume rise. Another analyst with a United States brokerage attributed the sharp rise in product prices to second-quarter import controls. 'If you look at petrochemical prices in other Asian markets, they have actually weakened,' she said. Analysts expect the company's profit margin to improve in the second half on the back of a slight easing in crude oil prices. The operating profit margin slipped 0.8 per cent year on year to 7.2 per cent in the first half. Earlier this year, Shanghai Petrochemical took a 38.1 per cent stake in the Shanghai Chemical Industry Park - a Sino-foreign project spearheaded by the Shanghai government - aiming to attract 50 billion yuan of investment in the next five years. The firm has so far invested about 600 million yuan on the project's land development.