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Sluggish demand cuts Jilin Chemical

Jilin Chemical Industrial had a 100,000-tonne year-on-year decline in crude-oil processing volume in the first quarter this year due to sluggish demand, according to general manager Shi Jianxun.

In Hong Kong yesterday, Mr Shi said he expected the fall to have a certain 'negative impact on profitability this year', but this would be offset by savings stemming from asset write-offs last year.

The company plans to process 4.65 million tonnes of crude oil this year, compared with 4.5 million tonnes in 1999 and again last year. The H-share is a subsidiary of China National Petroleum Corp, the parent of listed PetroChina.

Using crude oil as raw material, it produces a range of petroleum products, dyestuffs, synthetic rubber and chemical fertilisers.

Mr Shi said this year's profitability hinged on price movements for the company's end-products, compared with price movements for crude oil. In the first quarter, prices of the company's refined oil products had fallen in tandem with crude oil prices.

The company expected crude oil to average between US$23 and US$25 a barrel.

Due to sharp oil-price rises last year, the cost of crude oil accounted for 68 per cent of the company's operating costs, up from 57 per cent in 1999.

After a 602 million yuan (about HK$564.07 million) one-time write-off of old production facilities, a 298 million yuan lay-off programme involving 7,000 staff and 37.1 million yuan of inventory write-offs, the firm recorded a net loss last year of 835.99 million yuan, compared with a profit of 148.8 million yuan in 1999.

Mr Shi said the measures would save 139 million yuan this year and it would continue to streamline its operations.

It has planned capital expenditure of 900 million yuan this year, mostly to upgrade and expand refining facilities.

At the end of last year, the firm had 228.96 million yuan cash and 993.43 million of bank loans due within this year.