Sinopec Engineering’s shares fall on profit decline
Refineries and chemical plants builder affiliate is aiming for 2017 orders to recover
Shares in Sinopec Engineering (Group), the refineries and chemical plants builder affiliate of listed China Petroleum & Chemical (Sinopec), fell by the most in six days on Monday at one point after the firm reported a sharp decline in profit amid lower demand for chemical plants using coal as feedstock.
The Beijing-based company reported a 50 per cent drop in 2016 net profit to 1.66 billion yuan (US$240 million) while revenue slid 13.5 per cent to 39.4 billion yuan, in line with its profit warnings issued in January.
Shares fell as much as 2.3 per cent to an intraday low of HK$7.55 before closing 0.1 per cent higher at HK$7.74. The Hang Seng Index edged up 0.8 per cent.
A 51 per cent decline in Sinopec Engineering’s coal-to-chemicals projects more than offset the growth in crude oil refining and chemical projects that use oil as feedstock.
Overseas markets accounted for 36.8 per cent of the total, up from 20 per cent in 2015, as refinery projects in Malaysia and Kazakhstan as well as a chemical project in Saudi Arabia reached construction peaks.
After facing “extremely difficult market conditions” last year, chairman Ling Yiqun said in a filing to Hong Kong’s bourse that this year’s outlook remained challenging.
“[With] crude oil price staying low and global industrial investment being sluggish, the refinery and chemical engineering industry will remain severe, market competition will become fiercer and engineering companies will continue facing downward performance pressure,” he said.
Still, as oil prices rebounded from last year’s low, the firm is targeting for order intakes to recover to 38.4 billion yuan in 2017 after last year’s volume dived 47.6 per cent to 27.6 billion yuan, falling short of its target of 47.7 billion yuan.
The main source of the rebound was from the construction start at Sinopec’s Sino-Kuwait joint-venture oil refinery project in Guangdong, the expansion of its joint-venture petrochemical plant in Tianjin with Saudi Arabia’s Sabic and the work resumption on a coal-to-chemicals project in Anhui, Sinopec Engineering president Xiang Wenwu told reporters.
Led by declines of 22 per cent in chemical projects that use oil and coal as feedstocks, total order backlog fell 11.8 per cent to 88.2 billion yuan at the end of last year from a year earlier.
Sinopec Engineering is proposing a final dividend of 7.8 fen per share, bringing the full-year payout to 15 fen, down from 29.7 fen in 2015.