Sinopec profit jumps 44 per cent on cheaper crude and pipeline sales
Oil refiner expects 150 per cent surge in income for first quarter of 2017 after posting first profit growth in three years
China Petroleum & Chemical Corp (Sinopec) reported its first profit gain in three years as the world’s largest oil refiner got a boost from cheaper crude and took a one-time gain from pipeline sales.
Net income in 2016 rose 44 per cent to 46.7 billion yuan (US$6.8 billion), the company said in a statement to the Shanghai stock exchange on Sunday. That compares with a mean of 39.9 billion yuan from 19 estimates compiled by Bloomberg. Revenue fell about 4 per cent to 1.93 trillion yuan.
Global oil refiners have fared better than producers during the energy downturn as cheaper crude boosted profit margins and stimulated fuel demand. Along with slashing spending, that has helped the Beijing-based company outperform its state-owned rivals despite falling oil prices and declining production.
In a separate statement, the company projected income during the first quarter of this year jumped 150 per cent, citing higher oil prices, stable demand and improved profitability.
“Lower crude prices really helped Sinopec’s margins last year,” said Tian Miao, an analyst at North Square Blue Oak. “Sinopec may continue to benefit from China’s strong fuel demand growth, especially [petrol]. The risk for Sinopec going forward is that crude prices rise too high and too fast as higher upstream margins wouldn’t be enough to cover refining losses.”
Gross refining margins in 2016 were 471.90 yuan a tonne, about 48 per cent higher than the previous year, the company said. It also booked a 20.56 billion yuan gain from the sale in December of a 50 per cent stake in a pipeline unit, Sinopec Sichuan-to-East China Gas Pipeline.
The company expects global crude production to fall for a third year while aiming to boost capital expenditures by 44 per cent to 110.2 billion yuan, the first increase in four years. Spending includes building the second phase of its Fuling shale-gas project and liquefied natural gas import infrastructure in Tianjin, as well as domestic gas storage facilities.
Sinopec issued a dividend of 17 fen, compared with a forecast for eight fen.
The stock rose 1.1 per cent to HK$6.20 on Friday while the benchmark Hang Seng Index in Hong Kong added 0.1 per cent.
Investors are next eyeing Sinopec’s efforts to revive an initial public offering of its retail business, which could raise as much as US$10 billion.
The company asked banks to submit proposals by December for roles to manage a potential Hong Kong listing next year, Bloomberg reported.
China’s biggest offshore explorer, CNOOC, reported its worst-ever profit on Thursday. It was able to eke out a 637 million yuan net income, thanks to bigger income tax credits, cost-cutting and a recovery in oil prices.
The nation’s largest oil producer, PetroChina, will announce results on March 30.