Hong Kong company reporting season

Sinopec posts 40pc interim profit gain thanks to higher crude oil prices

PUBLISHED : Sunday, 27 August, 2017, 8:26pm
UPDATED : Sunday, 27 August, 2017, 10:42pm

China Petroleum & Chemical (Sinopec), the world’s second largest oil refiner by capacity, reported a 40 per cent rise in interim first half profit on the back of a strong rebound in crude oil prices.

The company, which is also a major oil and gas producer, had a net profit of 27.92 billion yuan (US$4.2 billion) in the first six months, up from 19.92 billion yuan in the same period last year.

The profit is ahead of the 22.1 billion yuan average estimate of two analysts in a Bloomberg poll, and amounted to 54.4 per cent of the 51.3 billion yuan full year estimate of 19 analysts polled.

“The Chinese economy is expected to maintain a stable and solid growth momentum in the second half, increasing demand for oil and petrochemical products,” the company said in a filing to Shanghai Stock Exchange on Sunday.

The company added that the natural gas business would grow on a fast track buoyed by the government’s support for clean energy.

An interim dividend of 10 fen per share was proposed, up from 7.9 fen last year.

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First half revenue grew 32.6 per cent year on year to 1.165 trillion yuan.

Operating losses from oil and gas production narrowed to 18.3 billion yuan from a loss of 21.9 billion yuan loss in the year earlier period.

The average price of the Brent oil benchmark jumped 30 per cent on year to US$51.80 a barrel in the first half, after Opec was forced to cut output to counter US shale oil producers’ expansion.

First half oil output fell 5.3 per cent on year to 146 million barrels, while that of natural gas surged 16.3 per cent to 12.8 billion cubic metres (bcm).

The figures suggested the energy giant is on track to meet its full year targets.

The company in March announced an output target of 294 million barrels for the whole of this year, 3.1 per cent less than last year, following a 13.2 per cent output decline last year as the low oil price forced the shutting of high cost fields.

For natural gas, the company said it would grow output by 15 per cent for the whole of this year to 25 bcm, after missing last year’s curtailed target by 5.4 per cent.

First-half refining profit fell 9.8 per cent to 29.4 billion yuan, while that of fuel distribution rose 5 per cent to 16.6 billion yuan. Profit from chemicals production climbed 25.6 per cent to 12.2 billion yuan.

Sinopec’s management is expected to provide an update on the time table of the separate listing of its fuel distribution unit Sinopec Marketing, which was approved by Sinopec’s board in May.

The plan was to sell a 10 per cent stake of the unit to investors.

Some 30 per cent of the unit’s shares were sold to more than two dozen firms in 2014 for 107 billion yuan as part of President Xi Jinping’s so-called “mixed ownership” reform, which aims to improve governance of state firms by selling stakes to private investors and thereby bolstering diversity on the boards of state-owned companies.

Sinopec shares have risen 6.6 per cent so far this year, trailing the Hang Seng Index’s 26.6 per cent gain.