Sinopec’s fuel marketing unit to miss IPO timeline target in the name of reform
Sinopec says it needs more time to put together a comprehensive plan to raise competitiveness
China Petroleum & Chemical (Sinopec), the world’s second largest oil refiner, is expecting some delay in its plan to spin off its fuel marketing unit as it needs more time to come up with new management systems to enhance competitiveness, according to its chief.
The plan, originally scheduled to take place within this year, is pending “some reform issues that need to be ironed out both in depth and in details,” chairman Wang Yupu told reporters on Monday without elaboration.
Asked if Sinopec Marketing, which was estimated by Sanford Bernstein senior analyst Neil Beveridge two years ago to be worth 404 billion yuan (US$61 billion), would list in Hong Kong, secretary to the board Huang Wensheng said it would be decided by market conditions.
“Hong Kong is still considered a relatively attractive listing venue, but it will be up to the unit’s board to decide,” he said. “Listing is not the be-all and end-all of the exercise, reform and competitiveness enhancement are.”
The Sinopec board had approved of the listing in May this year, but apart from the parent company, Sinopec Marketing has 25 other shareholders who had invested a total of 107 billion yuan for a 30 per cent interest in 2014.
Their collective additional oversight would help the unit improve governance, make top management appointments and enhance their accountability, which will set an example for President Xi Jinping’s “mixed ownership” reform to make state enterprises more competitive and market-oriented.
Sinopec Marketing’s plan was to sell a 10 per cent stake to other investors, to further diversify its shareholder base and dilute Sinopec’s shareholding.
The unit posted an eight per cent year on year rise in earnings before interest and tax to 18 billion yuan in the year’s first half, as profit from non fuel retailing businesses surged 63.6 per cent to 1.26 billion yuan.
Sinopec on Sunday posted a 40 per cent year on year net profit jump to 27.9 billion yuan for the year’s first half, as higher oil prices trimmed losses at its oil production division and bolstered earnings at downstream fuel marketing and chemicals production.
Chief financial officer Wang Dehua said it aimed to cut its oil production cost to less than US$55 a barrel by 2020 from over US$60 currently.
Separately, as a further indication of the oil sector’s improving fortune, Xu Hongjian, financial director of Anton Oilfield Services, one of Sinopec’s suppliers, said he was confident the firm will return to positive operating cash flow in the year’s second half.
Despite returning to the black with a net profit of 12.2 million yuan in the year’s first half, compared to a loss of 65 million yuan in the same period last year, Anton recorded an operating cash outflow of 206 million yuan in the first half, as it spent more to grow business both in China and its biggest overseas market Iraq.
He expects the firm to see earnings before interest, taxes, depreciation and amortisation of 750 million to 800 million yuan for the full year ,after 387 million yuan was booked in the first half.