Sinopec: Net profit of 31.3 bn yuan in the first half of the year fell by 24.7%

China Petrochemical Co., Ltd. (hereinafter referred to as Sinopec, 600028.SH; 00386.HK) announced its mid-term performance of 2019 as of June 30 on August 25.

According to IFRS, Sinopec realized operating income of 49.138 billion yuan (RMB, the same below) in the first half of the year, down 20.2% from the same period last year; shareholders should account for profits of 32.206 billion yuan, down 24.0% from the same period last year; basic earnings per share was 0.266 yuan, down 24.0% from the same period last year. At the end of this report, the ratio of assets to liabilities was 52.5%, excluding the impact of the new leasing standards, and the ratio of assets to liabilities was basically the same as that at the end of last year.

According to the accounting standards of Chinese enterprises, Sinopec realized operating profit of 49.2 billion yuan in the first six months of this year, a decrease of 27.6% over the same period of last year; net profit attributable to shareholders of parent company was 31.338 billion yuan, a decrease of 24.7% over the same period of last year; basic earnings per share was 0.259 yuan (0.344 yuan in the first half of 2018). The board of directors decided to issue a mid-term dividend of 0.12 yuan per share (including tax).

Sinopec is a joint-stock enterprise with integration of upstream, middle and downstream, outstanding main petroleum and petrochemical industries, relatively complete sales network and listing at home and abroad. Its refining capacity ranks first in China, and it is the largest refined oil supplier in China. China Petrochemical Group Company, one of the three barrels of oil, is its largest shareholder. Reviewing the operating environment in the first half of the year, Sinopec said that in the first half of 2019, the international crude oil price went up and down rapidly, with the average spot price of Brent crude oil at $65.95 per barrel, down 6.6% from the same period last year. Domestic demand for natural gas maintained rapid growth, apparent consumption increased by 10.8% year-on-year, domestic demand for refined oil continued to grow, market resource supply was abundant, and competition was extremely fierce. The demand for major chemical products in China has increased rapidly.

Sinopec's operating profit narrowed in the first half of the year mainly due to the narrowing of gross profit of major products such as refinery and chemical industry. In the first half of this year, the operating income of Sinopec Exploration and Development Division was 6.2 billion yuan, turning losses into profits, an increase of 6.7 billion yuan over the same period of last year. Among them, the sales price and sales volume of natural gas and LNG increased significantly year-on-year. In the first half of the year, LNG sales increased by 104.5% to 7.25 billion cubic meters, while sales of liquid LNG increased by 75.6% to 1.97 million tons. The average sales price of crude oil is 2895 CNY/ton, an increase of 1.0% year on year; the average sales price of natural gas is 1431 yuan/km, an increase of 4.1% year on year; the average sales price of gasified LNG is 2354 yuan/km, an increase of 29.2% year on year.

Refinery business includes purchasing crude oil from third parties and exploration and development business, and processing crude oil into petroleum products. In the first half of the year, Sinopec's gross profit was 383 CNY/ton, which was 161 CNY/ton lower than that of the previous year, and 29.6% lower than that of the previous year. It is mainly attributed to the increase in imported crude oil stickers, the rise in overseas freight and insurance premiums, and the devaluation of the RMB exchange rate. At the same time, the price gap of naphtha, liquefied petroleum gas and other petroleum refining products has narrowed considerably. In the first half of the year, marketing and distribution realized operating income of 14.7 billion yuan, down 14.4% from the same period last year. It is mainly attributed to the fierce competition in domestic refined oil market and the narrowing of the retail end price gap.

Chemical Industry Department realized business income of 11.9 billion yuan in the same period, a decrease of 24.5% over the same period, mainly due to the fierce competition in the chemical products market, abundant supply and lower gross profit of products. The semi-annual report reported that in the second half of the year, the uncertainty of the international political and economic situation increased and the growth rate of the world economy was expected to slow down. China will continue to adhere to the supply-side structural reform as the main line to promote high-quality development. It is expected that China's economy will maintain stable growth, which will stimulate the growth of domestic demand for refined oil and petrochemical products, and products will gradually become high-end. With the further adjustment of China's energy structure, domestic natural gas demand will continue to grow.