BEIJING, March 29 /PRNewswire-Asia-FirstCall/ -- China Petroleum & Chemical Corporation ("Sinopec Corp." or "the Company") (HKEX: 386; NYSE: SNP; LSE: SNP; CH: 600028) today announced its annual results for year ended 31 December, 2008.
Financial Highlights: -- In accordance with the PRC Accounting Standards for Business Enterprises ("ASBE"), the Company's operating income amounted to RMB 1.452 trillion, representing an increase of 20.52% over 2007. Net profit attributed to equity shareholders of the parent company was RMB 29.69 billion, representing a decrease of 47.47% over the previous year. Basic earnings per share was RMB 0.342, down by 47.47%. -- In accordance with the International Financial Reporting Standards (IFRS), the Company's operating income and other income increased by 24.19% year on year to RMB 1.502 trillion in 2008. Net profit for the period attributed to equity shareholders of the Company was RMB 29.77 billion, down by 47.34% compared to 2007. Basic earnings per share was RMB 0.343, down by 47.34%. -- The Board of Directors proposed a final dividend of RMB 0.09 per share, making an annual dividend of RMB 0.12 per share. -- According to the preliminary calculations, the net profit for the first quarter of 2009 will increase by more than 50% compared to the corresponding period of the previous year. Business Highlights -- The Exploration and Production Segment achieved steady growth in its oil and gas production, generating an operating profit of RMB 66.6 billion, an increase of 36.5% year on year. The addition of proved reserve of oil and gas this year reached 267.6 million barrels of oil equivalent. -- The Refining Segment incurred an operating loss of RMB 61.5 billion, due to volatile oil prices in the international market and the strict domestic price control of refined oil products. -- The Marketing and Distribution Segment enhanced its sales network, improved the marketing structure by significantly increasing the proportion of retail sales so as to meet the growing domestic demand for refined oil products. The Company generated an operating profit of RMB 38.2 billion, an increase of 6.9% year on year. -- The Chemicals Segment incurred an operating loss of RMB 13.1 billion, due to a slump in demand for chemical products in addition to a sharp price drop in the international markets during the fourth quarter. -- In 2008, the Company reduced costs by RMB 3.964 billion as measures were taken to cut crude oil procurement and transportation costs, reduce consumption of energy and material inputs in the production process, and optimise the allocation of resources.
Mr. Su Shulin, Chairman of Sinopec, commented, "In 2008, we experienced extreme volatility in the international crude oil prices, stringent control on the pricing of domestic oil products, and significant changes in the demand for domestic refined oil products. In addition, both the demand and prices of petrochemical products plummeted harshly. Since July 2008, the international financial crisis has extended quickly to the real economy. Facing these unprecedented challenges, the Company proactively adjusted its business strategies and capitalised on its strengths to reinforce management, increase efficiency, develop its technological innovation, and enhance its control of safety, energy conservation and emissions. In 2008, we successfully reduced costs by RMB 3.964 billion. With concerted efforts from the management and staff, we have come through the market challenges strongly and accumulated valuable experiences for our future development.
Mr. Su Shulin continued, "Despite the difficult market environment in both domestic and international markets in 2009, we see favourable opportunities. Firstly, the Chinese government's economic stimulus policies have created opportunities for the Company to expand the market of refined oil and petrochemical products. Secondly, the improved pricing mechanism for refined oil products will help the Company's refining segment to turn around the loss it suffered in the past years, regain its position as a major revenue contributor and boost our overall profitability. Moreover, in order to strengthen upstream assets, the Company is looking into capturing strategic opportunities in overseas upstream oil and gas assets."
PRINCIPAL FINANCIAL DATA AND INDICATORS
FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH THE PRC ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES ("ASBE")
For the years ended 31 December Items 2008 2007 Change 2006 RMB Millions as restated* as previously (%) reported Operating income 1,452,101 1,204,843 1,204,843 20.52 1,061,669 Profit before taxation 24,226 83,434 82,911 (70.96) 76,305 Net profit attributable to equity shareholders of the Company 29,689 56,515 54,947 (47.47) 52,625 Net profit attributable to equity shareholders of the Company before extraordinary gain and loss 29,820 56,551 49,622 (47.27) 54,332 Net cash flow from operating activities 74,883 124,250 124,250 (39.73) 98,870 For the years ended 31 December Items 2008 2007 Change 2006 RMB Millions as restated* as previously (%) reported Total assets 752,235 729,863 718,572 3.07 613,627 Shareholders' equity attributable to equity shareholders of the Company 330,080 308,045 300,949 7.15 264,910 For the years ended 31 December Items 2008 2007 Change 2006 RMB Millions as restated* as previously (%) reported Basic earnings per share 0.342 0.652 0.634 (47.47) 0.607 Diluted earnings per share 0.302 0.652 0.634 (53.68) 0.607 Basic earnings per share (before extraordinary gain and loss) 0.344 0.652 0.572 (47.27) 0.627 Fully diluted return on net assets (%) 8.99 18.35 18.26 (9.36) 19.87 Weighted average return on net assets (%) 9.24 19.64 19.52 (10.40) 21.47 Weighted average return on net assets (%) 9.03 18.36 16.49 (9.33) 20.51 Weighted average return (before extraordinary gain and loss) on net assets (%) 9.28 19.65 17.63 (10.37) 22.17 Net cash flow from operating activities per share 0.864 1.433 1.433 (39.73) 1.140 For the years ended 31 December Items 2008 2007 Change 2006 RMB Millions as restated* as previously (%) reported Net assets attributable to equity shareholders of the Company per share 3.807 3.553 3.471 7.15 3.055 * The Company retrospectively adjusted the financial data in accordance with the China Accounting Standards for Business Enterprises Bulletin No.2 issued by the Ministry of Finance.
FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
Items 2008 2007 Change (%) 2006 RMB Millions Operating profit 28,123 85,864 (67.25) 80,632 Profit attributable to equity shareholders of the Company 29,769 56,533 (47.34) 53,603 Basic earnings per share (RMB) 0.343 0.652 (47.34) 0.618 Diluted earnings per share (RMB) 0.303 0.652 (53.53) 0.618 Return on capital employed (%) 5.3 12.0 (6.7) 12.8 Net cash generated from operating activities per share (RMB) 0.781 1.379 (43.36) 1.067 * Return on capital employed = operating profit x (1 - income tax rate)/capital employed Items 2008 2007 Change (%) 2006 RMB Millions Total assets 767,827 732,725 4.79 610,832 Shareholders' equity attributable to equity shareholders of the Company 328,669 307,433 6.91 264,334 Net assets per share (RMB) 3.791 3.546 6.91 3.049 Adjusted net assets per share (RMB) 3.699 3.466 6.72 2.976
SEGMENTAL FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS")
Year End December 31 Change 2008 2007 (%) RMB Millions Exploration & Production Segment Operating Income 196,501 145,667 34.9 Operating Cost 129,932 96,901 34.1 Operating Profit 66,569 48,766 36.5 Refining Segment Operating Income 859,083 658,849 30.4 Operating Cost 920,621 669,301 37.5 Operating Profit / (Loss) (61,538) (10,452) -- Marketing & Distribution Segment Operating Income 817,038 665,791 22.7 Operating Cost 778,829 630,064 23.6 Operating Profit 38,209 35,727 6.9 Chemicals Operating Income 241,091 240,689 0.2 Operating Cost 254,193 227,383 11.8 Operating Profit (13,102) 13,306 -- Corporate & Others Operating Income 734,751 456,830 60.8 Operating Cost 736,766 458,313 60.8 Operating Profit / (Loss) (2,015) (1,483) -- Market Environment and Business Review
In 2008, crude oil price experienced extreme volatility in the international markets while the domestic refined oil market experienced drastic changes from a supply shortage driven by a surge in demand in the first three quarters to oversupply as a result of the drop in demand growth in the fourth quarter. Domestic demand for chemical products recorded negative growth and in the second half of 2008, the worsening international financial crisis started to affect the real economy, weakening the demand for chemical products. As a result, the prices of chemical products plunged in the domestic and international markets.
Confronted with historically high crude oil prices in the international markets and tight domestic price controls, the Company adjusted its business strategy accordingly, enhancing precision management, reducing cost and increasing efficiency to guarantee stable supply of oil products in the domestic market and maintain steady business operations.
Production and Operation Exploration and Production
In 2008, the Company invested RMB 57.65 billion into implementing the strategy of expanding oil and gas resources. In exploration, the Company made significant breakthroughs in such regions as northeastern Sichuan, Tahe and the matured fields in eastern China. The Company added 267.6 million barrels of oil equivalent to its proved reserves of oil and gas. The Sichuan-Eastern China Gas project progressed on schedule and the construction of the Songnan gas field is on track. Meanwhile, the production capacity building in key areas has been strengthened and the development scheme of reserve through enhanced efforts in developing marginal reserves has been optimised, resulting in a steady increase in oil and gas production. While the output of crude oil in the matured eastern blocks remained stable, the production in the newly developed western fields accelerated. Newly added crude production capacity for 2008 is 5.8 million tonnes/year and the newly added production capacity of natural gas is 1.334 billion cubic meters/year.
The output of crude oil was 41.8 million tonnes and the output of natural gas was 8.3 billion cubic meters, an increase of 1.8% and 3.7% respectively from the previous year. Operating income for this segment grew 34.9% to RMB 196.5 billion, and operating profit increased 36.5% to RMB 66.6 billion, as a result of the rise of crude and gas sale prices and the growth in volume, as well as effective measures to control operating expenses.
Exploration and Production 2008 2007 2006 Changes 07-08 (%) Crude Oil Production (mmbbls) 296.8 291.67 285.19 1.8 Natural Gas Production (bcf) 2,931 2,826 2,565 3.7 Newly-added proved reserve of crude oil (mmbbls) 114 21 286 442.9 Newly-added proved reserve of natural gas (bcf) 9,216 37,567 1,615 (75.5) Proved reserve of crude oil (mmbbls) 2,841 3,024 3,295 (6.1) Proved reserve of natural gas (bcf) 69,593 63,308 28,567 9.9 Proved reserve of oil and gas (mmboe) 4,001 4,079 3,771 (1.9) Note: Crude oil volume is converted at 1 tonne to 7.1 barrels, and gas volume is converted at 1 cubic meter to 35.51 cubic feet Refining Segment
In 2008, the oil price fell by more than USD100/bbl after it peaked in July. The average Platt's Spot Price was USD97/bbl, an increase of 33.8% from the previous year. The Company was under pressure from both meeting domestic market demand and suffering huge losses as a result of the government's strict price control over oil products. Despite the difficulties, the Company managed to meet domestic demand for refined products, by keeping refinery facilities running at full capacity, accelerated the startup of newly- constructed and revamped facilities and adjusted the product mix to increase the proportion of gasoline and diesel. As a partner of the 2008 Beijing Olympic Games, the Company took the lead to supply Guo IV grade clean fuel, matching the demand from the hosting cities during the Games.
The Company processed 169 million tonnes of crude oil, representing an increase of 4.5% over the previous year; and produced 105.86 million tonnes of refined products, up 9.4% from the previous year. Even though sales volume across various refined oil products grew in the year, the sales price remained under strict regulatory control resulting in an operating income increase of 30.4% over the previous year to RMB 85.91 billion.
The Company adhered to the strategy of optimising and diversifying crude oil sources, to reduce the purchasing cost. The Company fully leveraged on the crude oil pipeline transmission capacity, improved allocation and transportation of crude oil, thus reduced transportation and storage costs. It tapped its refineries' potentials in processing high-sulphur, high-acid or heavy crude and accelerated the revamp of facilities to take in different grades of crude. The Company strengthened management and optimised its process, and increased light products yield and refinery yield even with low-grade crude oil. Responsive to market changes for high-value-added products, it upgraded the quality of gasoline and diesel, and adjusted the product mix. The Company invested a total of RMB 12.49 billion in the above-mentioned technological revamp and product upgrading.
Due to the spiralling crude prices on the international market during 2008, the refining segment incurred a loss in gross profit, in addition operating expenses of RMB 920.6 billion jumped 37.5% year on year. Despite government subsidies of RMB 40.5 billion, it recorded an operating loss of RMB 61.5 billion, up RMB 51.1 billion from the previous year.
Summary of Operations of Refining Segment 2008 2007 2006 Changes 07-08 (%) Crude oil throughput (thousand barrels/day) 3,399.0 3,132.9 2,946.5 8.5 Gasoline, diesel and kerosene production (million tonnes) 105.86 93.09 87.21 13.7 Of which: Gasoline (million tonnes) 29.09 24.69 23.00 17.8 Diesel (million tonnes) 68.78 60.08 57.86 14.5 Kerosene (million tons) 7.99 8.32 6.35 (4.0) Light chemical feedstock (million tonnes) 22.99 23.47 22.74 (2.0) Light products yield (%) 74.80 74.48 74.75 0.32 Refinery yield (%) 94.07 93.95 93.47 0.12 Note: Refinery throughput is converted at 1 tonne to 7.35 barrels Marketing and Distribution Segment
In 2008, the Company actively adapted itself to changes in the market. Supply in the first three quarters of 2008 was particularly tight, and the Company collected resources through various channels such as outsourcing and imports to increase oil products supply and ensured sufficient supply to the domestic market during periods of disaster relief, the agricultural peak season, and the Beijing Olympic Games. By doing so, the Company made important contributions to China's economic and social development. In 2008, the Company sold 123 million tonnes of refined oil product, an increase of 3.0% from the previous year. The operating income for this segment was RMB 817.0 billion, a 22.7% increase year on year.
The Company improved the marketing structure and greatly increased the proportion of retail sales. It also fully utilised the existing logistics system and increased the utilisation of pipeline transportation to reduce freight costs. Efforts have also been made in improving the service function of the service stations, improving the service quality, facilitating the renovation of the service stations, encouraging the use of IC cards, and expanding the non-fuel business. Throughput per station has increased steadily. The Company invested RMB 14.15 billion in strengthening its sales network, building, acquiring and revamping a number of depots and 720 service stations. However, due to growing cost in refined products procurement cost, its operating expenses jumped 23.6%, slightly higher than the growth rate of the operating income. After taking into account the subsidy of RMB 9.8 billion from the government, the Company posted an operating profit of RMB 38.2 billion, up 6.9% from the previous year.
Summary of Operations of Marketing and Distribution Segment 2008 2007 2006 Changes 07-08 (%) Total domestic sales volume of refined oil products (million tonnes) 122.98 119.39 111.68 3.0 Of which: Retail volume (million tonnes) 84.10 76.62 72.16 9.8 Direct sales volume (million tonnes) 19.63 20.17 18.95 (2.7) Wholesale volume (million tonnes) 19.25 22.6 20.57 (14.8) Total number of stations 29,279 29,062 28,801 0.7 Of which: Number of Company-operated service stations 28,647 28,405 28,001 0.9 Number of franchised service stations 632 657 800 (3.8) Average annual throughput per station (tonne/station) 2,935 2,697 2,577 8.8 Chemicals Segment
In 2008, the Company adopted a flexible strategy for the changing market, optimised its allocation of materials and production scheme, and through strengthening the connection among production, sales and research, and the management of marketing, the Company adjusted its production volume according to the market demand. The Company strengthened management of sales and marketing, fully utilised its advantages in centralised marketing of chemical products, to optimise regional markets and rationalise allocation of resources. It enhanced precision management, improved efficiency of facilities in operation and ensured production safety. It also adjusted production in accordance with market needs.
In 2008, the Company focused on the production of basic organic chemicals, synthetic fibre monomer and polymer, synthetic resin, synthetic fibre, synthetic rubber and fertilizer, and posted RMB 241.1 billion in operating income, almost the same as the previous year. Due to the increasing consumption of raw and auxiliary materials, plus price hikes of certain items, purchasing and operating expenses increased 11.8%, leading to an operating loss of RMB 13.1 billion in the year 2008.
Summary of Production of Major Chemical Products Unit: thousand tons 2008 2007 2006 Changes 07-08 (%) Ethylene 6,289 6,534 6,163 (3.7) Synthetic resin 9,590 9,660 8,619 (0.7) Synthetic rubber 834 800 668 4.3 Synthetic fibre monomer and polymer 7,264 8,018 7,242 (9.4) Synthetic fibre 1,260 1,417 1,502 (11.1) Urea 1,649 1,565 1,609 5.4 R&D and Energy Conservation
In 2008, in order to meet the requirements of production and operation, the Company successfully developed a number of new technologies. The Company has developed technological systems such as the development of the Puguang gas field and the development of the carbonate reservoir. These developments supported reserve and production capacity buildup while reducing cost and increasing efficiency. Clean fuel production technologies such as gasoline selective desulphurisation and diesel hydro fining, and the complete technologies of caprolactam have been successfully commercialised. The pilot tests on producing oil from synthetic gas and bio-diesel have been completed, giving a solid foundation for developing new energies. Significant progress has been achieved in the application of water injection technology in major oil fields, large-scale ethyl benzene and isopropyl benzene production. The application of forecast technology on deep-level carbonate reservoir and technologies on styrene have achieved prominent results. A breakthrough has been made on the operation technologies of coal gasification. The Company developed and produced a number of new products to meet market needs. The Great Wall special lubricant was successfully used on the Shenzhou-VII spacecraft, and polyethylene resin was used in the drinking water pipeline of the life-support system in the space suits. In 2008, the Company applied for 918 domestic patents and was granted 572. The Company applied for 225 foreign patents and was granted 173.
In 2008, the Company maintained its stable and safe production and made remarkable achievements in energy saving and emission reductions. The Company continued to improve the HSE management system, enhanced production safety and environmental protection rules, implemented safety and environment responsibilities at all levels and increased awareness of safety and environment protection among all employees. Energy intensity for the year reduced by 5.2%; the industrial water consumption decreased by 3.6%; Chemical Oxygen Demand in waste water dropped by 4.3%; and the recycling rate of industrial water stayed over 95%.
Business Prospect
Looking into 2009, the persistent and widespread international financial crisis has exerted significant influence on domestic and global oil and chemical markets. Influenced by falling demand, the international oil prices are expected to fluctuate at a relatively low level for a certain period. The demand growth for refined oil products in the domestic market is expected to slow down. Due to the combined pressure of slower economic growth and a downward cyclical trend, the chemicals business will be facing more challenging situations.
Under the difficult market environment, we also see favourable opportunities ahead. Despite a global economic slowdown, the growth of the Chinese economy is only partially influenced and the Chinese economic fundamentals will remain unchanged where the basic domestic demand for oil and petrochemical products will remain robust. The Chinese government has taken proactive fiscal and easy monetary policies, undertaking a series of measures aiming to expand domestic demand and promote economic growth. The improved pricing mechanism for refined oil and petrochemical products will enable the refining business to turn around the losses over the years, regain its position as a major revenue contributor and boost our overall profitability, fully capitalizing on its economies of scale and management expertise.
As the market condition changes in 2009, the Company will continue to undertake flexible operational strategies, further strengthen efficiency management, carefully organise production, attach importance to the safety of production, reduce material and energy consumption and focus on the following areas:
In exploration, the Company will strengthen its comprehensive research into geology and increase investment, especially in the geophysical exploration. The Company will steadily increase the recovery rate and the output of single well, maintain stable increase in the production of oil and gas while firmly control development and operating costs. In development of natural gas, we will place emphasis on ensuring commence of production in the Puguang and Songnan gas fields, strengthening the development of natural gas market, the construction of natural gas pipelines, to facilitate sales and reliable supply. In 2009, the Company plans to produce 42.4 million tonnes of crude oil and 10 billion cubic meters of natural gas.
Responding to the demand changes in the refined oil products and chemical feedstock markets, the Company will operate for maximum profitability and optimise its production scheme, ensuring coordination between upstream and downstream operations, make efforts to reduce the purchasing costs of crude oil, further adjust product mix, increase the output of high value-added products such as LPG, lubricants and asphalt and formulate a flexible marketing strategy to steadily improve market competitiveness. In 2009, the Company plans to process 184 million tonnes of crude oil and produce 115 million tonnes of refined oil products.
The Company will rapidly respond to market changes and continue to explore and improve service quality to bolster customer loyalty and expand retail sales. The Company will strive to expand direct sales according to market changes. In addition, it will reinforce improvement of logistics for oil products and management of distribution to enhance the capability of the logistics in ensuring supply of products and reduce costs. Moreover, the Company will enhance internal management to reduce various expenses related to distribution of oil products. Non-fuel business will be actively promoted and self service stations will be promoted further. In 2009, the Company plans 125 million tonnes of domestic sales of oil products.
The Company will continue its technological partnership with key industries and key users. It will take full advantage of its geographic spread and economies of scale, formulating flexible marketing strategies for various products and expand market with greatest efforts. The Company will optimize product mix and deploy new products in accordance with market demand. The Company will optimise the resource allocation and utilisation of light chemical feedstock, light hydrocarbon from gas fields and natural gas, in order to maximise overall profitability. In 2009, the Company plans to produce 6.83 million tonnes of ethylene.
The total planned capital expenditure and cost saving program for 2009 are RMB 111.8 billion and RMB 2.8 billion respectively.
In light of the challenging global and domestic environment in the coming year, the Company will continue to craft its strategy responding to market changes. Over years of development, the Company's business operation, asset quality, industrial structure and profitability have reached a new level with a reinforced capability to defend risks. These strengths and advantages will enable us to grasp opportunities amid challenges, achieving sustainable and effective development.
About Sinopec Corp.
Sinopec Corp. is the first Chinese company that has been listed in Hong Kong, New York, London and Shanghai. The Company is an integrated energy and chemical company with upstream, midstream and downstream operations. The principal operations of Sinopec Corp. and its subsidiaries include: exploring, developing, producing and trading crude oil and natural gas; processing crude oil into refined oil products; producing, trading, transporting, distributing and marketing refined oil products; and producing and distributing chemical products. Based on 2007 turnover, Sinopec Corp. is the largest listed company in China. The Company is one of the largest crude oil and petrochemical companies in China and Asia. It is also one of the largest gasoline, diesel and jet fuel and other major chemical products producers and distributors in China and Asia.
For additional information about Sinopec Corp., please visit the Company's website at http://www.sinopec.com/ .
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This press release includes "forward-looking statements". All statements, other than statements of historical facts that address activities, events or developments that Sinopec Corp. expects or anticipates will or may occur in the future (including but not limited to projections, targets, reserve volume, other estimates and business plans) are forward-looking statements. Sinopec Corp.'s actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to the price fluctuation, possible changes in actual demand, foreign exchange rate, results of oil exploration, estimates of oil and gas reserves, market shares, competition, environmental risks, possible changes to laws, finance and regulations, conditions of the global economy and financial markets, political risks, possible delay of projects, government approval of projects, cost estimates and other factors beyond Sinopec Corp.'s control. In addition, Sinopec Corp. makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements.
