UpdateSinopec's nine-month chem EBIT up

30 October 2007 08:38  [Source: ICIS news]

(Adds closing share price in the last paragraph.)

By Florence Tan

SINGAPORE (ICIS news)--Sinopec on Tuesday reported a 8.8% rise in its chemical operating profit for the first nine months of this year amid strong downstream demand and increased output, but refining earnings slipped due to high crude oil prices.

Operating profit for its chemical segment in the nine months reached yuan (CNY) 11.1bn ($1.5bn) from CNY10.2bn in the same period of 2006 on higher output especially of value-added products, Asia’s largest refiner said on its website.

The company’s ethylene production rose 7.8% in the nine months to 4.89m tonnes while its synthetic resin yield increased 14.6% to 7.2m tonnes, it added.

Earnings at its refining segment were reduced to CNY214m in the first three quarters from CNY5.5bn in the first half this year, although this was an improvement compared with the CNY29.7bn losses in the first nine months of 2006.

Sinopec’s third quarter net profit rose 5.5% to CNY13.6bn from the same period a year ago, but it did not provide a breakdown for the segments.

Its third quarter average crude costs rose to $68/bbl from $56/bbl in the first quarter this year, its chief financial officer (CFO) Dai Houliang said in a teleconference, adding that current crude oil prices at around $93/bbl were much higher than the company’s $70/bbl forecast made in September.

Rising crude oil prices were expected to continue adding pressure to Sinopec’s refined oil products supply but it would not have an impact on its chemical segment, he said.

China’s cap on petroleum prices has often led to losses among refiners in the country when crude costs surge.

"As a refining major, we still need to maintain supply," Dai said in Mandarin, adding that the company has increased its sour crude throughput to 60% of its total and will carry out technological improvements to lower refining costs.

A third of the company’s refined oil products, including naphtha, were still sold at international market prices, he said.

Despite high crude oil prices, the company’s refinery project in Qingdao, Shandong province, was on schedule to start up in 2008, Dai added.

Construction on the 1m tonne/year refinery would be completed in the first quarter while trial runs would start in the following quarter, he said.

A refinery-petrochemical joint venture with Kuwait Petroleum Corp (KPC) in southern Guangdong province was still at an initial stage, Dai said.

He added that Sinopec did not receive any notification that Shell was quitting the project, in reaction to a Kuwaiti news agency KUNA report that Beijing had asked KPC to drop Shell as a prospective partner.

Sinopec’s chemical capital expenditure in the first three quarters this year was at CNY7.2bn and its cracker projects in Tianjin, Zhenhai and Fujian were progressing as scheduled.

Sinopec’s share price closed 2.1% higher on Tuesday at Hong Kong dollar (HK$) 11.92 ($1.54).

Sinopec’s production (unit: ‘000 tonne)

Product	Jan-Sep 2007	Jan-Sep 2006	% change
Light chemical feedstock	17,980	17,160	4.78
Ethylene	4,887	4,534	7.79
Synthetic resin	7,207	6,289	14.6
Synthetic fibre monomers and polymers	5,921	5,401	9.63
Synthetic fibre	1,074	1,137	-5.54
Synthetic rubber	546	490	11.43
Urea	1,229	1,321	-6.96

Note: Figures include production from joint ventures BASF-YPC and Shanghai Secco

($1=CNY7.47/HK$7.75)

By: Florence Tan
+65 6780 4359

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