Sinopec’s chemicals segment returns to profit on price rebound

07 April 2009 11:54  [Source: ICIS news]

SHANGHAI (ICIS news)--Sinopec’s chemicals segment has returned to profitability in the first two months of 2009 on a rebound in prices, Asia’s largest refinery said on its Sinopecnews website on Tuesday.

“The good beginning of the year results from the big price gap between naphtha and chemical products amid a low naphtha price,” Wu Haijun, director of Sinopec’s chemical segment, said in Mandarin. “However, the situation may not persist as the petrochemical market has entered the trough of a booming business cycle.”

Sinopec made a huge loss on producing chemicals between August and December 2008, compared with a profit for the first seven months of the year, the company said.

“The global oil demand will likely still show negative growth in 2009. And the global chemical market will experience weak demand, lower operating rates and narrowing profit margins this year,” Wu added.

Sinopec had on 29 March reported a full-year 2008 operating loss for its chemicals segment of yuan (CNY) 13.35bn ($1.95bn).

“The most important task of chemicals segment this year is to expand production volumes and explore markets positively,” said Dai Houliang, senior vice-president of Sinopec.

The chemicals segment planned to produce 6.83m tonnes of ethylene this year, it said in the full-year financial report.

In 2008, the segment’s ethylene production reached 6.30m tonnes, a 3.7% decrease compared with the previous year. It sold 28.21m tonnes of chemical products, a decrease of 2.8% against the previous year, according to the report.

Sinopec as a whole reported a 47.3% year-on-year drop in its 2008 net profits to CNY29.8bn, largely due to the price-control measures introduced by the government in late March.

Meanwhile, the company said it would perform better in the first quarter of this year. It expected a 50%-plus rise in earnings from the CNY6.7bn net profit recorded for the same period in 2008. It cited lower crude prices, which had put the company's refining unit back into profitability.

Besides its chemicals and refining segments, the company also covers exploration, production, marketing and distribution.

($1 = CNY6.83)

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By: Judith Wang
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