FocusBetter refining margins to lift Sinopec Q4 earnings - analysts

29 October 2010 09:49  [Source: ICIS news]

SHANGHAI (ICIS)--China's petrochemical major Sinopec, which has registered a 14.7% year-on-year rise in its third quarter net income to yuan (CNY) 19.6bn ($2.93bn), may perform better in the fourth quarter amid rising chemical prices and better refining margins, analysts said on Friday.

In the September quarter, the company posted a 36.3% increase in its revenue to CNY489.9bn on the back of growing domestic demand for oil products and chemical products, it said in a disclosure to the Hong Kong Stock Exchange late on Thursday.

“The profit is in line with my expectation, largely contributed from its exploration and production segment,” Qiu Xiaofeng, an analyst with China Merchants Securities in Shanghai said.

Analysts forecast Sinopec to achieve a full-year net profit of CNY76bn, representing a 20% increase from 2009, taking into account China's second fuel price hike this year, as well as the uptrend in chemical prices.

China raised domestic fuel prices by CNY 220-230/tonne ($33-35/tonne) effective 26 October, in line with the strengthening of international crude prices.

“Refining margin [is going] to improve in the fourth quarter of 2010 due to the fuel price hike. We estimate this could lift the company’s refining margin from an average of $5/bbl (3.6/bbl) to $8/bbl in November. This should boost its fourth quarter 2010 earnings significantly,” according to a report by UOB Kay Hian.

Strong demand for petrochemicals like ethylene, benzene and polymers amid an ongoing tight supply would boost the company’s petrochemicals earnings in the fourth quarter, the report added.

In the first three quarters of 2010, Sinopec processed 154m tonnes of crude oil, representing a 14.4% year-on-year growth, the company said.

Its ethylene output grew 39.4% year on year to 6.61m tonnes, while synthetic resin production totalled 9.53m tonnes, up 28.67% year on year, it said.

Sinopec shelled out CNY55.8bn in capital expenditures in the first nine months of the year, the company said.

In the January-to-September period, Sinopec’s net profit grew 11.5% year on year to CNY56.4bn, while revenue increased 59.8% to CNY1,427.6bn, it said.

($1 = €0.72, $1 = CNY6.69)

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By: Judith Wang
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