Shanghai Petrochemical Announces 2008 Interim Results
Turnover Increases by 22.55%; But Operating Results Decline Due to High Crude Oil Prices
HONG KONG, Aug. 27 /Xinhua-PRNewswire-FirstCall/ — Sinopec Shanghai Petrochemical Company Limited (“Shanghai Petrochemical” or the “Company”) (HKEx: 338; SSE: 600688; NYSE: SHI) announced today the unaudited operating results of the Company and its subsidiaries (the “Group”) for the six-month period ended June 30, 2008 (the “Period”) prepared under International Financial Reporting Standards (“IFRS”).
Under IFRS, turnover of the Group during the Period amounted to RMB32,867.1 million, up RMB6,046.9 million and representing an increase of 22.55% year-on-year. Loss before taxation was RMB433.8 million, while loss after taxation attributable to equity shareholders of the Company amounted to RMB358.1 million. Basic loss per share was RMB0.050 (basic earnings per share for 2007 interim: RMB0.248). The board of directors does not recommend the payment of any interim dividend for 2008 (2007 interim: Nil).
Mr. Rong Guangdao, Chairman of Shanghai Petrochemical, said, “In the first half of 2008, the domestic petrochemical industry was faced with a serious situation where international oil prices soared to high levels, repeatedly hitting record highs; prices of production materials rose continuously; refined oil products prices and crude oil prices were seriously inverted as a result of the government’s stringent control over the prices of refined oil products; and market competition was ever-intensifying. As a result, all domestic oil refining businesses posted losses and the petrochemical industry witnessed an obvious decline in profitability. In light of such grim situation, the Group fully implemented the overall cost leadership strategy as its main course of action. The Group further improved its production operation, adjusted the assets and product mix, enhanced internal management and strove for cost and expense reductions. In the first half of the year, the Group maintained stable operations and production, without encountering any major incidents in production, safety or environmental protection. The performance of major technical and economic indicators was satisfactory with total production output reaching 5.0687 million tons, up 15.43% year-on-year, whereas operating results posted a substantial decrease over the same period last year due to impact of changes in the external operating environment and policy-related factors.”
In the first half of 2008, the Group realized net sales of RMB32,294.4 million, up 22.01% over the same period last year, among which net sales derived from petroleum products, intermediate petrochemicals and resins and plastics increased by 43.88%, 44.30% and 5.51% year-on-year respectively, while net sales of synthetic fibres reported an 8.18 % dip year-on-year.
As for production operation, the Group processed 5.0665 million tons of crude oil, an increase of 553.8 thousand tons or 12.27% year-on-year. Of the total processed amount, imported oil and offshore oil amounted to 4.8933 million tons and 173.2 thousand tons respectively. The output of gasoline and diesel amounted to 417.3 thousand tons and 1.8897 million tons respectively, up 43.50% and 38.93% year-on-year respectively. Production of jet fuel was 336.9 thousand tons, down 4.15% year-on-year. The output of ethylene and propylene amounted to 480.9 thousand tons and 265.0 thousand tons respectively, representing respective increases of 0.92% and 6.85% year-on-year. Output of synthetic resins and plastics amounted to 536.1 thousand tons, down 3.99% year-on-year. The output of synthetic fibre monomers and synthetic fibre polymers amounted to 487.9 thousand tons and 304.6 thousand tons respectively, up 13.28% and 0.73% year-on-year respectively. Output of synthetic fibres dropped 9.00% to 147.7 thousand tons. The Group’s output-to-sales ratio and receivable recovery ratio remained at satisfactory levels in the first half of the year, standing at 99.03% and 98.47% respectively.
In the first half of 2008, the Group’s weighted average cost of crude oil rose RMB1,521.13/ton or 42.88% on a year-on-year basis to RMB5,068.88/ton. With the average prices of crude oil having soared, the Group’s total cost of crude oil processed during the Period shot up 60.50% year-on-year to RMB25,681.50 million. Crude oil costs accounted for 75.05% of the Group’s cost of sales.
During the Period, the construction of the Group’s structural adjustment projects continued to move forward. The 600,000-ton/year PX aromatics complex and the 150,000-ton/year C5 separation plant, adding flue-gas desulphurization facilities to No. 3 and No. 4 furnaces of the coal-fired power plant, the flare-gas recovery expansion project and the 220,000-volt transformer station renovation project were proceeding as scheduled.
Looking ahead, Mr. Rong Guangdao said, “In the second half of 2008, the average cost of crude oil may continue to climb. Since the significant loss in the Company’s oil refining operations arising from the inversion between refined oil product prices and crude oil prices in the country may not be reversed within a short period of time. On one hand, whether the State’s financial subsidy policies to ensure the supply of refined oil products will change or continue remains to be seen. On the other hand, in line with the recent sharp drop in international oil prices, prices of downstream petrochemicals witnessed a decline, and the Company has yet to process these already purchased expensive crude oil in transit and in stock. The Group cannot be optimistic about the extremely tough production and operation environment. In light of the above unfavorable conditions, the Group will continue to strengthen management work to ensure smooth, stable and optimized production operations; further implement the overall cost leadership strategy amid the challenges posed by high oil prices; dedicate efforts on corporate development tasks, steadily pushing ahead reforms on the Company’s internal systems and mechanisms; and strengthen team building among staff to further improve the Company’s operating efficiency.”
Shanghai Petrochemical is one of the largest petrochemical companies in the PRC and was one of the first Chinese companies to effect a global securities offering. Located in Jinshan District in the southwest of Shanghai, it is a highly integrated petrochemical complex which processes crude oil into a broad range of products in synthetic fibres, resins and plastics, intermediate petrochemicals and petroleum categories.
This press release contains statements of a forward-looking nature. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward- looking statements by terminology such as “will,”"expects,”"anticipates,”"future,”"intends,”"plans,”"believes,”"estimates” and similar statements. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to: the risk that the PRC economy may not grow at the same rate in future periods as it has in the last several years, or at all, including as a result of the PRC government’s macro-economic control measures to curb over-heating; uncertainty as to global economic growth in future periods; the risk that prices of the Company’s raw materials, particularly crude oil, will continue to increase; not be able to raise its prices accordingly which would adversely affect the Company’s profitability; the risk that new marketing and sales strategies may not be effective; the risk that fluctuations in demand for the Company’s products may cause the Company to either over-invest or under-invest in production capacity in one or more of its four major product categories; the risk that investments in new technologies and development cycles may not produce the benefits anticipated by management; the risk that the trading price of the Company’s shares may decrease for a variety of reasons, some of which may be beyond the control of management; competition in the Company’s existing and potential markets; and other risks outlined in the Company’s filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update this forward-looking information, except as required under applicable law.
Please refer to the hyperlink below for the consolidated income statement (unaudited):
http://xprnnews.xfn.info/SHPetroChem/20080827/SPC_financial_statement.pdf For further information, please contact: Ms. Christy Lai / Ms. Leona Zeng Rikes Hill & Knowlton Communications Limited Tel: +852-2520-2201 Fax: +852-2520-2241
Sinopec Shanghai Petrochemical Company Limited
CONTACT: Ms. Christy Lai / Ms. Leona Zeng of Rikes Hill & KnowltonCommunications Limited, +852-2520-2201, or fax, +852-2520-2241