China's largest oil refiner China Petroleum & Chemical Corp. (SNP, SNP.L), also known as Sinopec, reported Sunday that first-half profit increased from last year, driven by lower crude prices, and the recent fuel pirce hikes made by the Chinese government. Looking ahead, the company said it expects international crude oil price in the second half to be higher than the first half.
The Chinese government controls prices under a mechanism that takes into account crude-oil costs, taxes and a profit for refiners, including China Petroleum & Chemical Corp. and PetroChina Co., the nation's biggest fuel producers. China may adjust fuel prices when crude-oil costs change more than 4% over 22 working days, the reform commission said in May.
During the year, China adjusted crude prices twice in order to lower costs for manufacturers as China targets 8% economic growth this year to generate jobs and maintain social stability.
In accordance with the International Financial Reporting Standards or IFRS, Sinopec posted net profit attributable to equity shareholders of the company of RMB 33.25 billion or RMB 0.381 per share for the six-month period of 2009, compared to RMB 7.68 billion or RMB 0.057 per share in the prior year period.
The Chinese-based company's turnover, other operating revenues and other income, was RMB 534.025 billion, down 30.2% over last year.
Su Shulin, Chairman of Sinopec, "The substantial increase in profit for the first half of 2009 is primarily a reflection of weaker comparatives from the same period of last year. In early 2008, crude prices reached historic highs, but Chinese domestic fuel prices were tightly controlled, to the extent that retail prices were at some stages lower than the underlying crude price."
Operating profit for the Exploration and Production segment jumped 79.7% to RMB 5.5 billion, due to the decrease of crude price in the reporting period.
The Refining Segment generated an operating profit of RMB 19.9 billion, as a result of continuous optimization of crude sources and resultant reduction in crude cost, as well as implementation of domestic pricing mechanism and reform on levies and charges on road transportation.
Operating profit for the Marketing and Distribution segment soared 44.3% to RMB12.5 billion, hurt by weakened domestic demand on oil products in the reporting period and the implementation of domestic pricing mechanism which narrowed gross margin of oil products.
The Chemicals segment's operating profit climbed 115.3% to RMB9.8 billion over the first half of 2008, due to the market development initiatives and the drop in input cost.
The price of oil reached $147 per barrel in July 2008 but fell as low as $34 in February this year.
In addition, Sinopec said that its board has proposed a half year dividend of RMB 0.07 per share with total dividend amount reaching RMB 6.069 billion.
Looking ahead, Sinopec expects international crude oil price in the second half to be higher than the first half, fluctuating within a narrow range.
The company said, "While domestic demand for refined oil products will maintain steady growth, the demand for chemical products will continue to recover. Domestic ethylene production capacity is expected to grow significantly."
In the second half of 2009, Sinopec plans to process 97.10 million tonnes of crude oil. Also, in the period, the company plans to produce 21.40 million tonnes of crude oil and 4.963 billion cubic meters of natural gas.
SNP closed Friday's regular trading session at US$90.66, up US$1.13 or 1.26%. SNP.L ended Friday's regular trading session at 84.00 pence, up 2.20 pence or 2.69%.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.