Sinopec Announces 2020 Interim Results Operating Profit Turnaround in Q2; Proposed Special Dividend of RMB 0.07 per share

Rhea-AI Summary

Sinopec Corp. reported interim results for the six months ending June 30, 2020, with a turnover of RMB 1.03 trillion, despite the challenges posed by the COVID-19 pandemic. Profitability saw a month-on-month improvement from Q2, achieving an operating profit of RMB 4.8 billion. The company proposed a special dividend of RMB 0.07 per share. However, total operating revenues decreased by 31% year-on-year. The liability-to-asset ratio stood at 54.37%, indicating a stable financial position, with cash reserves at RMB 86.4 billion.

Positive

• Operating profit of RMB 4.8 billion in Q2 2020.
• Cash generated from operations increased by 21% year on year.
• Proposed special dividend of RMB 0.07 per share.

Negative

• Operating revenues decreased by 31% year on year.
• Operating loss of RMB 21.5 billion for the six-month period.
• Loss attributable to equity shareholders of RMB 22.9 billion.

HONG KONG, CHINA / ACCESSWIRE / August 31, 2020 / China Petroleum & Chemical Corporation ("Sinopec Corp." or the "Company") (HKEX:386; SSE:600028; NYSE:SNP) today announced its interim results for the six months ended 30 June 2020.

Financial Highlights

• In accordance with IFRS, the Company's turnover and other operating revenues in the first half of 2020 were RMB 1.03 trillion.

• Profitability improved and rebounded month by month from the second quarter.Natural gas production,refined oil productssales volume and chemical sales volume recorded significant quarter on quarter increase. Achieved turnaround in second quarter with operating profit of RMB 4.8 billion.

• In accordance with IFRS, the Company's liability-to-asset ratio as of 30 June 2020 was 54.37%, maintaining a sound financial position. Net cash generated from operating activities up by 21% year on year. Cash and cash equivalents amounted to RMB 86.4 billion as at 30 June 2020.

• In upstream, made substantial achievements in maintaining oil production, increasing gas output and reducing cost. Natural gas production up by 0.6% year on year. In refining,dynamicallyoptimisedproduct slate and brought the advantages of integrated production and marketing into full play. Operating profit of the chemicals segment was RMB 3.2 billion; Operating profit of the marketing and distribution segment was RMB 8.7 billion.

• In order to maintain the continuity,stability and sustainability of dividend distribution of the Company and considering the long-term development of the Company and overall interests of all shareholders,the Board of Directors proposed a special dividend of RMB 0.07 per share.

• Actively fulfilled social responsibilities and dedicated to serve the frontline of the epidemic; made the best use of its advantages in resources and technology, and contributed to the prevention and control of the COVID-19 and economic growth.

Business Review

In the first half of 2020, due to the worldwide spread of COVID-19, global economy was depressed and the global market was shrinking. China's gross domestic product (GDP) fell by 1.6% year on year. In the first half of 2020, the average spot price of Platts Brent was USD 40.07 per barrel, down by 39.2% year on year, combined with the sharp drop in demand for petroleum products and slowdown in demand growth for petrochemical products, thus the petroleum and petrochemical industry suffered unprecedented difficulties.Confronted with the extremely severe market situation, the Company launched a "100-day campaign to tide over difficulties and improve performance" guided by focusing on main challenges, system optimisation, bottom-line risks prevention and control, and seizing opportunities out of crises. We coordinated COVID-19 prevention and control with maintaining production and operation, vigorously adjusted the structure, expanded the market, reduced the inventory and tapped the potential. The Company's operation and profitability improved month by month from the second quarter and the performance recovered steadily.

In particular, facing the COVID-19 outbreak, the Company actively made the best use of its advantages in resources and technology, promptly switched to increase the production of medical and health-care materials. To meet the market demand of melt blown fabric, the Company built the world's largest manufacturing base in a short time. In addition, the Company ensured the supply of oil and gas with all efforts, provided innovative services model, led enterprises in the industry chain to resume production and work, and proactively promoted the normalisation of economic and social orders.

Exploration and Production

In the first half of 2020, under low crude oil price environment, the Company maintained high-quality exploration efforts, focused on profit-driven development, and deepen and consolidated the maintaining oil production, increasing gas output and reducing cost. We accelerated the whole industry chain integration of natural gas business, and saw a continued growth in the market share of natural gas. In exploration, we reinforced risk exploration and pre-exploration in new areas, which led to new discoveries in Tarim Basin, Jiyang Depression and Sichuan Basin, etc. In oil development, we increased the application of technologies to lower cost and optimised projects implementation plan according to the change of oil prices, which helped to further decrease our cost. In natural gas development, we accelerated capacity building in West Sichuan, Dongsheng and Weirong gas fields, and continuously progressed with the all-dimension development of Fuling shale gas field and fine development of Puguang and Yuanba gas fields. Production of oil and gas in the first half of 2020 amounted to 225.71 million barrels of oil equivalent, of which domestic crude production was 124.05 million barrels, and gas output was 512.41 billion cubic feet.

In the first half of 2020, operating revenues of the segment were RMB 78.9 billion, representing a decrease of 24.0% year on year. This was mainly due to the decrease in sales prices of crude oil, natural gas and LNG.In the first half of 2020, the oil and gas lifting cost was RMB 749 per tonne, representing a decrease of 5.8% year on year. This was mainly due to the operating expenses decreased effectively as a result of the segment continuously reinforced the cost management and controlling.In the first half of 2020, the operating loss of the segment was RMB 6.0 billion.

Exploration and Production: Summary of Operations

	Six-month period ended 30 June		Changes
	2020	2019	%
Oil and gas production (mmboe)	225.71	226.63	(0.4)
Crude oil production (mmbbls)	140.27	141.68	(1.0)
China	124.05	124.05	0.0
Overseas	16.22	17.63	(8.0)
Natural gas production (bcf)	512.41	509.50	0.6

Refining

In the first half of 2020, with a market-oriented approach, the Company further integrated production and marketing, optimised resources allocation, dynamically adjusted the product mix and diesel-to-gasoline ratio, and maximised the value of the business chain. Domestic and overseas markets were coordinated to maintain high utilisation rates of facilities. We actively responded to international oil price movements and adjusted crude oil procurement in a timely manner. We also sped up the advanced capacity building and pushed forward structural adjustment projects. The marketing mechanism was further optimised, and the profitability of asphalt, lubricant, LPG and other products was further enhanced. In the first half of 2020, 111 million tonnes of crude oil were processed, representing a year-on-year decrease of 10.5%, and 67.19 million tonnes of refined oil products were produced, including 30.47 million tonnes of diesel, 26.82 million tonnes of gasoline and 9.90 million tonnes of kerosene.

In the first half of 2020, operating revenues of the segment were RMB 438.4 billion, representing a decrease of 26.7% year on year.In the first half of 2020, the unit refining cash operating cost (defined as operating expenses less cost of crude oil and refining feedstock, depreciation and amortisation, taxes other than income tax and other operating expenses, divided by the throughput of crude oil and refining feedstock) was RMB 177 per tonne, representing an increase of 6.9% year on year, which was mainly because the unit cost increased as a result of the crude oil throughput decreased compared with the same period of last year.The operating loss of the segment was RMB 31.7 billion.

Refining: Summary of Operations

	Six-month period ended 30 June		Changes
	2020	2019	(%)
Refinery throughput (million tonnes)	110.95	123.92	(10.5)
Gasoline, diesel and kerosene production (million tonnes)	67.19	78.94	(14.9)
Gasoline (million tonnes)	26.82	31.33	(14.4)
Diesel (million tonnes)	30.47	32.24	(5.5)
Kerosene (million tonnes)	9.90	15.37	(35.6)
Light chemical feedstock production (million tonnes)	19.00	20.04	(5.2)

Note: Includes 100% of the production of domestic joint ventures.

Marketing and Distribution

In the first half of 2020, facing the severe challenge brought by the sharp decline in market demand, the Company brought the advantage of our marketing network into full play. Since the second quarter, the Company has seized the favourable opportunity of market recovery, optimised resources allocation, made full efforts to expand the market and sales, achieving a rapid rise in sales volume and substantial growth in performance year on year. We adhered to customer-oriented and continuously improved our services quality. We further optimized marketing network layout, consolidated and enhanced network advantages, innovated marketing models by introducing the "one click refuelling", etc., promoted the integration of online and offline business, and created a new service model of reducing physical contact while refuelling and shopping in an efficient and convenient way during the COVID-19 outbreak. In the first half of 2020, total sales volume of refined oil products was 107.03 million tonnes, of which domestic sales was 77.75 million tonnes, and domestic retail sales volume was 52.50 million tonnes. The retail volume in the second quarter increased by 40.5% over the first quarter and up by 2.7% year on year.

In the first half of 2020, the operating revenues of the segment were RMB 529.8 billion, down by 23.4% year on year. This was mainly due to refined oil products sales volume and price decreased because of domestic market demand plunged.In the first half of 2020, the segment's operating profit was RMB 8.7 billion.

Marketing and Distribution: Summary of Operations

	Six-month period ended 30 June		Changes
	2020	2019	(%)
Total sales volume of refined oil products (million tonnes)	107.03	126.91	(15.7)
Total domestic sales volume of refined oil products (million tonnes)	77.75	91.77	(15.3)
Retail (million tonnes)	52.50	60.06	(12.6)
Direct sales and Wholesale (million tonnes)	25.24	31.72	(20.4)
Annualised average throughput per station (tonne/station)	3,419	3,916	(12.7)
Note: The total sales volume of refined oil products includes the amount of refined oil marketing and trading sales volume.
	As of 30 June 2020	As of 31 December 2019	Changes from the end of last year (%)
Number of company-operated stations	30,712	30,696	0.05
Number of convenience stores	27,721	27,606	0.42

Chemicals

In the first half of 2020, the Company fine-tuned chemical feedstock mix to further lower costs. Leveraging our industrial advantages, we extended industry chain and produced more raw materials for medical and health-care use. We optimised the product slate, scheduling utilisation and production based on market demand to further increase the ratio of high value-added products. The ratio of new and specialty synthetic resin reached 67.9% and that of high value-added synthetic rubber reached 31.2%. Construction of advanced capacity was accelerated and a number of key projects were pushed forward. In the first half of 2020, ethylene output was 5.78 million tonnes. We actively expanded the market, improved targeted marketing and service quality, actively promoted the application of e-commerce platform and construction of intelligent logistics, which enhanced the profitability of the business chain. In the first half, the total chemical sales volume was 40.09 million tonnes.

In the first half of 2020, operating revenues of the chemicals segment were RMB 172.2 billion, representing a decrease of 33.9% year on year, which was mainly due to the decrease in chemical business scale and products price.The segment's operating profit in the first half of 2020 was RMB 3.2 billion, representing a decrease of RMB 8.7 billion or 73.1% as compared with that of 2019, which was mainly due to the COVID-19 impact resulting in the decrease in demand and price of chemical products and the decrease in gross margin of chemical business.

Major Chemical Products: Summary of OperationsUnit of production: 1,000 tonne

	Six-month period ended 30 June		Changes
	2020	2019	(%)
Ethylene	5,776	6,160	(6.2)
Synthetic resin	8,376	8,429	(0.6)
Synthetic fiber monomer and polymer	4,421	5,030	(12.1)
Synthetic fiber	573	633	(9.5)
Synthetic rubber	526	529	(0.6)

Note: Includes 100% of the production of domestic joint ventures.

Health, Safety, Security and Environment

In the first half of 2020, the Company promoted the health management of all staff, especially continuously strengthened the COVID-19 prevention and control measures with a focus on personal care and psychological counselling and safeguarded the occupational, physical and psychological health of employees. The three-year programme of special rectification of work safety was launched, and safety risk identification and control were strictly implemented. We improved prevention and control system and emergency response capacity in all dimensions, and further improved the safety management level of the Company. We actively implemented the green and low-carbon strategy, promoted the Green Enterprise Campaign with high quality, enhanced energy efficiency improvement and water conservation, continuously strengthened the management of greenhouse gas emission. In the first half of the year, the Company maintained safe and clean production. The comprehensive energy consumption per 10,000 yuan of output decreased by 5.4% year on year, industrial fresh water intake was down by 1.1% year on year, the COD of discharged wastewater decreased by 2.1% year on year, the sulfur dioxide emission dropped by 4.1% year on year, and the proper disposal rate of solid waste reached 100%.

Capital Expenditures

Focusing on quality and profitability of investment, the Company continuously optimised our investment projects. The total capital expenditures amounted to RMB 44.990 billion in the first half of 2020. Capital expenditure for the exploration and production segment was RMB 20.470 billion, mainly for capacity building in Shengli and Northwest crude oil projects and Fuling and Weirong shale gas projects. Capital expenditure for the refining segment was RMB 9.536 billion, mainly for Zhongke project, Zhenhai, Tianjin, Maoming and Luoyang refining upgrading projects. Capital expenditure for the marketing and distribution segment was RMB 8.646 billion, mainly for construction of service stations, oil products depots and non-fuel business development. Capital expenditure for the chemicals segment was RMB 6.117 billion, mainly for Zhongke, Zhenhai, and Gulei projects, ethylene revamping for Sinopec-SK and Jiujiang aromatics projects, and melt blown fabrics projects. Capital expenditure for corporate and others was RMB 221 million, mainly for research and development facilities and information technology projects. In the second half, the Company will dynamically optimise investment projects based on future market trends. Capital expenditures for the full year are expected to decrease by around 10% compared with the plan proposed in the beginning of 2020.

Business Prospects

Looking ahead to the second half of 2020, the international economic situation is expected to be severe and complex with increased instability and uncertainty. China has made significant achievements in control and prevention of COVID-19 outbreak, and its economy has shown a stable and positive momentum. As a result, it is expected that domestic demand for petroleum and petrochemical products will witness a fast recovery. However, affected by various factors such as COVID-19 outbreak and the international economic situation, the international oil prices is expected to fluctuate at a low level.

Confronted with the present situation, the Company will focus on the vision of building a world leading clean energy and chemical company, actively promote transformation and development, and continue the campaign of tiding over difficulties and improving performance. We will coordinate efforts of improving performance, adjusting structure, promoting reform and preventing risks to achieve better performance. Our focuses are on the following aspects:

For exploration and production, the Company will increase efforts to maintain oil production, boost gas output and reduce cost, continue to strengthen high-quality exploration, promote profit-driven development, and improve the ability to cope with low oil prices. In crude oil development, we will promote the capacity building in Shunbei and west rim of Jungar Basin, continuously strengthen the fine management of mature oilfields, enhance oil recovery through scientific and technological innovation, and consolidate the foundation for stable production. In natural gas development, construction of key projects will be accelerated. At the same time, seizing the opportunities of pipeline reform and natural gas demand growth, the Company will vigorously expand the market and sales, and increase market share and profitability of natural gas. In the second half of 2020, we plan to produce 138 million barrels of crude oil, including 124 million barrels domestic production and 14 million barrels abroad, and 580.5 billion cubic feet of natural gas.

For refining, the Company will insist on the integration of production and marketing and coordination of domestic and overseas markets, to optimise the utilisation and production. We will speed up the advanced capacity building to enhance market competitiveness. We will strengthen market research and analysis and coordination of the whole process management of crude oil procurement to reduce procurement costs. Meanwhile, we will deepen product mix adjustment based on market needs. In the second half of 2020, we plan to process 130 million tonnes of crude oil.

For marketing and distribution, the Company will improve the internal market-oriented mechanism, optimise resource flow and regional production and marketing, fully unleash the integration advantages and actively deal with market competition. We will seize the opportunity of market recovery, further expand the market and sales, and strive to expand the total business volume and retail scale. We will also provide differentiated services based on customer categories. The comprehensive service station model of "oil, gas, electricity, hydrogen and non-fuel business" will be promoted, and we will make best effort to build an ecological circle of "people, vehicles and life", so as to enhance the competitiveness of our comprehensive services. In the second half of 2020, we plan to sell 92 million tonnes of refined oil products in the domestic market.

For chemicals, the Company will continue to focus on the "basic plus high-end" development concept, accelerate the structural adjustment, quality improvement and upgrading, and foster new growth engines. We will deepen the adjustment of feedstock slate and continuously reduce the cost, deepen the adjustment of product mix, speed up the cultivation of new material business, and continuously increase the proportion of high value-added products. We will dynamically optimise the utilisation and production along the industry chain to generate more profits, and the production and supply of medical and health-care materials in accordance with the COVID-19 outbreak. Meanwhile, we will strengthen strategic cooperation along the industrial chain, strengthen the expansion of expand high-quality customer base, and constantly enhance our leading position in the market. We plan to produce 6.10 million tonnes of ethylene in the second half of 2020.

Appendix: Key financial data and indicators

FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH CASs

Principal accounting data

Items	Six-month period ended 30 June		Changes over the same period of the preceding year (%)
	2020 (RMB million)	2019 (RMB million)
Operating income	1,034,246	1,498,996	(31.0)
Net (loss)/ profit attributable to equity shareholders of the Company	(22,882)	31,338	-
Net (loss)/ profit attributable to equity shareholders of the Company excluding extraordinary gains and losses	(24,404)	30,451	-
Net cash flow from operating activities	39,794	32,918	20.9
	At 30 June2020 (RMB million)	At 31 December 2019 (RMB million)	Change from the end of last year (%)
Total equity attributable to equity shareholders of the Company	692,356	739,169	(6.3)
Total assets	1,821,639	1,755,071	3.8

Principal financial indicators

Items	Six-month period ended 30 June		Changes over the same period of the preceding year (%)
	2020 (RMB)	2019 (RMB)
Basic (losses)/ earnings per share	(0.189)	0.259	-
Diluted (losses)/ earnings per share	(0.189)	0.259	-
Basic (losses)/ earnings per share (excluding extraordinary gains and losses)	(0.202)	0.252	-
Weighted average return on net assets (%)	(3.21)	4.28	(7.49)percentage points
Weighted average return (excluding extraordinary gains and losses)on net assets (%)	(3.42)	4.16	(7.58) percentage points

FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH IFRS

Principal accounting data

Items	Six-month period ended 30 June		Changes over the same period of the preceding year (%)
	2020 (RMB million)	2019 (RMB million)
Operating (loss)/ profit	(21,501)	49,138	-
(Loss)/ profit attributable to shareholders of the Company	(21,725)	32,206	-
Net cash generated from operating activities	39,794	32,918	20.9
	At 30 June 2020 (RMB million)	At 31December 2019 (RMB million)	Change from the end of last year (%)
Total equity attributable to shareholders of the Company	691,363	738,150	(6.3)
Total assets	1,821,639	1,755,071	3.8

Principal financial indicators

Items	Six-month period ended 30 June		Changes over the same period of the preceding year (%)
	2020 (RMB)	2019 (RMB)
Basic (losses)/ earnings per share	(0.179)	0.266	-
Diluted (losses)/ earnings per share	(0.179)	0.266	-
Return on capital employed (%)	(1.89)	4.92	(6.81)percentage points

The following table sets forth the operating revenues, operating expenses and operating (loss)/profit by each segment before elimination of the inter-segment transactions for the periods indicated, and the percentage change between the first half of 2020 and the first half of 2019.

	Six-month period ended 30 June		Changes
	2020	2019
	(RMB million)		(%)
Exploration and Production Segment
Operating revenues	78,929	103,804	(24.0)
Operating expenses	84,931	97,561	(12.9)
Operating (loss)/profit	(6,002)	6,243	-
Refining Segment
Operating revenues	438,358	597,797	(26.7)
Operating expenses	470,047	578,707	(18.8)
Operating (loss)/profit	(31,689)	19,090	-
Marketing and Distribution Segment
Operating revenues	529,801	691,842	(23.4)
Operating expenses	521,137	677,133	(23.0)
Operating profit	8,664	14,709	(41.1)
Chemicals Segment
Operating revenues	172,199	260,488	(33.9)
Operating expenses	169,005	248,593	(32.0)
Operating profit	3,194	11,895	(73.1)
Corporate and Others
Operating revenues	484,625	770,161	(37.1)
Operating expenses	484,793	772,716	(37.3)
Operating loss	(168)	(2,555)	(93.4)
Elimination of inter-segment profit/ (loss)	4,500	(244)	-

About Sinopec Corp.

Sinopec Corp. is one of the largest integrated energy and chemical companies in China. Its principal operations include the exploration and production, pipeline transportation and sale of petroleum and natural gas; the sale, storage and transportation of petroleum products, petrochemical products, coal chemical products, synthetic fibre, fertiliser and other chemical products; the import and export, including an import and export agency business, of petroleum, natural gas, petroleum products, petrochemical and chemical products, and other commodities and technologies; and research, development and application of technologies and information.

Sinopec sets 'fueling beautiful life' as its corporate mission, puts 'people, responsibility, integrity, precision, innovation and win-win' as its corporate core values, pursues strategies of value-orientation, innovation-driven development, integrated resource allocation, open cooperation, and green and low-carbon growth, and strives to achieve its corporate vision of building a world leading clean energy and chemical company.

Disclaimer

This press release includes "forward-looking statements". All statements, other than statements of historical facts that address activities, events or developments that Sinopec Corp. expects or anticipates will or may occur in the future (including but not limited to projections, targets, reserve volume, other estimates and business plans) are forward-looking statements. Sinopec Corp.'s actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to the price fluctuation, possible changes in actual demand, foreign exchange rate, results of oil exploration, estimates of oil and gas reserves, market shares, competition, environmental risks, possible changes to laws, finance and regulations, conditions of the global economy and financial markets, political risks, possible delay of projects, government approval of projects, cost estimates and other factors beyond Sinopec Corp.'s control. In addition, Sinopec Corp. makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements.

Investor Inquiries：Media Inquiries：

Beijing

Tel：(86 10) 5996 0028Tel：(86 10) 5996 0028
Fax：(86 10) 5996 0386Fax：(8610) 5996 0386
Email：ir@sinopec.comEmail：ir@sinopec.com

Hong Kong

Tel：(852) 2824 2638 Tel：(852) 2522 1838
Fax：(852) 2824 3669 Fax：(852) 2521 9955
Email：ir@sinopechk.comEmail：sinopec@prchina.com.hk

SOURCE: China Petroleum & Chemical Corporation via EQS Newswire

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FAQ

What are the interim results for Sinopec Corp. (SNP) for the first half of 2020?

Sinopec Corp. reported operating revenues of RMB 1.03 trillion, with an operating loss of RMB 21.5 billion for the first half of 2020.

What dividend did Sinopec Corp. (SNP) propose?

The Board of Directors proposed a special dividend of RMB 0.07 per share.

How did Sinopec Corp. (SNP) perform in terms of cash flow in the first half of 2020?

Net cash generated from operating activities increased by 21% year on year, reaching RMB 39.8 billion.

What was the impact of COVID-19 on Sinopec Corp. (SNP) in the first half of 2020?

COVID-19 caused a significant decline in global market demand, leading to a 31% decrease in operating revenues.