Sinopec posts record H1 profit on higher prices


CHINA Petroleum & Chemical Corp, Asia’s biggest refiner, posted record half-year profit that beat analyst estimates after the government raised gasoline and diesel prices to help fuel producers cope with rising crude costs.

Net income climbed 12 percent to 41.17 billion yuan (US$6.5 billion), or 0.462 yuan a share, from a restated 36.80 billion yuan, or 0.419 yuan, a year earlier, the Beijing-based company known as Sinopec said in a statement to the Hong Kong stock exchange yesterday. That surpassed the 36.02 billion-yuan median estimate in a survey of six analysts and the previous record of 36.38 billion yuan in the first half of 2007.

China controls fuel prices to curb inflation and raised fuel prices by about 10 percent as oil surged to the highest in more than two years. Earnings from refining may improve in the second half after crude fell 12 percent from its peak in April, prompting analysts to forecast inflation may ease and allow room for further increases in gasoline and diesel prices.

“They managed their refining losses better than expected,” said Brynjar Eirik Bustnes, a Hong Kong-based analyst at JPMorgan Chase & Co. “That could have come from not buying when oil was at US$120 plus and drawing down crude inventories bought at cheaper prices.”

Sinopec swung to a refining loss of 12.2 billion yuan from a profit of 5.7 billion yuan a year earlier, according to the earnings statement.

Brent crude in London, a benchmark grade for China, rose above US$120 a barrel in April as political turmoil in the Middle East and North Africa disrupted supplies, from about US$95 at the end of December. Prices have since fallen to about US$111 on concerns a global recession will cut demand.

China’s fuel-pricing mechanism allows the government to adjust tariffs when crude costs change more than 4 percent over 22 working days. The government last raised gasoline and diesel prices by up to 5.8 percent on April 7.

Sinopec increased oil processing by 5 percent to 108.5 million metric tons in the first half to help meet demand in the world’s fastest-growing major economy, while the cost of purchasing crude surged 38 percent to 406 billion yuan, according to the statement. Refining margins fell 69 percent to 74 yuan a ton.

Refining and marketing accounted for 62 percent of Sinopec’s operating income last year, compared with 19 percent for PetroChina. CNOOC Ltd, relying on oil and gas production for 99 percent of its revenue, boosted its first-half profit by 51 percent to a record.

Overall revenue rose 32 percent to 1.22 trillion yuan because of higher fuel prices and sales volume, according to the earnings statement.

Domestic oil-product sales jumped 10 percent to 75.1 million tons in the first six months, and Sinopec plans to process 114 million tons of crude in the second half.

“We expect that international crude oil prices will fluctuate within a wider range and domestic demand for refined oil and chemicals products will keep increasing,” Sinopec said. In the second half, the refiner will “improve the procurement and transport of crude oil and take measures to reduce costs.”

China’s demand for oil products rose 7.2 percent in the first half. – Bloomberg News


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