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Sinopec profit plummets over higher oil costs

(Shanghai Daily)
Updated: 2007-03-30 13:53

China's largest ethylene maker said today its profit falling 54 percent as higher oil prices increased the company's raw material costs, according to Bloomberg.

SinopecShanghaiPetrochemical's net income dropped to 844.4 million yuan (US$109 million), or 0.12 yuan a share, from 1.85 billion yuan, or 0.257 yuan, a year earlier, according to international accounting standards, the company said in a statement to theHong Kongstock exchange today.

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That beat the median estimate of 693 million yuan in a Bloomberg survey of seven analysts. Net sales rose to 49.9 billion yuan from 45.2 billion yuan.

China's fuel-price controls slashed profits for the nation's refiners as crude oil surged to a record last year, reaching US$78.40 a barrel in New York in July. The company, a unit of China Petroleum & Chemical Corp, or Sinopec, in August reduced output of products including gasoline to limit losses.

"In 2006, the group faced adverse operating conditions," Shanghai Petrochemical said in a statement. "The group also suffered severe losses in relation to its oil refining operation as a results of the price controls imposed on petroleum products by the State."

The cost of processing oil rose 18 percent to 3,780.56 yuan a ton, it said.

Shanghai Petrochemical processed 8.9 million tons of oil, or 65 million barrels, into fuels last year, a decline of 6 percent from a year earlier, it said.

The outlook for the company is improving, analysts at UBS AG wrote in a report before the earnings announcement.

"We expect Sinopec Shanghai Petrochemical to benefit from a turnaround in refining margins and strong chemical margins," Thomas Wong and Lauren Wong, Hong Kong-based analysts at UBS, wrote in a research note yesterday. The rating on the stock was upgraded to "buy" from "neutral 2."

China raised fuel prices for gasoline, diesel and jet fuel by 500 yuan a metric ton on May 24 after increasing gasoline prices by 300 yuan a ton and diesel prices by 200 yuan a ton in March last year.

Shanghai Petrochemical's ethylene output fell 0.2 percent to 960,200 tons last year from a record 962,400 tons in 2005, parent Sinopec said January 9.

The fall in output was caused by "general factors including an overall reduction in energy consumption growth and the inferior quality of crude oil," Sinopec said. Increased output by rivals contributed to reduced sales, it said.