Sinopec Corp. Announces 2008 Interim Results

China Petroleum & Chemical Corporation ("Sinopec Corp.” or "the Company”) (HKEX: 386; NYSE: SNP; LSE: SNP; CH: 600028) today announced its interim results for the six months ended 30 June, 2008. Under PRC accounting standards for business enterprises, the Company’s operating income increased by 30.3% to RMB 734.783 billion in the first half of 2008. Net profit attributable to the equity shareholders of the parent company decreased 73.4% year on year to RMB 9.339 billion. Under International Financial Reporting Standards (IFRS), the Company’s turnover with other operating revenues and income increased by 36.2% year on year to RMB 768.185 billion in the first half of 2008. Profit attributable to shareholders of the Company decreased 77.3% year on year to RMB 8.255 billion. The Board of Directors proposed an interim dividend of RMB 0.03 per share. In the first half of 2008, confronted with complicated and severe conditions resulting from soaring crude oil prices, tight price controls on oil products in the domestic market and rising prices of chemical products driven by increased raw materials cost, the Company managed to increase oil and gas production, speed up structural adjustments, took a variety of measures to increase the supply of oil products and made efforts to guarantee the domestic market supply of oil products through optimised production and operation activities, improved management, conserving energy and reducing emissions, and realized steady growth in oil and gas production, refinery throughput, sales volume of oil products and the production of major chemical products. In coping with the exceptional snow storms in South China as well as the magnitude 8 earthquake in Wenchuan County in Sichuan Province on 12 May 2008, the Company promptly activated its contingency plan to guarantee the supply of refined oil products in the disaster-stricken areas. The company fully honored its social responsibility by actively donating goods and money to support the rescue work and reconstruction of the disaster-stricken areas. Operating Highlights Financial Data and Indicators Prepared in Accordance with the PRC Accounting Standards for Business Enterprises Items   At 30 June 2008   At 31 December 2007   Change from the end of last year   RMB millions   RMB millions   (%) Total assets   820,556   718,572   14.2 Shareholders’ equity attributable to equity shareholders of the Company   305,471   300,949   1.5 Net assets per share (RMB) (Fully diluted)   3.523   3.471   1.5 Adjusted net assets per share (RMB)   3.437   3.391   1.4 Items   Six-month period ended 30 June   Change over the same period of the preceding year   2008 RMB millions   2007 RMB millions   (%) Operating (loss) / profit   (23,784)   53,285   (144.6) Profit before taxation   9,516   52,701   (81.9) Net profit attributable to equity shareholders of the Company   9,339   35,110   (73.4) Net (loss) / profit before extraordinary gain and loss   (17,445)   34,924   (150.0) Return on net assets (%)   3.06   12.31   (9.25)percentage points Basic earnings per share (RMB)   0.108   0.405   (73.4) Basic (loss) / earnings per share before extraordinary gain and loss (RMB)   (0.201)   0.403   (150.0) Diluted earnings per share (RMB)   0.076   0.405   (81.0) Net cash flow from operating activities   5,986   64,700   (90.7) Net cash flow from operating activities per share (RMB)   0.069   0.746   (90.7) Financial Data and Indicators Prepared in Accordance with the IFRS Items   Six-month period ended 30 June   Change over the same period of the preceding year 2008   2007     RMB millions   RMB millions   (%) Operating profit   7,222   53,584   (86.5) Profit attributable to equity shareholders of the Company   8,255   36,375   (77.3) Return on capital employed (%)   1.33   8.21   (6.88) percentage points Basic earnings per share (RMB)   0.095   0.420   (77.3) Diluted earnings per share (RMB)   0.064   0.420   (84.8) Net cash flow generated from operating activities   2,640   62,295   (95.8) Net cash flow generated from operating activities per share (RMB)   0.030   0.718   (95.8) * Return on capital employed = operating profit x (1 - income tax rate)/capital employed Items   At 30 June 2008   At 31 December 2007   Change from the end of last year   RMB millions   RMB millions   (%) Total assets   838,469   732,725   14.4 Total equity attributable to equity shareholders of the Company   310,871   307,433   1.1 Net assets per share (RMB)   3.586   3.546   1.1 Adjusted net assets per share (RMB)   3.499   3.466   1.0 Operating Results by Segment (IFRS)     Six-month period ended 30 June   Change   2008   2007     RMB millions   (%) Exploration and Production Segment             Operating revenues   96,659   62,724   54.1 Operating expenses   69,561   39,974   74.0 Operating profit   27,098   22,750   19.1 Refining Segment             Operating revenues   420,082   307,894   36.4 Operating expenses   466,103   302,164   54.3 Operating (loss) /profit   (46,021)   5,730   - Marketing and Distribution Segment             Operating revenues   396,459   308,547   28.5 Operating expenses   374,125   291,752   28.2 Operating profit   22,334   16,795   33.0 Chemicals Segment             Operating revenues   132,005   115,720   14.1 Operating expenses   127,472   107,178   18.9 Operating profit   4,533   8,542   (46.9) Corporate and others             Operating revenues   411,237   202,348   103.2 Operating expenses   411,959   202,581   103.4 Operating loss   (722)   (233)   - MARKET ENVIRONMENT AND BUSINESS REVIEW In the first half of 2008, the Chinese economy continued to grow steadily and rapidly, with a GDP growth rate of 10.4%. Apparent domestic consumption of oil products (inclusive of gasoline, diesel and kerosene) and ethylene equivalent consumption increased by 13.9% and 2.5% respectively over the same period of last year. In the first half of 2008, confronted with complicated and severe conditions resulting from soaring crude oil prices, tight price controls on oil products in the domestic market and rising prices of chemical products driven by increased raw materials cost, the Company managed to increase oil and gas production, speed up structural adjustments, took a variety of measures to increase the supply of oil products and made efforts to guarantee the domestic market supply of oil products through optimised production and operation activities, improved management, conserving energy and reducing emissions, and realized steady growth in oil and gas production, refinery throughput, sales volume of oil products and the production of major chemical products. BUSINESS REVIEW 1 PRODUCTION AND OPERATIONS (1) Exploration and Production In the first half of 2008, international crude oil prices soared, and the average Platt’s Brent spot price was US$ 109.14/barrel, up by 72.53% over the same period of last year. The Company made new progress in petroleum exploration in Tahe oil field, in natural gas exploration in the surrounding areas of Puguang gas field in northeastern Sichuan, western Sichuan and the southern area in Songlao basin, and in the exploration of concealed oil and natural gas reserves in the matured fields in the east of China. With respect to development, through such measures as strengthening the comprehensive adjustments in the matured fields, optimising the construction process of production capacity in the new blocks and enhancing the development of low-grade reserves and speeding up the pace of increasing recovery rate, the Company has yielded marked achievements in increasing both oil and gas reserves and production. Moreover, the construction of the Sichuan-East China Gas project has been progressing smoothly. In the first half of this year, the Company produced 147.38 million barrels of crude oil, up by 2.4%, and produced 144.2 billion cubic feet of natural gas, up by 3.3% over the same period of last year. Summary of Operations of Exploration and Production Segment     Six-month period ended 30 June   Change   2008   2007   (%) Crude oil production (mmbbls)   147.38   143.88   2.4 Natural gas production (bcf)   1,442   1,396   3.3 Newly added proved reserve of crude oil (mmbbls)   158.74   147.88   7.3 Newly added proved reserve of natural gas (bcf)   1,869   1,586   17.8     At 30 June 2008   At 31 December 2007   increase/decrease (%) compared with the end of last year Proved reserve of crude oil (mmbbls)   3,035   3,024   0.4 Proved reserve of natural gas (bcf)   63,736   63,308   0.7 Note: Crude oil production is converted at 1 tonne = 7.1 barrels, and natural gas production is converted at 1 cubic meter = 35.31 cubic feet. (2) Refining In the first half of 2008, in order to meet market demand, the Company kept refinery facilities running safely and at full capacity and increased the output of oil products. It also optimized crude oil resources and tried to reduce the purchasing cost of crude oil, reinforced structural adjustment of products mix and increased the production of high value- added products such as high-grade gasoline, vigorously promoted the sales of other petroleum products rather than gasoline, diesel or kerosene, produced clean oil products meeting the national IV standard. As a cooperation partner of the 2008 Beijing Olympic Games, the Company provides oil products in major hosting cities. In the first half of the year, the refinery throughput increased by 6.7% over the same period of last year, and the output of oil products increased by 10.1%, among which, gasoline increased by 7.7% and diesel by 13.0% over the same period of last year. Summary of Operations of Refining Segment     Six-month periodended 30 June   Change   2008   2007   (%) Refinery throughput (million tonnes)   84.25   78.94   6.7 Gasoline, diesel and kerosene production (million tonnes)   51.52   46.80   10.1 Of which: Gasoline (million tonnes)   13.78   12.79   7.7 Diesel (million tonnes)   33.80   29.91   13.0 Kerosene including jet fuel (million tonnes)   3.94   4.10   (3.9) Light chemical feedstock (million tonnes)   12.07   12.26   (1.5) Light products yield (%)   74.68   73.93   0.75percentage point Refinery yield (%)   93.87   93.73   0.14percentage point Note: Refinery throughput is converted at 1 tonne = 7.35 barrels (3) Marketing and Distribution In the first half of 2008, the Company constantly optimised its sales networks, intensified service awareness and improved service quality, collected resources through various channels and timely arranged the imports of oil products, optimised the allocation and transport of oil products, reduced transportation cost and managed to guarantee sufficient supply of oil products in the domestic market and actively promoted sales of oil products with high octane number. The total sale volume of refined oil reached 63 million tonnes, increased by 8.8% compared with that of the same period last year, among which retail increased 19.2% over the same period of last year. In its coping with the exceptional snow storms in South China as well as the earthquake in Wenchuan, the Company promptly activated its contingency plan to guarantee the supply of refined oil products, and adopted such methods as movable gas-filling and manual delivery of oil products, thus ensuring the supply of refined oil products in the disaster-stricken areas. Summary of Operations of Marketing and Distribution Segment     Six-month periodended 30 June   Change   2008   2007   (%) Total domestic sales volume of refined oil products (million tonnes)   63.02   57.92   8.8 Of which: Retail volume (million tonnes)   42.91   36.01   19.2 Direct sales volume (million tonnes)   10.37   10.15   2.2 Wholesale volume (million tonnes)   9.73   11.77   (17.3) Total number of service stations   29,188   28,898   1.0 of which: Number of company-operated service stations   28,551   28,153   1.4 Number of franchised service stations   637   745   (14.5) Annualized throughput per station (tonne)   3,006   2,558   17.5 (4) Chemicals In the first half of 2008, the Company took advantage of concentrated sales and made great effort to expand the chemical market, coped with the market changes in a flexible way and organised the production and sales of products in high demand, endeavored to increase profits, improved management, consolidated raw material and product structure optimisation, vigorously promoted new technologies and tried hard to increase the output of high added-value products. Ethylene output reached 3.307 million tonnes, a 1.0% increase year-on-year, and the production of synthetic resin reached 4.923 million tonnes, an increase of 3.1% over the same period of last year. Synthetic rubber production reached 0.46 million tonnes, up by 27.8% over the same period of last year. Summary of Production of Major Chemical Products   Unit: 1,000 tonnes     Six-month periodended 30 June   Change   2008   2007   (%) Ethylene   3,307   3,273   1.0 Synthetic resins   4,923   4,774   3.1 Synthetic fiber monomers and polymers   3,768   3,938   (4.3) Synthetic fiber   681   721   (5.5) Synthetic rubbers   460   360   27.8 Urea   685   813   (15.7) Note: 100% production of two ethylene joint ventures, namely BASF-YPC and SHANGHAI SECCO was included 2 COST SAVINGS In the first half of 2008, the Company took various measures to reduce costs, including: fully leveraging the modern logistics system to optimise resources allocation and reduce transportation costs, tapping the potentials of refining capacities for lower quality crude, reducing purchasing costs of crude oil, optimizing operation of facilities and reducing energy and material consumption. In the first half of 2008, the Company saved RMB 1.703 billion in cost with the Exploration and Production, Refining, Marketing and Distribution and Chemicals achieving cost savings of RMB 577 million, RMB 341 million, RMB 315 million and RMB 470 million respectively. 3 ENERGY SAVINGS AND EMISSION REDUCTIONS In the first half of 2008, the Company made remarkable achievements in energy savings and emission reductions. It established SINOPEC Energy-saving Monitoring Center and Energy-saving Technical Service Center, introduced a reporting system on energy-saving activities, initiated benchmarking activities for assessing energy efficiencies within the industry, continued to conduct the publicising and education work of energy-saving and emission reduction, vigorously promoted such advanced energy-saving technologies as pulsed electric desalting, and aromatics extraction of pygas. In the first half of this year, the Company’s energy intensity, industrial water consumption and COD in discharged waste water dropped by 6.6%, 11.8% and 15.0%, respectively over the same period of last year. 4 CAPITAL EXPENDITURE In the first half of 2008, the Company’s total capital expenditure was RMB 36.536 billion. Among which, capital expenditure for Exploration and Development was RMB 20.981 billion. The newly-built production capacity of crude oil and natural gas was 2.79 million tonnes and 480 million cubic-meters per year respectively. The capital expenditure for Refining was RMB 3.849 billion as the green-field and expansion refinery projects in Qingdao, Gaoqiao, Wuhan and Luoyang have been put into production. The Caofeidian crude oil jetty project achieved mechanical completion. Capital expenditure in Chemicals was RMB 5.907 billion. The Yangzi Petrochemicals Butadiene project with a capacity of 100,000 tonnes per year was put into operation, and the Tianjin, Zhenhai ethylene and Jinling PX projects were underway as scheduled. Capital expenditure in Marketing and Distribution was RMB 4.548 billion. The sales network of oil products was furthered optimised and 195 new service stations were added. Capital expenditure for Corporate and Others amounted to RMB 1.251 billion. BUSINESS PROSPECTS Looking into the second half of 2008, the Company believes that China’s economy will maintain growth momentum and that international prices of crude oil will remain high. It also believes that the domestic refining business will still be under pressure and that the demand growth for chemical products may slow down. In the second half of this year, the Company shall continue to apply flexible operational strategies, intensity management and make optimal arrangement for various production and operation activities. In Exploration and Development, the Company will speed up exploration in such key regions as Tahe and northeastern Sichuan, actively tap the potential of existing oil fields, and further improve its recovery rate. In the second half of 2008, the Company plans to produce 21.24 million tonnes of crude oil and 4.2 billion cubic meters of natural gas. In Refining, the Company shall continue to operate at its full capacity on the basis of ensuring safe and stable production to ensure market supplies, optimise the purchase and allocation of crude oil resources, make efforts to reduce the costs of crude oil, further adjust product structure and increase the output of high value-added products. In the second half of 2008, the Company plans to refine 89.75 million tonnes of crude oil. In Marketing and Distribution, the Company will continue to meticulously organise the allocation and transport of refined oil, make efforts to guarantee the market supplies of refined oil products and ensure the oil supplies for the Olympic Games and the reconstruction of disaster-stricken areas and key industries. Meanwhile, the Company shall intensify the arrangement of resources, optimise the flow and storage and transportation of resources and improve profitability from the sales. In the second half of 2008, the Company plans to a total domestic sales volume of oil products at 64 million tonnes. In Chemicals, the Company shall optimise raw materials, product structure and unit operation, intensify the implementation of saving energy and materials, consolidate the linkage of production, sales and research, promote developments of new products, and increase the production of high value-added products. In the second half of 2008, the Company plans to produce 3.26 million tonnes of ethylene. In the second half of 2008, we shall continue to optimise our production and operation activities, improve management, increase profit through taping potentials, reduce energy consumption and emissions, and strive to fulfill the production and business goals of the whole year. Notice: Sinopec Corp. will announce its 2008 interim results at www.sinopec.com and in major newspapers on 25 August, 2008. An archived webcast to discuss Sinopec Corp.’s 2008 interim results will be posted on 26 August on the Company’s website www.sinopec.com. About Sinopec Corp. Sinopec Corp. is the first Chinese company that has been listed in Hong Kong, New York, London and Shanghai. The Company is an integrated energy and chemical company with upstream, midstream and downstream operations. The principal operations of Sinopec Corp. and its subsidiaries include: exploring, developing, producing and trading crude oil and natural gas; processing crude oil into refined oil products; producing, trading, transporting, distributing and marketing refined oil products; and producing and distributing chemical products. Based on 2007 turnover, Sinopec Corp. is the largest listed company in China. The Company is one of the largest crude oil and petrochemical companies in China and Asia. It is also one of the largest gasoline, diesel and jet fuel and other major chemical products producers and distributors in China and Asia. For additional information about Sinopec Corp., please visit the Company’s website at www.sinopec.com 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.