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Shanghai Petrochemical announces 2014 annual results

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Hydrocarbon Engineering,

Sinopec Shanghai Petrochemical Company Limited has announced the audited operating results of the company and its subsidiaries (the Group), prepared under International Financial Reporting Standards (IFRS), for the year ended 31 December 2014.

According to IFRS, revenue of the Group for the year amounted to RMB102,126.2 million, representing a decrease of 11.57% over the previous year. Net loss attributable to owners of the company amounted to RMB692.2 million (2013: net profit attributable to owners of the company of RMB2,055.3 million). Basic loss per share was RMB0.064 (2013: basic earnings per share of RMB0.190 based on the company's total issued share capital of 10.8 billion shares). The Board of Directors did not recommend the distribution of dividend for the year (2013: distributing cash dividend of RMB 0.50 (VAT inclusive) for every 10 shares to all shareholders).

Wang Zhiqing, Chairman of Shanghai Petrochemical, said, "In 2014, The Chinese economy entered into a ‘three periods pile up situation’, which is a gears shifting period of growth pace, a throes period of structural adjustment and digestion period of stimulus at the early stage, and the Chinese economy operating generally presented a trend of continuously slowing down. Affected by factors such as greater downward pressure of the domestic economy, slower growth of demand, over capacity and constantly low prices, the petroleum and petrochemical industry remained in a weak position, and earnings of companies fell. Under great market pressure, the Group focused on economic returns, stepped up its effort in environmental protection and intensified its system optimisation to cost reduction and increase efficiency. Leveraging its competitive edge in the integration of its refinery and petrochemical segments, the Group also actively promoted structural adjustment and development and was able to maintain stable production and operations as a whole.”

In 2014, the Group's net sales amounted to RMB92,725.0 million, representing a decrease of 12.11% y/y. Of which, net sales of synthetic fibres, resins and plastics, intermediate petrochemicals and petroleum products decreased by 10.22%, 12.47%, 32.77% and 14.21%, respectively. Net sales of trading of petrochemical products rose by 32.56%.

In 2014, with the sluggish domestic petroleum and petrochemical industry and of the company's planned turnaround, the total volume of the Group's goods amounted to 13 570 600 t, down 13.03% over the previous year. During the year, the Group processed 14 170 200 t of crude oil (including 1 274 800 t of crude oil processed on a sub contract basis), representing a decrease of 9.56% as compared with the previous year. Total production output of refined oil products amounted to 8 424 300 t, down 7.15%, with the Group producing 2 870 500 t of gasoline, at par with the previous year, and 4 065 300 t of diesel, down 17.56%.The Group also produced 1 488 500 t of jet fuel, up 17.21%. The Group produced 804 400 t of ethylene, 510 200 t of propylene and 105 600 t of butadiene, down 15.62%, 16.61% and 18.46%, respectively. The Group produced 347 500 t of benzene and 680 600 t of paraxylene, down 18.16% and 27.53%, respectively. The Group also produced 1 042 300 tons of synthetic resins and copolymers (excluding polyesters and polyvinyl alcohol), down 7.75%; 705 900 tons of synthetic fibre monomers, down 19.52%; 417 000 t of synthetic fibre polymers, down 20.34%; and 232 400 t of synthetic fibres, down 8.07%. In 2014, the Group's output to sales ratio and receivable recovery ratio were 100.06% and 100.00%, respectively.

In 2014, the world economy continued to grow at a slow pace and the demand for crude oil was generally weak. A number of factors, including the shale gas renovation in the US, the quantitative easing monetary policy coming to an end, and geopolitical factors resulted in a great fluctuation of international crude oil prices. In 2014, the average unit cost of crude oil processed (for its own account) was RMB4,618.68/t, down 4.16% over the previous year. The Group's total cost of processing crude oil in 2014 represents 64.11% of the total cost of sales.

In 2014, the Group leveraged its competitive edge in the integration of its refinery and petrochemical segments, and increased the refining volume of high sulfur crude oil by taking full advantage of the high degree of adaptability of its refinery plants. The Group further centralised crude oil procurement and decreased the cost of crude oil. To maximise its overall economic return, the Group carried out a series of optimisation adjustment, such as optimisation of ethylene feedstock, optimisation of natural gas and fuel gas structure, optimisation of hydrogen system, minimising the flare gas emission, and maximising the output of gasoline and jet fuel, as well as optimising the processing flow of naphtha, residual oil and wax oil. Through adopting measures such as transformation from diesel hydrogenation to jet fuel hydrogenation and quality upgrade of 3.30 million t of diesel hydrogenation, the structure of refined oil was further enhanced with an annual diesel to gasoline proportion of 1.42:1. The Group reinforced the marginal contribution tracking on its plants, to keep track of changes in the effectiveness and make adjustments to the load of plants and the respective commencement/suspension plan in a timely manner. Priority for production was given to products with effectiveness and marketability. In seeking to leverage the innovative financing platform in the Shanghai Free Trade Pilot Zone and the preferential policies, the Group set up Shanghai Jinshan Trading Corporation at the Zone. The Group explored the use of innovative incentive schemes, adopting the A Share Option Incentive Scheme for senior management and core employees.

Looking forward, Wang Zhiqing said, "The global economy will remain volatile following the financial crisis as the generally weak rebound is expected to largely continue in 2015. China's economic development faces uncertainties in the recovery of the global economy. While the steady economic growth is driven by the country's fundamentals conditions and reform policy, factors such as difficulties in boosting domestic and foreign demand significantly, as well as sharp structural contradictions, will hamper and constrain economic growth. As such, there remains multiple challenges in maintaining steady economic growth. In this context, the domestic petroleum and petrochemical markets will face a tougher external business environment with market competition intensifying due to the slowdown in market demand, overcapacity of refineries in the country and impact from imported petrochemical products. Stricter regulations in relation to environment and resources brought greater challenges to business operations and development. Under the prolonged nature of the challenging production and operation environment, the Group will continue its efforts in safety and environmental protection. It will also maintain stable production and operations when focusing on system and products structure optimisation in 2015. The Group will further strengthen its internal management and endeavour to maximise economic benefits for sustainable growth.”

Adapted from press release by Rosalie Starling

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