Sinopec reports on 2014 financial performance

China Petroleum & Chemical Corporation (Sinopec) has announced its annual results for the year ended 31 December 2014.

Financial highlights

• In accordance with the International Financial Reporting Standards (IFRS), in 2014, the company's turnover, other operating revenues and other income wasRMB2,825.9 billion, down 1.9% y/y, mainly due to the price decline of crude oil and petrochemical products. Operating profit was RMB73.5 billion, down 24.1% y/y. Profit attributable to equity shareholders of the company was RMB46.5 billion, down 29.7%. Basic earnings per share were RMB0.398.
• In accordance with the PRC Accounting Standards for Business Enterprises (ASBE), in 2014, the company's operating income was RMB2,825.9 billion, down 1.9% y/y. Operating profit was RMB65.5 billion, down 32.1%. Net profit attributable to equity shareholders of the company was RMB47.4 billion, down 29.4% y/y. Basic earnings per share were RMB0.406.
• The Board of Directors proposed a final cash dividend of RMB0.11 per share. Combined with the interim dividend of RMB0.09 per share, the total annual cash dividend for 2014 is RMB0.20 per share. The company has gradually increased its dividend payout ratio in recent years, with dividend payout ratio reaching over 50% in 2014 (by IFRS). Total cash dividend paid for the full year was RMB23.8 billion.

Operational highlights

In 2014, the global economic recovery remained weak while China's economic growth was 7.4%. International crude oil prices fluctuated at a high level in the first half of the year before plunging in the second half, with a precipitous drop in the fourth quarter. In the second half of 2014, domestic refined oil products experienced 11 consecutive cuts. Through enhanced analysis and evaluation of macroeconomic and market trends, the company actively responded to the significant change in international crude oil prices while accelerating structural adjustments, expanding its markets and improving management and cost controls. The company maintained stable production and operations in general.

• Production of oil and gas grew steadily. Domestic crude oil production remained stable, while overseas production increased significantly. Fuling shale gas proceeded smoothly with its first phase capacity construction. Natural gas production and sales volume both increased significantly. Average unit all in cost has been well controlled.
• In the refinery business, crude oil processing and refined oil production recorded solid growth. The company adjusted its product mix in response to the market, increasing production of oil products with strong demand and high value added products. Production of gasoline (especially high octane gasoline) and jet fuel grew substantially, further lowering the diesel to gasoline ratio. The company accelerated the quality upgrade of oil products. Sinopec also improved its resource allocation and strengthened inventory management and cost control.
• The marketing and distribution segment progressed smoothly with its reform plan, laying the foundation for the company to further transform the operational systems and mechanisms of the marketing business, explore multiple business models, and develop through innovation. In light of the extremely competitive refined oil product market, the company adjusted its marketing strategies and improved the sales structure to increase total sales volume. The service driven non fuel business recorded significant growth compared to last year.
• The chemical segment proactively responded to severe market conditions by adjusting its feedstock mix and lowering raw material costs. Sinopec continued to adjust its product mix, increase the proportion of high value added products, and also strengthened R&D, production and sales of new products. The company optimised operations of its manufacturing facilities, adjusted utilisation rates, and shut down facilities with unsatisfactory marginal costs.

Fu Chengyu, Chairman of Sinopec said: "Under the severe market conditions of 2014, Sinopec focused on growth quality and efficiency, achieving safe and stable production. We effectively controlled the cost of each segment and maintained favourable growth momentum through adjustment and improvement in our business and product structure. The company continued to fulfil its social responsibilities across all aspects. We focused on the effects of climate change and worked to achieve growth in a low carbon and green manner, promoting win-win development between Sinopec and its various stakeholders. In 2015, China will enter a new normal phase of slower growth while international crude oil prices are likely to stay low. The company still faces a challenging operating environment. Sinopec will seize the opportunities and tackle the challenges. We are committed to development through the improvement of internal quality and efficiency. We will maintain our strategy with innovation at the core in order to transform Sinopec to a scientific and services based company, and gradually shift the industry structure from 'petrol and chemicals' to 'energy and materials'."

Adapted from press release by Rosalie Starling

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