Shanghai Petrochemical releases interim results

Sinopec Shanghai Petrochemical Co. Ltd has announced the unaudited operating results of the Company and its subsidiaries, prepared under International Financial Reporting Standards for the six months ended 30 June 2016.

According to IFRS, turnover for the Group for the Period reached RMB36 968.5 million. The Group recorded profit after income tax and non-controlling shareholder interests of RMB3148.6 million. Basic earnings per share amounted to RMB0.292. The Board of Directors did not recommend the distribution of 2016 interim dividend.

Mr. Wang Zhiqing, Chairman of Shanghai Petrochemical, said: "In the first half of 2016, China's economy faced the complicated domestic and international environment and the increased downward pressure on its growth. China accelerated its supply-side structural reform and supported the start-up business and innovation, which enabled the economy to achieve an overall steady development and recorded a GDP growth of 6.7% for 2H16, representing a decrease of 0.3 percentage points as compared to the same period last year. The petrochemical industry in China was steady for 2H16 in general as consumption of major products increased steadily, profitability of refined oil products improved while profit from the petrochemical business grew more rapidly. However, downward pressure affecting the development of the industry remains. While investment decreased and a new growth driver had yet to come, the industry was in the process of bottoming out and regaining confidence. The Group endeavoured to achieve progress in safety and environmental protection, operation optimisation, market exploration, as well as cost and expenses reduction while facing the adversity and intensive market competition."

In 2H16, the Group's net sales amounted to RMB30 782.3 million. Among which, net sales of synthetic fibers, resins and plastics, intermediate petrochemical products and petroleum products declined by 22.17%, 12.10%, 16.30% and 29.06%, respectively. Net sales from the trading of petrochemical products increased by 32.00%.

In 1H16, the total production volume of the Group reached 6 510 500 t, which representing a year-on-year decrease of 8.53%. From January to June, the Group processed 7 354 000 t of crude oil (including 1 316 800 t of crude oil processed on a sub-contract basis), which remain the same level with last year. The production volume of refined oil products reached 4 437 200 t, representing a year-on-year increase of 0.56%. Among which, the output of gasoline was 1 562 600 t, representing a year-on-year increase of 4.79%; the output of diesel was 2 038 800 t, representing a year-on-year decrease of 4.79%; and the output of jet fuel was 835 800 t, representing a year-on-year increase of 7.20%. The Group produced 414 800 t of ethylene and 330,800 t of paraxylene, representing a year-on-year decrease of 2.05% and 2.96%, respectively. The Group also produced 527 200 t of synthetic resins and plastic (excluding polyesters and polyvinyl alcohol), representing a year-on-year decrease of 0.88%; 333 300 t of synthetic fiber monomers, representing a year-on-year decrease of 21.52%; 217 500 t of synthetic fiber polymers, representing a year-on-year decrease of 0.09%; and 110 400 t of synthetic fibers, representing a year-on-year decrease of 4.66%. During the Reporting Period, the output-to-sales ratio and receivable recovery ratio of the Group were 98.25% and 100.00%, respectively.

In 2H16, the fundamentals of crude oil market gradually recovered, the global crude oil prices rebounded after touching the bottom in the beginning of the year and then showed a rising trend, with fluctuations. The average unit cost of crude oil processed (for the Group's own account) was RMB1745.24/t, representing a decrease of 34.22% year-on-year. The Group's cost of crude oil accounted for 39.29% of the total cost of sales.

During the Period, the Group thoroughly broke down and implemented the responsibilities on safe production. The Group maintained the stable operation of production devices and strengthened the evaluation on production and operation performance with all technical and economic indicators effectively improved. The Group adhered to the dynamic optimisation mechanism of "daily computation of gross profit margin and weekly exploration of plant potential". Meanwhile, the Group steadily implemented major emission reduction projects, such as the desulfurization and denitrification of boilers in thermal power division and the start-up boiler renovation for the Olefins Division. It also completed the "Clear Water, Blue Sky" environmental protection project. In terms of technology development, on top of designing high-value-added new products and implementing marketing initiatives, the Group actively endeavoured to achieve an up-to-standard operation of carbon fiber equipment with a breakthrough in the industrial application of carbon fiber achieved. The Group developed and manufactured 117 300 t of new products, and submitted 26 patent applications and obtained 28 patent authorisations. In addition, the Group actively optimized the management framework and further enhanced corporate management.

Mr. Wang Zhiqing, also added: "In 2H16, the global economy will be clouded with more uncertainties. Given low prices for staple commodity, lackluster growth of advanced economies, weak investment and trading, coupled with the impact of uncertainties such as geopolitics and Brexit (the United Kingdom leaving European Union), the global economy will continue to be in a stage of profound adjustments and the challenges to an economic recovery will still be severe. Despite the unchanged fundamental long-term positive trend of China's economic development, the downward pressure on the economy will remain enormous as the structural contradictions in the China's economy will continue to be obvious, new drivers for economic growth are yet to emerge, and it will take time to formulate solutions to the overcapacity problem. Facing the serious structural overcapacity of the petrochemical industry in China, as well as the reform of resource tax in China and fees imposed on pollutants emissions, costs of petrochemical enterprises will definitely increase. The increasingly stringent safety and environmental standards of the state and acceleration of oil products upgrade will also pose tremendous challenges to the industry. Facing a challenging market environment, the Group's approach will be more efficiency-oriented and market-oriented to ensure achievements in various aspects, including safety and environmental protection, optimisation of system, reduction of cost and expenses, as well as corporate governance, which in turn will realise a continuous growth of benefits."

Shanghai Petrochemical is one of the largest petrochemical companies in China in terms of sales revenue, and was one of the first Chinese companies to complete a global securities offering. Located in the Jinshan District in southwest Shanghai, the Group is a highly-integrated petrochemicals enterprise which processes crude oil into a broad range of products such as synthetic fibres, resins and plastics, intermediate petrochemicals and petroleum products.

Edited from press release by Angharad Lock

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