Sinopec Announces FY2003 Results



China Petroleum & Chemical Corporation (Sinopec) (HKEX: 386; NYSE: SNP; LSE: SNP; CH: 600028) announced its financial results for the twelve months ended December 31, 2003.

"In 2003, a year under difficult and changing market conditions, the Company exercised great flexibility with its operating strategy, reinforced its corporate governance, and carried forward its internal reform. The Company has nonetheless managed to record good operating results, despite having disposed some of its low efficiency assets and paid for its reform," Chen Tonghai, Sinopec Corp's Chairman, commented.

"All segments continued to post encouraging growth. Particularly, positive growth in the Marketing and Distribution Segment has showcased the Company's leading position in the Chinese market, which is attributed to its efforts in building and consolidating its marketing and distribution network across the country through the years. As a result, the Company's efforts have been acknowledged by the capital market, leading to greater returns to shareholders and an elevation of its valuation," Mr. Chen continued.

In accordance with International Financial Reporting Standards (IFRS), revenue for 2003 was RMB 443.14 billion (US$ 53.54 billion), a 28.39% increase from the year before. Operating profit was RMB 37.27 billion (US$4.50 billion), representing a 29.95% year-over-year increase. Profit attributable to shareholders reached RMB 21.59 billion (US$2.61 billion), a 32.35% increase compared to 2002. ROACE increased to 9.04% from 7.24% in 2002, representing an increase of 1.96 percentage points. Earnings per share based on the total number of outstanding shares at the end of 2003 was RMB0.249 (US$0.029).

The Board of Sinopec Corp. proposed a dividend of RMB 0.09 (US$0.011) per share for 2003. The year-end dividend will be RMB 0.06 (US$0.007), or US$0.72 per American Depositary Share (ADS), which reflects the difference between the mid-year dividend amount of RMB 0.03 (US$0.004) and the proposed full-year amount.

Operating Highlights

Financial Highlights (IFRS)
(for the year ended 31 December)

                               2003      2002      2001     2003/2002
                               RMB       RMB       RMB       yoy (%)
                              millions  millions  millions
---------------------------- --------- --------- --------- -----------
Revenue                       443,136   345,145   323,629       28.39
---------------------------- --------- --------- --------- -----------
Operating profit               37,267    28,679    27,669       29.95
---------------------------- --------- --------- --------- -----------
Profit from ordinary
 activities before tax         34,081    25,085    24,900       35.86
---------------------------- --------- --------- --------- -----------
Profit / (loss) attributable
 to shareholders               21,593    16,315    16,246       32.35
---------------------------- --------- --------- --------- -----------
Basic earnings per share
 (RMB)                          0.249     0.188     0.191       32.45
---------------------------- --------- --------- --------- -----------
Net profit per share (Based
 on total number of shares
 in issue at the year end)
 (RMB)                          0.249     0.188     0.187       32.45
---------------------------- --------- --------- --------- -----------
Returns on capital employed                                   1.96
 (%)                                                        percentage
                                 9.04      7.08      6.79     points
---------------------------- --------- --------- --------- -----------
Return on net assets (%)                                      2.90
                                                            percentage
                                12.86      9.96     10.37     points
---------------------------- --------- --------- --------- -----------
Net cash flow from operating
 activities per share (RMB)     0.699     0.635     0.654       10.08
---------------------------- --------- --------- --------- -----------


2003 Operating Overview by Segment
(for the year ended December 31)

                                2003       2002              2003/2002
                                RMB        RMB                yoy (%)
                              billions   billions
---------------------------- ---------- ---------- --------- ---------
Exploration and production
---------------------------- ---------- ---------- --------- ---------
  Operating revenues              70.3       57.6                22.0
---------------------------- ---------- ---------- --------- ---------
  Operating expenses              51.1       42.8                19.4
---------------------------- ---------- ---------- --------- ---------
  Operating profit                19.2       14.8                29.7
---------------------------- ---------- ---------- --------- ---------
Refining
---------------------------- ---------- ---------- --------- ---------
  Operating revenues             273.8      213.8                28.1
---------------------------- ---------- ---------- --------- ---------
  Operating expenses             267.8      207.8                28.9
---------------------------- ---------- ---------- --------- ---------
  Operating profit                 6.0        6.0                 0.0
---------------------------- ---------- ---------- --------- ---------
Marketing and distribution
---------------------------- ---------- ---------- --------- ---------
  Operating revenues             241.4      187.0                29.1
---------------------------- ---------- ---------- --------- ---------
  Operating expenses             229.5      178.6                28.5
---------------------------- ---------- ---------- --------- ---------
  Operating profit                11.9        8.4                41.7
---------------------------- ---------- ---------- --------- ---------
Chemicals
---------------------------- ---------- ---------- --------- ---------
  Operating revenues              92.3       75.1                22.9
---------------------------- ---------- ---------- --------- ---------
  Operating expenses              90.1       74.5                20.9
---------------------------- ---------- ---------- --------- ---------
  Operating profit                 2.2        0.6               266.7
---------------------------- ---------- ---------- --------- ---------
Corporate and others
---------------------------- ---------- ---------- --------- ---------
  Operating revenues              63.6       45.7                39.2
---------------------------- ---------- ---------- --------- ---------
  Operating expenses              65.6       46.8                40.2
---------------------------- ---------- ---------- --------- ---------
  Operating profit                (2.0)      (1.1)               81.8
---------------------------- ---------- ---------- --------- ---------


Exploration & Production
In 2003, the Company made significant exploration achievements in burial hills, and new and hidden layers in Shengli Oil Fields in Eastern China, which are expected to become stable sources of oil supply for the Company in the near future. Important discoveries were also made in Tarim and Jungel Basins in Western China whose reserves are expected to provide important supplemental resources for the final two years during the 10th Five-Year Plan period. In Southern China and Erdos Basin, new natural gas discovery was made and it was expected to boost the Company's future reserves. Owing to a change in Sinopec Corp's rights and interests in the joint venture project, "Development of Petroleum & Natural Gas Field at West Lake in East China Sea", the Company's proved reserves of crude oil were reduced by 25.4 million barrels, and proved reserves of natural gas were reduced by 649 billion cubic feet accordingly. With regard to development, the Company had newly built crude oil and natural gas production capacity of 5.93 million tonnes per year, and 890 million cubic meters per year, respectively. In 2003, the Company's production of crude oil and natural gas reached 270.96 million barrels and 187.7 billion cubic feet, representing an increase of 0.43% and 4.98% over 2002, respectively.

In 2003, the domestic crude oil price followed closely to that of the international market. The Company's realized price of crude oil was US$ 27.56 per barrel, up by US$ 5.14 per barrel over 2002, whereas the realized price of natural gas increased by 3.57% to US$2.03 per thousand cubic feet in 2003.

Operating Summary of the Exploration and Production Segment

                                                            2003/2002
                                    2003     2002     2001   yoy (%)
-------------------------------- -------- -------- -------- ----------
Crude oil production (mmbbls)     270.96   269.80   269.16       0.43
-------------------------------- -------- -------- -------- ----------
Natural gas production (bcf)       187.7    178.8    162.8       4.98
-------------------------------- -------- -------- -------- ----------
Newly added proved crude oil
 reserves (mmbbls)                   208      375      316     -44.53
-------------------------------- -------- -------- -------- ----------
Newly added proved gas reserves
 (bcf)                            -254.3     20.2    309.0  -1,358.90
-------------------------------- -------- -------- -------- ----------
Year-end proved reserves of
 crude oil (mmbbls)                3,257    3,320    3,215      -1.90
-------------------------------- -------- -------- -------- ----------
Year-end proved reserves of
 natural gas (bcf)               2,887.6  3,329.4  3,488.0     -13.27
-------------------------------- -------- -------- -------- ----------
Year-end proved reserves of oil
 and gas (mmboe)                   3,738    3,875    3,796      -3.54
-------------------------------- -------- -------- -------- ----------


Refining
In 2003, Sinopec optimized its resources by adjusting its product mix and by increasing exports. Crude oil throughput increased and the Company maintained good control over production for refined oil products. The Company also increased production of high value-added products and chemical feedstock to meet market demands. Crude oil throughput increased by 10.71% to 116.26 million. Meanwhile, the Company has upgraded its existing oil refining facilities, and in doing so the quality of its gasoline and diesel oil has also been upgraded to meet the new national standards. The Company produced 9.23 million tonnes of high-grade gasoline, an increase of 38.80% over 2002. The Company has also expanded its market share in lubricating oil by integrating its resources and launching a unified brand. In 2003, the light product yield reached 73.80%, up by 0.58 percentage point over 2002 while the refining yield reached 92.63%, an increase of 0.13 percentage point over 2002. Refining margins were US$4.09/barrel, an increase of 3.28% compared to the year before.

Operating Summary of the Refining Segment

                                                          2003/2002
                              2003      2002      2001     yoy (%)
-------------------------- -------- --------- --------- --------------
Crude processing volume
 (1,000bbls/day)           2,341.0  2,114.60  2,042.40           10.7
-------------------------- -------- --------- --------- --------------
Of which: Sour crude
 processing volume (1,000
 bbls/day)                  478.70    402.80    387.60           18.8
-------------------------- -------- --------- --------- --------------
Refinery utilization (%)                                     8.5
                                                         percentage
                             87.80     79.30     77.90      points
-------------------------- -------- --------- --------- --------------
Gasoline, diesel and
 kerosene production
 (million tonnes)            68.72     62.42     61.14           10.1
-------------------------- -------- --------- --------- --------------
Of which: Gasoline
(million tonnes)             21.74     19.62     18.74           10.8
-------------------------- -------- --------- --------- --------------
          Diesel
(million tonnes)             41.67     37.74     37.93           10.4
-------------------------- -------- --------- --------- --------------
          Kerosene
(million tonnes)              5.31      5.06      4.47            4.9
-------------------------- -------- --------- --------- --------------
Chemical feedstock           16.46     15.04     12.36            9.4
-------------------------- -------- --------- --------- --------------
Light product yield (%)                                       0.58
                                                            percentage
                             73.80     73.22     72.33        point
-------------------------- -------- --------- --------- --------------
Refining yield (%)                                            0.13
                                                            percentage
                             92.63     92.50     92.23        point
-------------------------- -------- --------- --------- --------------

Notes:  a) Crude oil processing volume is converted at 1 tonne = 7.35
            barrels.
        b) All the operating data excluded Xi'an Petrochemical and
            Tahe Petrochemical.


Marketing and Distribution
In 2003, the total domestic sales volume of refined oil products increased by 8.3% to 75.92 million tones over 2002, of which retail sales increased 11.9% to 38.85 million tonnes. The Company's retail market share in its principal markets increased by one percentage point to 69%. Average throughput per petrol station increased 8.1% to 1,686 tonnes. Domestic retail sales and direct distribution volumes of refined oil products accounted for 71.36% of the Company's total domestic sales volume, which represented a 3.76 percentage points increase over 2002. In line with market demands, the Company exported 6.08 million tonnes of refined oil products in total, up by 21.2% over that in 2002.

Summary of the Marketing and Distribution Segment

                                                            2003/2002
                                      2003    2002    2001   yoy (%)
----------------------------------- ------- ------- ------- ----------
Total domestic sales of refined oil
 products (10,000 tonnes)            7,592   7,009   6,774        8.3
----------------------------------- ------- ------- ------- ----------
Of which: Retail volume
        (10,000 tonnes)              3,885   3,473   3,043       11.9
----------------------------------- ------- ------- ------- ----------
        Direct Distribution volume
        (10,000 tonnes)              1,533   1,263   1,164       21.4
----------------------------------- ------- ------- ------- ----------
        Wholesale volume
        (10,000 tonnes)              2,174   2,273   2,567       -4.4
----------------------------------- ------- ------- ------- ----------
Average annual throughput / petrol
 station (tonne/station)             1,686   1,560   1,473        8.1
----------------------------------- ------- ------- ------- ----------
Total number of petrol stations
 under Sinopec Corp. brand at year-
 end                                30,242  28,127  28,246        7.5
----------------------------------- ------- ------- ------- ----------
Of which: Number of petrol stations
          operated                  24,506  24,000  24,062        2.1
----------------------------------- ------- ------- ------- ----------
        Number of franchised petrol
         stations                    5,736   4,127   4,184       39.0
----------------------------------- ------- ------- ------- ----------
Percentage of retail volume to                                 1.6
 total sales volume (%)                                     percentage
                                      51.2    49.6    44.9    points
----------------------------------- ------- ------- ------- ----------


Chemicals
The Company continued to maintain a high utilization rate of its petrochemical facilities. In 2003, the Company produced 3.17 million tonnes of ethylene, an increase of 16.67% over the year before. Major chemicals such as synthetic resin, synthetic fiber, monomers and polymers for synthetic fiber, and synthetic rubber, all recorded significant increases in production. The Company has also established an acrylon sales and marketing subsidiary, marking a step toward reforming its chemical product distribution and marketing system.

Production of Major Chemicals
(Unit: 1,000 tonnes)

                                                             2003/2002
                                       2003     2002   2001   yoy (%)
----------------------------------- -------- -------- ------ ---------
Ethylene                            3,169.1  2,716.4  2,153     16.67
----------------------------------- -------- -------- ------ ---------
Synthetic resins                    4,691.0  4,004.8  3,204     17.13
----------------------------------- -------- -------- ------ ---------
Of which: Performance
compound resins                     2,304.9  1,846.9  1,332     24.80
----------------------------------- -------- -------- ------ ---------
Synthetic rubbers                     501.9    457.7    398      9.66
----------------------------------- -------- -------- ------ ---------
Monomers/polymers for synthetic
 fibers                             4,417.5  3,833.5  3,598     15.23
----------------------------------- -------- -------- ------ ---------
Synthetic fibers                    1,279.5  1,153.0  1,028     10.97
----------------------------------- -------- -------- ------ ---------
Of which: Differential fibers         477.4    402.0    326     18.76
----------------------------------- -------- -------- ------ ---------
Urea                                2,027.6  2,666.3  2,342    (23.95)
----------------------------------- -------- -------- ------ ---------
Notes: all the operating data excluded Maoming Ethylene


Technology Development
In its continued efforts to enhance its core competitiveness, the Company launched an active drive for scientific & technological innovation and advancement, and has succeeded in achieving a wide range of results:

  • Successfully developed supporting technologies for exploring hidden oil and gas reserves
  • Harnessed a number of key technological know-hows, including the complete 2nd generation world-class polypropylene technologies
  • Met the new national standard for clean gasoline.
  • The Greatwall brand of lubricating oil and grease were used in the heralded launch of Shenzhou No.5 Spaceship
  • Breakthrough in promoting and expanding pilot testing ERP


  • Cost Savings
    In 2003, the Company reduced its costs by RMB 2.72 billion (US$329 mm). The Exploration and Production Segment recorded a cost saving totaled RMB 805 million (US$97 mm) while the Refining Segment reduced its cost by RMB 740 million (US$89 mm) with cash operating cost slightly declined to US$ 2.00 per barrel from US$ 2.02 per barrel the year before. The Marketing and Distribution Segment achieved a cost saving of RMB 538 million (US$65 mm) and the Chemicals Segment recorded a cost saving of RMB 639 million (US$77 mm) with cash operating cost of ethylene dropped to US$ 142.63 per tonne from US$ 149.24 per tonne the year before.

    Capital Expenditures
    In 2003, the Company's capital expenditure was RMB 45.05 billion (US$5.44 billion). A detailed breakdown by segment is as follows:

    E&P         : RMB 20.63 billion (US$2.49 billion) to optimize
                  reserves, increase production and rationalize reserve
                  profile.
    
    Refining    : RMB 9.73 billion (US$1.18 billion) to put a number of
                  reconstruction and expansion projects online, improve
                  production capacity of clean fuel.
                  Ningbo-Shanghai-Nanjing crude oil pipeline will be
                  opened soon.
    
    Marketing & : RMB 6.83 billion (US$825 mm) to acquire, construct and
    Distribution  reconfigure gas stations, storage and transport
                  facilities. Also, construction on the southwest
                  refined oil pipeline has already begun.
    
    Chemicals   : RMB 7.35 billion (US$888 mm) to reconfigure existing
                  ethylene and fertilizer projects. 
    
    Others      : RMB 518 million (US$63 mm) to construct and improve
                  information systems.


    Progress on Major Joint Venture (JV) Projects
    The Company's major joint venture projects made good progress in 2003. The details are as follows:

  • Natural gas exploration and development at West Lake, East China Sea with CNOOC, Royal Dutch Shell and US Unocal was officially launched.
  • Grass-root ethylene projects with BASF in Nanjing and BP in Shanghai are in the construction phase and are expected to go into production by early 2005.
  • The Coal Gasification Project with Royal Dutch Shell in Hunan Province is in the construction phase and production is expected in 2005.
  • The feasibility study report on "Integration of Oil Refining and Chemicals Production in Fujian Province", a joint-venture project with Exxon Mobil and Saudi Aramco, was approved by the authorities and preparation work is now under way.
  • The joint feasibility study report on retail business cooperation of refined oil products in Jiangsu Province, a joint venture with Royal Dutch, was approved by the State Council, and a joint venture company will be established soon.
  • The joint feasibility study report on retail business cooperation of refined oil products in Zhejiang Province, a joint venture with BP, was submitted to the Ministry of Commerce for approval.


  • Corporate Governance
    In its continued efforts in improving its corporate governance standards and meeting the regulatory requirements of all four listing boards, the Company revised the Articles of Association, among other documents, in 2003. In the meantime, with regard to the Board of Directors, the decision making process was further streamlined and the "Three Committees" function was fully leveraged. In the area of information disclosure, the Company has become more transparent by disseminating information in a more timely, accurate, and thorough manner through its complete investor relations management system.

    Health, Safety and Environment (HSE)
    Sinopec Corp. strives to balance between HSE and economic development. The Company's goal has always been to establish safe production mechanisms with long-term benefits.

  • Steady promotion of HSE management: By the end of 2003, 49 branch companies or subsidiaries of Sinopec Corp. had already established fairly complete HSE management systems and put them into operation.
  • Implementation of safety pre-appraisals for new projects: According to this policy, the emphasis is on prevention.
  • Active promotion of clean production, water conservation and pollution reduction: The Company's industrial water consumption was reduced by 1% as compared to 2002.
  • Development of a number of technologies that improve the quality of petroleum products: The Company began completely implementing the new national standard for light diesel on July 1, 2002 and reduced the sulfur content in its light diesel products from 1.0%(m/m) under the old standard, to 0.2%(m/m) under the new one. Sinopec Corp. has already implemented the new national standard for automotive gasoline effective July 1, 2003.

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