Fri, Sep 23, 2005 - Page 10 News List

Chinese Petroleum Corp reports dive in earnings


State-run Chinese Petroleum Corp (CPC, 中油) reported that earnings slumped by 245 percent last month from a year ago, and that it expects to see losses widen through the end of the year after Premier Frank Hsieh (謝長廷) demanded a price freeze for three months.

"We expect to move into the red this year for the first time, if crude oil prices remain at the current level," Liao Tsang-long (廖滄龍), deputy director of CPC's public relations division, said yesterday.

CPC saw a deficit of NT$2.51 billion (US$75.7 million) last month, compared with pretax earnings of NT$1.73 billion during the same time last year, according to company figures.

For the first eight months of the year, CPC reported pretax earnings of NT$13.69 billion, a 17.8 percent decline from a year ago, but NT$3.21 billion more than the goal set by the government, because of increased sales as well as savings in operating costs, according to the company.

CPC reached the annual target set by the government in June, as the company saw a jump in profits from sales of oil and petrochemical products to the overseas market, Liao said. But the gain will be quickly eroded over the next two months, he said.

To stabilize domestic consumer prices, the government demanded that CPC not raise wholesale prices through the end of the year, after privately owned Formosa Petrochemical Corp (台塑石化) raised wholesale gasoline prices by NT$2.4 per liter late last month.

As Formosa has refused to cancel the hike, the over 500 gas stations buying Formosa's oil have had to reflect the increase in retail prices starting Wednesday, which led daily sales to plummet by 80 percent, said Kao Fu-lai (高福來), chairman of the Formosa Gas Station Association.

Sales at Formosa for the first eight months of the year jumped by 27.43 percent to NT$269.6 billion. The company's after-tax earnings for the first half of the year reached NT$30.83 billion.

Formosa's price hike prompted many customers to switch to CPC, causing its daily oil supply to rise by 5 percent, but CPC is still losing about NT$2 per liter, Liao said.

CPC's last price increase was on Aug. 2, when the company raised wholesale gasoline prices by NT$1.5 per liter. At the time crude oil had hit US$62.30 per barrel.

US crude oil futures for delivery next month closed up US$0.60 at US$66.80 per barrel yesterday, and are likely to climb further with Hurricane Rita threatening Gulf of Mexico oil and gas production.

"We will try to cut our costs to sustain company operations," Liao said. "After all, easing consumer prices is a state-run company's responsibility."

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