China Petroleum & Chemical Corp (中國石化), Asia’s biggest refiner, posted its lowest half-yearly profit since 2008 after the sale of fuel at state-controlled prices reduced earnings.
Net income declined 41 percent to 24.5 billion yuan (US$3.9 billion) from 41.17 billion yuan a year earlier, the Beijing-based company known as Sinopec said in a filing to the Shanghai Stock Exchange yesterday. The result beat a median estimate of seven analysts compiled by Bloomberg that estimated a profit of 22.9 billion yuan.
Sinopec’s profit slide follows a drop in earnings for rival PetroChina Co (中石油), which said it expects fuel-pricing reforms in the second half to help cut losses from refining. Sinopec and parent China Petrochemical Corp (中國石油化工集團) have announced more than US$40 billion in deals to acquire assets globally since 2009 to build up oil and gas production and diversify from refining.
“Sinopec somehow did a nice job in cost control because they can process less expensive low-grade crude in many refineries,” said Gordon Kwan, Hong Kong-based head of energy research at Mirae Asset Securities Ltd.
“Further upside in the second half will hinge on the pace of China’s domestic fuel pricing reforms and improvement in its upstream-asset quality. Until then, it is likely Sinopec shares will lag behind rivals PetroChina and CNOOC,” Kwan added.
China’s three biggest oil companies have posted lower earnings in the first half. PetroChina’s profit dropped 6 percent to 62 billion yuan, while CNOOC Ltd (中國海洋石油), China’s biggest offshore oil and gas explorer with no exposure to refining, said that net income declined 19 percent.
Sinopec has declined 12 percent in Hong Kong this year, while the benchmark Hang Seng Index has gained 7.8 percent. The stock fell 2.6 percent on Friday to close at HK$7.17.