Sinopec Profit Jumps 57% to 13.36 Billion Yuan Despite Weak Fuel Demand
Key Facts
Sinopec said third-quarter net profit was 13.36 billion yuan, up 57% from the same period a year earlier, according to Dow Jones Newswires’ coverage of the company’s results. Profit growth came as its fuel business faced weaker demand, with refined-fuel sales and domestic consumption falling in the first nine months. Reuters said improved refining margins and higher crude prices offset weak fuel demand. The company’s third-quarter revenue rose 9.3% to 769.74 billion yuan, according to Dow Jones. The figures reflect a divergence between growth in revenue and profit on one hand and contraction in some fuel-related activity volumes on the other.
For the first nine months, net profit was 38.99 billion yuan, up 30% year on year, according to Reuters. Over the same period, the company recorded an average Platts spot Brent crude price of $94.05 a barrel, up 33% from a year earlier, according to Dow Jones, citing Sinopec. But higher prices were not accompanied by growth in domestic demand for refined oil products: consumption fell 8.6% in the nine months. The company attributed the decline to the impact of high oil prices on demand and the accelerated substitution of new energy sources, according to Dow Jones. These indicators put earnings performance in the context of higher crude prices while fuel demand remained under pressure.
Sinopec said its results benefited from improved margins on refining and chemical products, an improved product mix and increased output of higher-value products, according to Dow Jones Newswires. These products included jet fuel, naphtha and refined products. The explanation points to the company’s product mix and sales margins as factors supporting results, alongside the crude-price conditions reported by Reuters. In operating data, Sinopec processed 167.37 million metric tons of crude in the first nine months, equivalent to about 4.48 million barrels a day. The volume of crude processed fell 10.2% from the same period a year earlier, according to Reuters.
The decline extended to refined-fuel sales, which fell 11.4% to 151.91 million metric tons in the first nine months, according to Reuters. Domestic sales were 118.90 million tons, down 10.7% from the comparable period. By contrast, the refining segment’s earnings before interest and taxes rose to 30.10 billion yuan over the period, compared with 7 billion yuan a year earlier. The comparison shows that improved refining profitability coincided with lower crude processing and fuel sales, rather than an increase in sales volumes. The chemicals segment recorded an earnings-before-interest-and-taxes loss of 1.69 billion yuan, narrower than the loss of 8.22 billion yuan in the first nine months of the previous year.
Sinopec’s results came during a period that also saw profit growth at Chinese energy company PetroChina: its third-quarter net profit rose 21.6% year on year to 51.84 billion yuan, according to data reported by Reuters. This allows a comparison of the two major companies’ results in China’s energy sector over the same period, with differences in profit levels and growth rates. At Sinopec, quarterly net profit growth was 57%, according to Dow Jones, while net profit rose 30% over the first nine months, according to Reuters. Sinopec’s first-half profit had risen 19.3%, according to an earlier report published by EL7. These figures provide a timeline of profit growth during the year, while falling fuel demand and lower sales remained among the key operating figures reported for the period.
As for Chinese indicators, the manufacturing purchasing managers’ index stood at 50.1% in September, up 0.3 percentage points from the previous month and entering expansion territory, according to China’s National Bureau of Statistics. The bureau is scheduled to publish the next monthly reading on October 31 at 9:30 a.m., according to its schedule. The release follows the September reading, which improved from the previous month, while Sinopec data showed a decline in domestic consumption of refined oil products in the first nine months. The bureau’s schedule specified only the publication time for the index, while the fuel-demand figures in the company’s results remained a separate indicator of its operating activity. The company’s shares, listed under the symbol SNPMF, closed at 0.58 on October 27, according to EL7 data, which did not specify the price unit.