China Petroleum & Chemical Corporation 1H 2004 Results Announcement 30 August 2004 Hong Kong
China Petroleum & Chemical Corporation
1H 2004 Results Announcement
30 August 2004Hong Kong
230 August 2004
This presentation and the presentation materials distributed herewith include forwar
d-looking statements. All statements, other than statements of historical facts, that addres
s activities, events or developments that Sinopec Corp. expects or anticipates will or may
occur in the future (including but not limited to projections, targets, estimates and busine
ss plans) are forward-looking statements. Sinopec Corp.'s actual results or developments
may differ materially from those indicated by these forward-looking statements as a result
of various factors and uncertainties, including but not limited to price fluctuations, actual
demand, exchange rate fluctuations, exploration and development outcomes, estimates of
proven reserves, market shares, competition, environmental risks, changes in legal, finan
cial and regulatory frameworks, international economic and financial market conditions, p
olitical risks, project delay, project approval, cost estimates and other risks and factors be
yond our control. In addition, Sinopec Corp. makes the forward-looking statements referre
d to herein as of today and undertakes no obligation to update these statements.
Disclaimer
330 August 2004
Agenda
• Performance Highlights
• 1H 2004 Performance Review
• 2H 2004 Business Prospects
Performance Highlights
530 August 2004
27,339
18,569
4122,3242335,850
4,047
1,620222
Profit Kept Growing - Asset Structure Further Optimized
EBIT Analysis
1H2003 1H2004
RefiningProfit Growth
ChemicalsProfit Growth
Impairment Losses
on Fixed Assets
E&P Profit Growth
MarketingProfit Growth
EmployeeReductionExpenses
Corporate& Others
Profit growth in business segments = EBIT of 1H2004 excluding impairment losses of fixed assets and employee reduction expenses – EBIT of 1H2003Note: Data shown in this presentation includes that of Maoming Ethylene, Xi’an Petrochemical and Tahe Petrochemical which were acquired in 2H 2003.
Unit: RMB million
630 August 2004
Profit Kept Growing - Leveraging Integrated Business
EBIT Contribution by Segment
(RMB million )
Unit: RMB million
Turnover and Other Operating Revenues
EBITDA
EPS (RMB) 50.56
34.14
33.62
Net Profit
0.19
275,442
42,112
16,151
0.12
205,335
31,516
10,727 50.56
-5000
0
5000
10000
15000
20000
25000
30000
1H2002 1H2003 1H2004
E & P RefiningChemical MarketingCorporate & Others
1H 04 1H 03 Change (%)
EBIT 47.2327,339 18,569
730 August 2004
Financial Highlights
Short-term Debt
Long-term Debt
Shareholders’ Fund
Unit: RMB million
Cash flow from Operating Activities
Cash flow from Investing Activities
Cash flow from Financing Activities
14,273
19,291
-30,659
10,421
Debt / Total Capital
EBITDA Interest Coverage
29,079
43,660
167,899
24.08%
17.2x
37,340
49,977
178,409
26.56%
21.2x
28.41
14.47
6.26
248bps
4.0x
Unit: RMB million
Cash & Cash Equivalent - Ending Balance
1H 04 FY 03 Change (%)
1H 04
830 August 2004
Returns and Dividend
7.08%
9.04%
6.17%
0%
2%
4%
6%
8%
10%
2002 2003 1H 2004
0.040.03
0.02
0.06
0.06
0.00
0.02
0.04
0.06
0.08
0.10
2002 2003 2004
Half-year Dividend Year-end Dividend
ROCE Improvement DividendRMB Yuan
930 August 2004
As a Result of Good Market Environment
Oil prices remained high and volatile
Refining margin improved and chemical businesses entered into upturn cycle
Macro economic control measures by the Chinese government have achieved good results; Chinese economy has maintained stable growth momentum
Domestic demand for petroleum and chemical products increased steadily
– Refined oil products consumption increased by 24.6 % yoy
– Chemical products (ethylene equivalent) consumption increased by 15.59 % yoy
Good market environment for Company’s earnings growth
1030 August 2004
As a Result of Continuous Delivery of Corporate Strategies
Operation volumes expanded as demand grew
– E & P: improved reserve profile and increased production capacity, maintained modest growth in crude and gas production
– Refining and Chemicals: increased capacity and efficiency, improved product quality
– Marketing: enhanced marketing network and improved marketing structure
Continued to rationalize asset structure
Reduced cost and headcounts to improve efficiency
Improved corporate governance
1130 August 2004
Visions
Corporate reform governs business activities to achieve effective growth
Continue to pursue a strategy founded on “resource and market expansion; cost reduction and prudent investment”
Continue to rationalize assets portfolio
Enhance internal control procedures
Realize Sustainable Effective Growth
1H 2004 Performance Review
1330 August 2004
E & P – Oil and Gas Production Continued to Grow
Crude Oil Production (mm bbls)
Natural Gas Production (bcf)
Period-end Proved Oil & Gas Reserves (mm boe)
Lifting Cost (USD/bbl)
Newly Added Proved Oil Reserves (mm bbls)
135.85
100.06
3,855
6.28
124.40
Newly Added Proved Gas Reserves (bcf) 872.74
133.72
90.71
3,887
6.26
115.80
276.80
1.59
10.31
-0.82
0.32
7.43
215.30
1H 04 1H 03 Change (%)
1430 August 2004
E&P – Segment Performance
Crude Oil and Natural GasRealized Price
RMB million
EBIT of E&P Segment
10,298 10,520
0
2,000
4,000
6,000
8,000
10,000
12,000
1H 2003 1H 2004
Crude OilUSD/bbl
Natural GasUSD/mcf
29.6228.9
2.05 2.08
0
4
8
12
16
20
24
28
32
1H 2003 1H 2004
0
1
2
3
Crude Oil Natural Gas
1530 August 2004
Refining – Increased Throughput to Meet Market Demand
Crude Oil Processed (mm tonnes) 64.98
Refining Utilization Rate (%)
Chemical Feedstock Production (mm tonnes)
Refining Yield (%)
Gasoline Production (mm tonnes)
Diesel Production (mm tonnes)
Kerosene Production (mm tonnes)
Light Stream Yield (%)
- Sour Crude Oil Processed (mm tonnes)
91.57
8.92
93.10
11.42
24.72
3.03
74.06
13.39
54.70
83.30
8.23
93.07
10.25
19.89
2.45
73.97
10.64
18.79
827 bps
8.38
3 bps
11.41
24.28
23.67
9 bps
25.85
1H 04 1H 03 Change (%)
1630 August 2004
Refining — Segment Performance
EBIT of Refining Segment
RMB million
Refining Margin / Cash Operating Cost
4.073.96
1.982.02
0.00
1.00
2.00
3.00
4.00
5.00
1H2003 1H2004
1.70
1.80
1.90
2.00
2.10
2.20
Refining Margin Cash Operating Cost
4,251
2,644
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
1H 2003 1H 2004
USD/bbl
1730 August 2004
Marketing — Optimized Marketing Network, Expanded Retail and Distribution
Franchised Gas Stations
Domestic Sales of Refined OilProducts (mm tonnes)
Incl. Retail (mm tonnes)
Distribution (mm tonnes)
Wholesale (mm tonnes)
Owned or Operated Gas Stations
Annual Average Throughput Per Station (tonnes/station)
5,297
10.49
24,128
1,612
1H 04
Marketing Cash Operating Cost (RMB/tonne) 163.2
5,376
10.81
25,306
1,986
1.49
3.05
4.88
23.20
153.4 -6.00
35.24
17.83
6.92
45.49
25.12
9.56
29.09
40.89
38.15
1H 03 Change (%)
1830 August 2004
Marketing – Segment Performance
EBIT of Marketing Segment
5,461
8,569
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
1H 2003 1H 2004
RON #90 Gasoline Guidance Price
2000
3000
4000
Jan Mar May Jul Sep Nov
2002 2003 2004
RMB/Tonne
#0 Diesel Guidance Price
2000
3000
4000
Jan Mar May Jul Sep Nov
2002 2003 2004
RMB/Tonne
RMB million
1930 August 2004
Chemicals — Fully Loaded to Meet Market Demand
Unit: 1,000 tonnes
Ethylene
Synthetic Resins
Synthetic Rubbers
Monomers & Polymers for Synthetic Fibers
Synthetic Fibers
Ratio of Differential Fibers
Ratio of Performance Compound
Ethylene Cash Operating Costs (USD/tonne)
1,863
2,806
297
2,443
641
45.11%
57.11%
143.67
1,724
2,529
261
2,133
598
40.26%
55.43%
147.46
8.06
10.95
13.79
14.53
7.19
485 bps
168 bps
-2.57
1H 04 1H 03 Change (%)
2030 August 2004
Chemicals – Segment Performance
EBIT of Chemicals Segment
4,924
858
0
1,000
2,000
3,000
4,000
5,000
6,000
1H 2003 1H 2004
RMB million
Chemicals Price Spreads (1990 - Jul. 2004)
USD/tonne
0
200
400
600
800
1000
1200
90-1
-1
91-1
-1
92-1
-1
93-1
-1
94-1
-1
95-1
-1
96-1
-1
97-1
-1
98-1
-1
99-1
-1
00-1
-1
01-1
-1
02-1
-1
03-1
-1
04-1
-1
LDPE-Naphtha PP-Naphtha
2130 August 2004
Cost Reduction
Cost Reduction in 1H 2004 was RMB1.43 bn
• Optimized resource allocation and logistics to reduce transportation costs
• Further increased sour crude throughput to reduce crude oil procurement costs
• Optimized operation of facilities to reduce energy and material consumption
RMB million
0
500
1000
1500
2000
2500
3000
2004 Plan 1H 2004 Actual
E & P RefiningChemicals Marketing
In addition, headcount reduction in 1H 2004 was about 8,000
2230 August 2004
Capital Expenditure
1H 2004 Capex: RMB25.82 bn
• E & P –10.07 bn, improved reserve profile and increased production capacity of oil and gas
• Refining – 4.10 bn, Ningbo-Shanghai-Nanjing pipeline was put into operation, and a number of revamping projects are progressing smoothly
• Chemicals – 2.94 bn, revamping of Qilu ethylene expected to complete in 2H 2004
• Marketing – 8.61 bn, smooth progress in south-west pipeline, good results from construction and acquisition of petrol stations
1H 2004 Capex Breakdown
39.01%
15.89%11.38%
33.35%
0.36%
E & P RefiningChemicals MarketingCorporate & Others
In addition RMB3.37 bn invested in Secco and other JV projects
2H 2004 Business Prospects
2430 August 2004
Market Environment in 2H 2004
Global economy expected to keep its recovery momentum
Global oil demand continue to grow
Refining margin is to remain at relatively good level, and
chemical businesses continue upturn cycle
Chinese economic growth expected to maintain relative
fast pace, resulting in increasing demand for petroleum
and chemical products
2530 August 2004
E & P
Pursue expand resource strategy and speed up exploration and development
Accelerate construction of production capacities
Enhance production management to reduce cost
2H 2004 Production Projection
Crude Oil 19.466 mm tonnes
Natural Gas 2.966 bn cubic meters
2630 August 2004
Optimize resources and reduce crude oil procurement cost
Optimize crude oil transportation to reduce cost
Adjust product mix according to market demand
Implement reform of marketing system for products other than gasoline, diesel and jet fuel
Refining
2H 2004 Production Projection
Refining Throughput 67.46 mm tonnes
2730 August 2004
Accelerate expansion of marketing network for refined oil products
Promote reform of marketing system for refined oil products
Improve quality of service and increase sales volume
Marketing
2H 2004 Production Projection
Total domestic sales volume 45.50 mm tonnes
Incl.: Retail Volume 25.37 mm tonnes
Direct Sales Volume 9.50 mm tonnes
2830 August 2004
Chemicals
2H 2004 Production Projection
Ethylene 1.70 mm tonnes
Maintain a stable full-load operation at major facilities and ensure smooth progress of revamping projects
Optimize allocation of raw material and resources
Increase production of high value-added products
Continue reform of marketing system for chemical products
2930 August 2004
0
10
20
30
40
50
60
Original Plan After Adjustment
E & P RefiningChemicals MarketingCorporate & Others
Seize Market Opportunities to Accelerate Development
E&P-Added 1.24 bn to construct natural gas and oil pipelines
Refining – Added RMB1.68 bn to speed up revamping of a number of projects
Chemicals – Added RMB1.15 bn to revamp petrochemical facilities
Marketing – Added RMB1.95 bn to acquire, construct and revamp petrol stations and terminals, speed up construction of south-west pipeline
2004 Capex Plan Adjustment
RMB billion
2004 Capex
50.256.3
3030 August 2004
Adhere to key operating guidance featuring “reform, rationalization, innovation and development”
Seize market opportunities and adopt flexible operating tactics to increase production volumes
Conclusion
Maintain Sound Operating Results
3130 August 2004
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