Sinopec's H1 profit up on record output despite lower product demand
China's Sinopec posted a 2.6% rise in net profit for the first half of the year as record oil and gas output compensated for falling domestic demand for refined fuel and petrochemicals.
China Petroleum & Chemical Corp, as Sinopec is officially known, reported on Sunday a net income of 37.1 B yuan ($5.21 B) for January to June, according to a filing with the Shanghai stock exchange.
Sinopec, the world's largest oil refiner by capacity, said its oil and gas production hit a record high of 257.66 MMbbl of oil equivalent, up 3.1% on the year, led by rising natural gas production.
Gas production was up 6% to 700.57 Bft3, Sinopec previously reported, while crude oil output rose 0.6% on the year to 140.53 MMbbl.
Refined product sales rose 2.1% to 119 metric MMt, although the domestic portion of those sales fell 2.5% to 90.14 MMt.
Revenue slipped 1.1% to 1.58 T yuan, dragged down by lower sales and prices of diesel and petrochemical products.
"China diesel demand deterioration seems the most concerning," Citi analysts said in a note.
Diesel sales fell 13.8% and gasoline 0.2% from a year earlier while aviation fuel sales increased 7.5%.
The company said it was growing its liquefied natural gas (LNG) refueling and electric vehicle charging businesses to counter challenges posed by weak diesel demand and the shift from gasoline-powered vehicles to electric ones.
China's apparent natural gas consumption rose 10% year-on-year in the first half, while domestic refined product consumption fell 0.5% year-on-year, Sinopec said.
For July-December, the company forecasts crude oil throughput at 126 MMt, or 5 MMtpd little changed vs. 126.69 metric MMt of crude oil, or about 5.08 MMbpd in the first half.
That compared with a 1.7% increase in the first quarter. The slowdown was driven by higher crude prices and tepid domestic fuel demand.
Sinopec aims to fine-tune its product mix and boost sales of gasoline and aviation fuel during the second half, when demand is expected to rise due to a pickup in travel during several major public holidays, its chief financial officer Shou Donghua told an earnings call on Monday.
Production of ethylene, a key building block for petrochemicals, fell 5.5% in the first half.
Capital expenditure dropped to 55.9 B yuan in the period, down from 74.67 B yuan in the first half of 2023, as the company reduced outlays for its chemicals business.
Citi analysts warned that third-quarter earnings could be weaker than the second quarter results because of inventory loss and lower oil prices.
Sinopec's Hong Kong listed shares closed up 1.18% on Monday, having risen nearly 25% so far this year, outperforming the Hang Seng index .HSI, which has risen 3.3%.
($1 = 7.1244 Chinese yuan renminbi)
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