Shanghai Petrochemical Announces 2014 Interim Results

HONG KONG, Aug. 28, 2014

According to IFRS, turnover for the Group for the Period reached RMB51,345 million, representing a decrease of 10.06% year-on-year. The Group recorded loss after income tax and non-controlling interests of RMB123.6 million (2013 interim: profit after tax and profit attributable to non-controlling interests of RMB473.2 million). Basic loss per share was RMB0.011 (2013 interim: basic earnings per share amounted to RMB0.044, based on a total number of 10.8 billion shares). The Board of Directors did not recommend the distribution of 2014 interim dividend (2013 interim: issuing 3.36 shares for every 10 shares to all shareholders by the premium of capital fund, and 1.64 shares for every 10 shares by surplus fund, as well as distributing cash dividend of RMB0.50 (VAT inclusive) for every 10 shares to all shareholders).

Mr. Wang Zhiqing, Chairman of Shanghai Petrochemical, said, "In the first half of 2014, the PRC economy gradually stabilised despite of a slowdown, maintaining stable growth within a reasonable range and signaling a further slowdown in economic growth. The PRC petrochemical market was impacted by weakened growth of market demand and a relatively rapid increase in production capacity. The petrochemical product market remained sluggish with further intensifying competition in the industry. Facing the challenging operating environment, the Group tackled the challenges head-on to maintain smooth operations of its plants. It thoroughly implemented system optimisation. The Group also continued its efforts in technological advancement and digitisation of information, further strengthening internal corporate management and cutting its losses by optimising production efficiency."

In the first half of 2014, the Group's net sales reached RMB46,690.8 million, representing a decrease of 10.49% year-on-year. Of this, net sales of synthetic fibres, resins and plastics, intermediate petrochemicals and petroleum products declined by 11.84%, 13.23%, 29.97% and 9.00% respectively. Net sales of trading of petrochemical products rose by 18.21%.

Under challenging economic conditions during the Period, the Group lowered crude oil processing volume in view of the market conditions, upstream and downstream material balance and plant maintenance, which reduced the total volume of goods produced by 12.84% year-on-year. During the Period, the Group processed 7,225,700 tons of crude oil (including 730,900 tons of crude oil processed on a sub-contract basis), representing a decrease of 6.25% year-on-year. Total production of refined oil products reached 4,251,200 tons, representing a decrease of 4.45% year-on-year. Of this, the output of gasoline was 1,514,700 tons, representing an increase of 9.63% year-on-year; output of diesel was 2,033,300 tons, representing a decrease of 19.15% year-on-year; and output of jet fuel was 703,200 tons, representing an increase of 27.16% year-on-year. The Group produced 404,700 tons of ethylene and 364,600 tons of paraxylene, representing a decrease of 15.46% and 20.20% year-on-year respectively. The Group also produced 487,900 tons of synthetic resins and plastic (excluding polyesters and polyvinyl alcohol), representing a decrease of 11.31% year-on-year; 361,700 tons of synthetic fibre monomers, representing a decrease of 19.34% year-on-year; 204,700 tons of synthetic fibre polymers, representing a decrease 22.70% year-on-year; and 116,900 tons of synthetic fibres, representing a decrease of 8.39% year-on-year. The Group's output-to-sales ratio and receivable recovery ratio were 100.54% and 100.00% respectively for the Period.

In the first half of 2014, global crude oil maintained the balance between supply and demand. International crude oil prices were volatile in an upward trend mainly due to the impact of the geopolitical situation. The average unit cost of crude oil (for the Group's own account) was RMB4,866.94 per ton, representing an increase of 0.28% year-on-year. The Group's cost of crude oil accounted for 68.38% of the total cost of sales.

During the Period, the Group continually enhanced its management of process technology for its plants while improving technical and economic indicators. The first phase of production plant maintenance for the year, with a focus on residual oil hydrogenation plants, was completed. The Group continued to tighten its management of specialised equipment, key units and gear transmission equipment, as well as anti-corrosion for equipment and management of heaters. The Group continued to leverage its competitive strengths in the integration of its refinery and petrochemical segments. Tapping fully on the high flexibility of its refinery plants, the Group increased the procurement and refining volume of low-grade crude oil and increased its focus on crude oil procurement, which contributed to lower crude oil cost. Refinery and petrochemical production were also optimised. The Group further strengthened refined oil product structure by lowering production of several lower-margin petrochemical products and boosting production of high-end gasoline. The Group enhanced the contribution margin tracing of the plants, and suspended production at some plants in phases while prioritising the production of more profitable and marketable products in line with market conditions. Through various innovative financing methods, the Group successfully implemented various offshore financing measures such as overseas agency payments and risk participation, lowering its capital costs. During the Period, China Jinshan Associated Trading Corporation, the Group's holding subsidiary, has established the Shanghai Jinshan Trading Corporation. in the Shanghai Free Trade Pilot Zone to further expand the Group's trading segment, increase its trading volume, expand its financing channels, and lower financing costs.