Shanghai Petrochemical Announces 2016 Annual Results; Net Profit Surges by 82.28% to RMB 5,969 million

HONG KONG, March 15, 2017

According to IFRS, revenue of the Group for the Year amounted to RMB 77,842.9 million. The net profit attributable to owners of the Company amounting to RMB 5,968.5 million, representing a surge of 82.28% compared to the same period last year. Basic earnings per share amounted to RMB 0.553 (2015: basic earnings per share was RMB 0.303). The Board of Directors recommended the distribution of cash dividend in respect of the year ended 31 December 2016 of RMB 2.50 (VAT inclusive) for every 10 shares to all shareholders for the Year (2015: annual dividend was RMB 1.00 for every 10 shares).

Mr. Wang Zhiqing, Chairman of Shanghai Petrochemical, said, "In 2016, the global economy continued its recovery, growing at a rate higher than that in 2015. Growth in developed economies was more subdued than expected while a positive recovery was seen in emerging markets and developing economies. The Chinese economy encountered a slower growth rate, with an annual GDP growth at 6.7%, down by 0.2 percentage point from 2015. Structural problems associated with the overcapacity of refining and petrochemical production remained overwhelming and restrictions on resources, environmental protection and safety became more stringent. However, as compared with the significant drop of international oil prices during the year, the decline in prices for downstream refining and petrochemical products was less remarkable, which resulted in an increase in the gross profit of such products and a rise in the corporate returns. The Group actively responded to the complex market conditions in 2016. Focusing on overall efficiency, the Group made great efforts in safety production and environmental protection standards, optimizing operations, exploring new markets as well as cutting costs and expenses. As a result, a good performance was achieved in production and operations, and there was a significant increase in economic efficiency as compared to the previous year."

In 2016, the Group's net sales amounted to RMB 65,936.5 million, representing a slight decrease of 1.64% year-on-year. Of which, net sales of synthetic fibres, resins and plastics, intermediate petrochemicals and petroleum products decreased by 20.30%、1.95%、5.41%、and 22.07% respectively. Net sales of trading of petrochemical products increased by 50.06%.

For the year under review, the Group recorded a decline in total processing capacity due to maintenance of major refining plants. The deduction of total processing capacity resulted in a decrease in actual production volume of the Group, which amounted to 12,830,600 tons, down 7.47% from the previous year. In 2016, the Group processed 14,302,800 tons of crude oil (including 2,588,000 tons of crude oil processed on a sub-contract basis), representing a year-on-year decrease of 3.33%. Total production output of refined oil products amounted to 8,359,200 tons, down by 6.87%, among which the Group produced 2,878,700 tons of gasoline, down by 7.07%; 3,882,200 tons of diesel, down by 8.98%, and 1,598,300 tons of jet fuel, down by 0.91%. The Group produced 825,600 tons of ethylene, down by 1.3%; 670,600 paraxylene, up by 1.65%. Its output-to-sales ratio and receivable recovery ratio were 100.27% and 100%, respectively.

During 2016, international crude oil prices showed a rebound after a period of fluctuation. The average unit cost of crude oil processed by the Group (for its own account) was RMB 1,979.58 per ton, down by 21.86% over the previous year. The Group's cost of processing crude oil in 2016 accounted for 41.60% of the total cost of sales.

The Group thoroughly analyzed and implemented a safety and production accountability system, stringently managed contractor qualifications, personnel training as well as the assessment irregularities. Moreover, the Group actively promoted the hazard and operability study (HAZOP) analysis, and conducted in-depth investigations and the elimination of hidden safety hazards. On top of that, there was an optimization and adjustment in facilities and inspection plan to strengthen on-site maintenance management. The overall production and operation was continuously improved; efforts to intensify optimization and cost/expenditure reduction. The Group continued to implement its dynamic optimization mechanism and thoroughly improved the crude oil structure, equipment workload, raw materials, as well as product structure and processing procedures; continued to carry out various measures in energy conservation and emission reduction in compliance with the relevant state requirements, thereby achieve all targets set by the government. In terms of marketing, the Group continued to focus on the development of sales through Internet+, export expansion, advanced technical services and improvement in incentive mechanisms achieved in significant outcome in market development; facilitated project construction, R&D and IT projects steadily and implemented enhancement and transformation for multiple projects. The Group further optimized its organizational structure and work standards, revised the management requirements, improved appraisal methods and incentivized its departments so as to maximize the overall efficiency of the Company.