Sinopec H1 Profit Up 19.3% as CNY 15.658 Billion Writedown Cuts Q2 Earnings in Half

China Petroleum and Chemical Corporation (Sinopec) reported first-half net profit attributable to shareholders of the parent company of CNY 25.627 billion, up 19.3% year on year, in a half-year report released on August 23. Impairment provisions cut consolidated half-year net profit by CNY 15.658 billion, including reversals.

The quarterly split shows where the damage landed. Attributable net profit was CNY 17.006 billion in the first quarter and CNY 8.624 billion in the second. Sinopec booked impairment provisions totalling CNY 16.030 billion for the half, of which CNY 15.943 billion were inventory writedowns.

Revenue reached almost CNY 1,436.561 billion, up 2% year on year. The gap between the 2% top-line move and the 19.3% profit gain sits in the margin lines rather than in volume.

Refining carried the earnings recovery. The refining gross margin was 5.2%, up 3.7 percentage points. Refining margin per unit reached CNY 453 per tonne, up 44.1%, supported by jet kerosene, naphtha and refinery by-products. Segment operating income came in at CNY 17 billion, up 381.5%, after the company widened crude supply from outside the Middle East.

Upstream gained on price. Sinopec sold 17.3 million tonnes of crude in the half at an average realised price of CNY 4,001 per tonne, up 17.2%, with exploration and production operating income of CNY 28.7 billion, up 21.5%. The exploration and development gross margin was 25.4%, up 1.6 percentage points.

The crude backdrop was stronger than a year earlier. The Platts Brent spot average was USD 92.6 per barrel over the first half, up 29.1% year on year. That combination, higher crude realisations upstream and wider refining margins downstream, is unusual: a rising crude benchmark normally squeezes the refining leg rather than lifting it.

Marketing and distribution moved the other way, posting operating income of CNY 5.7 billion, down 28.6%.

Chemicals volumes set an export record. Total chemical product sales reached 37.86 million tonnes in the half, with exports up 70% year on year, the highest on record.

Capital spending guidance for the second half runs from CNY 82.9 billion to CNY 99.9 billion. The board plans an interim dividend of CNY 0.105 per share, CNY 12.7 billion in total, a payout ratio of 49.5%.

For traders and refiners outside China, the numbers describe a period in which crude at USD 92.6 per barrel coexisted with a 44.1% rise in unit refining margin and a 381.5% jump in refining operating income. The offset arrived through the balance sheet rather than the income statement's operating lines: inventory writedowns of CNY 15.943 billion, close to the CNY 16.030 billion total provision, are the mechanism that took second-quarter attributable profit to CNY 8.624 billion from CNY 17.006 billion three months earlier.

The payout decision stands against that quarterly slide. A 49.5% interim distribution ratio and second-half capital expenditure of up to CNY 99.9 billion set the cash claims on a half-year profit base of CNY 25.627 billion.