China's Sinopec Q2 net dives on soaring crude

Business Materials 24 August 2008 20:53 (UTC +04:00)

Top Asian oil refiner Sinopec Corp posted an 87 percent fall in quarterly earnings as soaring crude prices and caps on state-set fuel prices pushed its refining business into the red, despite government subsidies, Reuters reported.

Analysts say Sinopec is likely to face a similarly tough time in the second half of this year even after Beijing raised gasoline and diesel prices by 18 percent in late June, because the government may scrap a tax rebate on imported crude.

State-run Sinopec and rival PetroChina have found themselves squeezed between skyrocketing crude prices, which jumped by nearly half in January-June before hitting a record $147 a barrel last month, and state-capped fuel prices, a massive burden for suppliers of the largest fuel market after the United States.

"It is expected that in the second half of this year the international prices of crude oil will remain high, the domestic refining business will still be under pressure and the demand growth for chemical products may slow down," the company said in a statement on Sunday.

Sinopec posted a net profit of 2.2 billion yuan ($322 million) in April-June, based on Reuters' calculations of previous reported data.

That compared with a net profit of 16.79 billion yuan a year earlier, and beat a consensus forecast of 860 million yuan from six analysts polled by Reuters.

For the first-half, the company said net profit came to 6.92 billion yuan under international accounting standards, versus a slightly revised profit of 36.4 billion yuan a year earlier.

In the second quarter of this year, Sinopec recorded a total government subsidy of 22.93 billion yuan and 3.07 billion yuan of value-added tax rebates for imported refined oil products.

But industry officials have told Reuters Beijing could quietly end a tax rebate, which has refunded three-quarters of a 17 percent value-added tax on crude imports. The rebate, introduced in April, was meant to help refiners offset losses.

Sinopec aims to process 89.75 million tonnes of crude in the second half of this year. It also plans to produce 21.24 million tonnes of crude oil and 4.2 billion cubic metres of natural gas.

Shares in Sinopec fell 38 percent in January-June, versus PetroChina's 27 percent fall and CNOOC's 1 percent gain. The benchmark Hang Seng Index .HSI fell 21 percent.

Sinopec trades at 15.5 times forecast earnings, pricier than Exxon Mobil's 8.5 and BP's 6 times. ($1=6.833 Yuan)