Sinopec Posts 65% Jump in H1 Net

China Petroleum & Chemical Corp., otherwise known as Sinopec, reported a 65% rise in H1 net earnings on lower crude costs and higher fuel prices. It also lowered its full-year 2007 refining forecast. The company posted H1 net profit of 36.19 billion yuan ($4.78 billion), up from 21.87 billion yuan a year ago. Revenue was up to 566.83 billion yuan from 491.22 billion yuan. Bloomberg broke out the company's Q2 net profit at 16.8 billion yuan ($2.2 billion), a 36% rise from the year-ago period. Sinopec's crude costs fell 7% to $60.80 a barrel from a year ago, in part because it processed a higher proportion of lower-quality crude. The company warned its refining operations could lose money if oil prices stayed above $60 a barrel. "Earnings growth momentum has clearly peaked, with refining margin deteriorating rapidly since late in the second quarter," said Gordon Kwan, China energy research head at CLSA. Sinopec has a 55.56% share in Sinopec Shanghai Petrochemical, the largest ethylene producer in China, which posted a leap in H1 net profit to 1.79 billion yuan from 5.7 million yuan. That company noted that in H2, "the average cost of crude oil...may increase significantly as compared with the first half of 2007, while the major production facilities will undergo large-scale inspection and maintenance." It nevertheless forecasts that it will swing to a profit in the period, thanks primarily to the substantial H1 gain.

Sources: Press release, Bloomberg, Wall Street Journal I, II, MarketWatch
Commentary: Expecting Upside In Chinese Energy Stocks • China Shares Regain All Losses
Stocks/ETFs to watch: SNP, SNI. Competitors: CEO, PTR

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