REG - China Pet &Chem Corp - Half-year Report <Origin Href="QuoteRef">600028.SS</Origin> - Part 13
29/08/2017 07:08
- Part 13: For the preceding part double click ID:nRSc0740Pl
Current
Receivables and inventories 1,449 347 - - 1,449 347
Accruals 655 391 - - 655 391
Cash flow hedges 18 27 (299) (242) (281) (215)
Non-current
Property, plant and equipment 11,397 11,264 (11,993) (14,615) (596) (3,351)
Tax losses carried forward 2,151 2,477 - - 2,151 2,477
Others 427 133 (190) (229) 237 (96)
Deferred tax assets/(liabilities) 16,097 14,639 (12,482) (15,086) 3,615 (447)
-
2,151
2,477
Others
427
133
(190)
(229)
237
(96)
Deferred tax assets/(liabilities)
16,097
14,639
(12,482)
(15,086)
3,615
(447)
At 30 June 2017, certain subsidiaries of the Company did not recognise deferred tax of deductible loss carried forward of
RMB 18,513 million (At 31 December 2016: RMB 19,194 million), of which RMB 1,637 million (2016: RMB 2,000 million) was
incurred for the six-month period ended 30 June 2017, because it was not probable that the future taxable profits will be
realised. These deductible losses carried forward of RMB 2,441million, RMB 2,565 million, RMB 3,957 million, RMB 4,080
million, RMB 3,833 million and RMB 1,637 million will expire in 2017, 2018, 2019, 2020, 2021, 2022 and after,
respectively.
Periodically, management performed assessment on the probability that future taxable profit will be available over the
period which the deferred tax assets can be realised or utilised. In assessing the probability, both positive and negative
evidence was considered, including whether it is probable that the operations will have sufficient future taxable profits
over the periods which the deferred tax assets are deductible or utilised and whether the tax losses result from
identifiable causes which are unlikely to recur. During the six-month period ended 30 June 2017, write-down of deferred tax
assets amounted to RMB 9 million (2016: RMB 43 million) (Note 10).
Movements in the deferred tax assets and liabilities are as follows:
Recognised in Recognised
consolidated in other
Balance at income comprehensive Balance at
1 Januray 2016 statement income 30 June 2016
RMB million RMB million RMB million RMB million
Current
Receivables and inventories 1,755 (542) 2 1,215
Accruals 413 462 - 875
Cash flow hedges 250 - (382) (132)
Non-current
Property, plant and equipment (9,131) 486 (129) (8,774)
Tax losses carried forward 5,883 (696) 5 5,192
Others 40 (29) - 11
Net deferred tax liabilities (790) (319) (504) (1,613)
5
5,192
Others
40
(29)
-
11
Net deferred tax liabilities
(790)
(319)
(504)
(1,613)
25 DEFERRED TAX ASSETS AND LIABILITIES (Continued)
Recognised in Recognised
consolidated in other
Balance at income comprehensive Balance at
1 January 2017 statement income 30 June 2017
RMB million RMB million RMB million RMB million
Current
Receivables and inventories 347 1,104 (2) 1,449
Accruals 391 264 - 655
Cash flow hedges (215) (14) (52) (281)
Non-current
Property, plant and equipment (3,351) 2,614 141 (596)
Tax losses carried forward 2,477 (313) (13) 2,151
Others (96) 333 - 237
Net deferred tax (liabilities)/assets (447) 3,988 74 3,615
(13)
2,151
Others
(96)
333
-
237
Net deferred tax (liabilities)/assets
(447)
3,988
74
3,615
26 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES
Short-term debts represent:
30 June 31 December
2017 2016
RMB million RMB million
Third parties' debts
Short-term bank loans 19,063 11,944
RMB denominated 17,460 10,931
US Dollar ("USD") denominated 1,603 1,013
Current portion of long-term bank loans 6,577 8,795
RMB denominated 6,553 8,753
USD denominated 24 42
Current portion of long-term corporate bonds 18,266 29,500
RMB denominated 11,500 -
USD denominated 6,766 29,500
24,843 38,295
Corporate bonds (i) - 6,000
43,906 56,239
Loans from Sinopec Group Company and fellow subsidiaries
Short-term loans 22,969 18,430
RMB denominated 983 2,858
USD denominated 20,213 13,577
Hong Kong Dollar ("HKD") denominated 1,739 1,969
EUR denominated 5 5
Singapore Dollar ("SGD") denominated 29 21
Current portion of long-term loans - 150
RMB denominated - 150
22,969 18,580
66,875 74,819
EUR denominated
5
5
Singapore Dollar ("SGD") denominated
29
21
Current portion of long-term loans
-
150
RMB denominated
-
150
22,969
18,580
66,875
74,819
The Group's weighted average interest rates on short-term loans were 1.68% (2016: 2.42%) at 30 June 2017. The above
borrowings are unsecured.
26 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND FELLOW SUBSIDIARIES (Continued)
Long-term debts represent:
30 June 31 December
Interest rate and final maturity 2017 2016
RMB million RMB million
Third parties' debts
Long-term bank loans
RMB denominated Interest rates ranging from 1.08% to 29,404 26,058
4.41% per annum at 30 June 2017 with
maturities through 2030
USD denominated Interest rates ranging from 1.55% to 386 426
4.29% per annum at 30 June 2017 with
with maturities through 2031
29,790 26,484
Corporate bonds (ii)
RMB denominated Fixed interest rates ranging from 3.30% to 47,500 65,500
5.68% per annum at 30 June 2017 with
maturity through 2022
USD denominated Fixed interest rates ranging from 1.88% to 18,550 18,985
4.25% per annum at 30 June 2017 with
maturities through 2043
66,050 84,485
Total third parties' long-term debts 95,840 110,969
Less: Current portion (24,843) (38,295)
70,997 72,674
Long-term loans from Sinopec Group
Company and fellow subsidiaries
RMB denominated Interest rates ranging from interest free to 44,832 44,922
3.92% per annum at 30 June 2017 with
maturities through 2021
Less: Current portion - (150)
44,832 44,772
115,829 117,446
44,832
44,772
115,829
117,446
Short-term and long-term bank loans and loans from Sinopec Group Company and fellow subsidiaries are primarily unsecured
and carried at amortised cost.
Note:
(i) The Company issued 182-day corporate bonds of face value RMB 6 billion to corporate investors in the PRC debenture
market on 12 September 2016 at par value of RMB 100. The effective cost of the 182-day corporate bonds is 2.54% per annum.
The short-term bonds were due on 14 March 2017 and have been fully paid by the Group at maturity.
(ii) These corporate bonds are carried at amotised cost. At 30 June 2017, RMB 18,550 million (USD demoniated corporate
bonds) are guaranteed by Sinopec Group Company.
27 TRADE ACCOUNTS AND BILLS PAYABLES
30 June 31 December
2017 2016
RMB million RMB million
Amounts due to third parties 158,991 154,882
Amounts due to Sinopec Group Company and fellow subsidiaries 4,920 13,168
Amounts due to associates and joint ventures 6,205 6,251
170,116 174,301
Bills payable 6,162 5,828
Trade accounts and bills payables measured at amortised cost 176,278 180,129
Bills payable
6,162
5,828
Trade accounts and bills payables measured at amortised cost
176,278
180,129
27 TRADE ACCOUNTS AND BILLS PAYABLES (Continued)
The ageing analysis of trade accounts and bills payables are as follows:
30 June 31 December
2017 2016
RMB million RMB million
Within 1 month or on demand 165,005 159,953
Between 1 month and 6 months 8,843 12,693
Over 6 months 2,430 7,483
176,278 180,129
7,483
176,278
180,129
28 ACCRUED EXPENSES AND OTHER PAYABLES
30 June 31 December
2017 2016
RMB million RMB million
Salaries and welfare payable 4,190 1,618
Interest payable 1,320 1,396
Dividend payable 22,336 2,006
Payables for constructions 40,515 52,827
Other payables 22,439 19,462
Financial liabilities carried at amortised costs 90,800 77,309
Taxes other than income tax 26,665 46,835
Receipts in advance 96,039 95,928
Derivative financial instruments 560 4,472
214,064 224,544
Receipts in advance
96,039
95,928
Derivative financial instruments
560
4,472
214,064
224,544
29 PROVISIONS
Provisions primarily represent provision for future dismantlement costs of oil and gas properties. The Group has mainly
committed to the PRC government to established certain standardised measures for the dismantlement of its oil and gas
properties by making reference to the industry practices and is thereafter constructively obligated to take dismantlement
measures of its oil and gas properties.
Movement of provision of the Group's obligations for the dismantlement of its oil and gas properties is as follow:
2017 2016
RMB million RMB million
Balance at 1 January 36,918 33,115
Provision for the period 493 1,700
Accretion expenses 659 495
Utilised (75) (182)
Exchange adjustments (66) 45
Balance at 30 June 37,929 35,173
Exchange adjustments
(66)
45
Balance at 30 June
37,929
35,173
30 SHARE CAPITAL
30 June 31 December
2017 2016
RMB million RMB million
Registered, issued and fully paid
95,557,771,046 listed A shares (2016: 95,557,771,046) of RMB 1.00 each 95,558 95,558
25,513,438,600 listed H shares (2016: 25,513,438,600) of RMB 1.00 each 25,513 25,513
121,071 121,071
121,071
121,071
30 SHARE CAPITAL (Continued)
The Company was established on 25 February 2000 with a registered capital of 68.8 billion domestic state-owned shares with
a par value of RMB 1.00 each. Such shares were issued to Sinopec Group Company in consideration for the assets and
liabilities transferred to the Company (Note 1).
Pursuant to the resolutions passed at an Extraordinary General Meeting held on 25 July 2000 and approvals from relevant
government authorities, the Company is authorised to increase its share capital to a maximum of 88.3 billion shares with a
par value of RMB 1.00 each and offer not more than 19.5 billion shares with a par value of RMB 1.00 each to investors
outside the PRC. Sinopec Group Company is authorised to offer not more than 3.5 billion shares of its shareholdings in the
Company to investors outside the PRC. The shares sold by Sinopec Group Company to investors outside the PRC would be
converted into H shares.
In October 2000, the Company issued 15,102,439,000 H shares with a par value of RMB 1.00 each, representing 12,521,864,000
H shares and 25,805,750 American Depositary Shares ("ADSs", each representing 100 H shares), at prices of HKD 1.59 per H
share and USD 20.645 per ADS, respectively, by way of a global initial public offering to Hong Kong and overseas investors.
As part of the global initial public offering, 1,678,049,000 state-owned ordinary shares of RMB 1.00 each owned by Sinopec
Group Company were converted into H shares and sold to Hong Kong and overseas investors.
In July 2001, the Company issued 2.8 billion listed A shares with a par value of RMB 1.00 each at RMB 4.22 by way of a
public offering to natural persons and institutional investors in the PRC.
During the year ended 31 December 2010, the Company issued 88,774 listed A shares with a par value of RMB 1.00 each, as a
result of exercise of 188,292 warrants entitled to the Bonds with Warrants.
During the year ended 31 December 2011, the Company issued 34,662 listed A shares with a par value of RMB 1.00 each, as a
result of conversion by the holders of the 2011 Convertible Bonds.
During the year ended 31 December 2012, the Company issued 117,724,450 listed A shares with a par value of RMB 1.00 each,
as a result of conversion by the holders of the 2011 Convertible Bonds.
On 14 February 2013, the Company issued 2,845,234,000 listed H shares ("the Placing") with a par value of RMB 1.00 each at
the Placing Price of HKD 8.45 per share. The aggregate gross proceeds from the Placing amounted to approximately HKD
24,042,227,300.00 and the aggregate net proceeds (after deduction of the commissions and estimated expenses) amounted to
approximately HKD 23,970,100,618.00.
In June 2013, the Company issued 21,011,962,225 listed A shares and 5,887,716,600 listed H shares as a result of bonus
issues of 2 shares converted from the retained earnings, and 1 share transferred from the share premium for every 10
existing shares.
During the year ended 31 December 2013, the Company issued 114,076 listed A shares with a par value of RMB 1.00 each, as a
result of conversion by the holders of the 2011 Convertible Bonds.
During the year ended 31 December 2014, the Company issued 1,715,081,853 listed A shares with a par value of RMB 1.00 each,
as a result of conversion by the holders of the 2011 Convertible Bonds.
During the year ended 31 December 2015, the Company issued 2,790,814,006 listed A shares with a par value of RMB 1.00 each,
as a result of conversion by the holders of the 2011 Convertible Bonds.
All A shares and H shares rank pari passu in all material aspects.
Capital management
Management optimises the structure of the Group's capital, which comprises of equity and debts. In order to maintain or
adjust the capital structure of the Group, management may cause the Group to issue new shares, adjust the capital
expenditure plan, sell assets to reduce debt, or adjust the proportion of short-term and long-term loans. Management
monitors capital on the basis of the debt-to-capital ratio, which is calculated by dividing long-term loans (excluding
current portion), including long-term debts and loans from Sinopec Group Company and fellow subsidiaries, by the total of
equity attributable to shareholders of the Company and long-term loans (excluding current portion), and liability-to-asset
ratio, which is calculated by dividing total liabilities by total assets. Management's strategy is to make appropriate
adjustments according to the Group's operating and investment needs and the changes of market conditions, and to maintain
the debt-to-capital ratio and the liability-to-asset ratio of the Group at a range considered reasonable. As at 30 June
2017, the debt-to-capital ratio and the liability-to-asset ratio of the Group were 13.9% (2016: 14.2%) and 43.2% (2016:
44.5%), respectively.
The schedule of the contractual maturities of loans and commitments are disclosed in Notes 26 and 31, respectively.
There were no changes in the management's approach to capital management of the Group during the period. Neither the
Company nor any of its subsidiaries is subject to externally imposed capital requirements.
31 COMMITMENTS AND CONTINGENT LIABILITIES
Operating lease commitments
The Group leases land and buildings, service stations and other equipment through non-cancellable operating leases. These
operating leases do not contain provisions for contingent lease rentals. None of the rental agreements contain escalation
provisions that may require higher future rental payments.
At 30 June 2017 and 31 December 2016, the future minimum lease payments under operating leases are as follows:
30 June 31 December
2017 2016
RMB million RMB million
Within one year 10,836 14,917
Between one and two years 11,070 14,228
Between two and three years 10,296 13,966
Between three and four years 10,069 13,217
Between four and five years 9,919 12,980
Thereafter 201,329 275,570
253,519 344,878
12,980
Thereafter
201,329
275,570
253,519
344,878
Capital commitments
At 30 June 2017 and 31 December 2016, capital commitments are as follows:
30 June 31 December
2017 2016
RMB million RMB million
Authorised and contracted for (i) 116,385 116,379
Authorised but not contracted for 53,299 31,720
169,684 148,099
169,684
148,099
These capital commitments relate to oil and gas exploration and development, refining and petrochemical production capacity
expansion projects, the construction of service stations and oil depots and investment commitments.
Note:
(i) The investment commitments of the Group is RMB 5,326 million (2016: RMB 4,173 million).
Commitments to joint ventures
Pursuant to certain of the joint venture agreements entered into by the Group, the Group is obliged to purchase products
from the joint ventures based on market prices.
Exploration and production licenses
Exploration licenses for exploration activities are registered with the Ministry of Land and Resources. The maximum term of
the Group's exploration licenses is 7 years, and may be renewed twice within 30 days prior to expiration of the original
term with each renewal being for a two-year term. The Group is obligated to make progressive annual exploration investment
relating to the exploration blocks in respect of which the license is issued. The Ministry of Land and Resources also
issues production licenses to the Group on the basis of the reserve reports approved by relevant authorities. The maximum
term of a full production license is 30 years unless a special dispensation is given by the State Council. The maximum term
of production licenses issued to the Group is 80 years as a special dispensation was given to the Group by the State
Council. The Group's production license is renewable upon application by the Group 30 days prior to expiration.
The Group is required to make payments of exploration license fees and production right usage fees to the Ministry of Land
and Resources annually which are expensed.
31 COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Exploration and production licenses (Continued)
Estimated future annual payments are as follows:
30 June 31 December
2017 2016
RMB million RMB million
Within one year 209 263
Between one and two years 76 123
Between two and three years 24 25
Between three and four years 25 24
Between four and five years 25 25
Thereafter 859 867
1,218 1,327
25
Thereafter
859
867
1,218
1,327
Contingent liabilities
At 30 June 2017 and 31 December 2016, guarantees by the group in respect of facilities granted to the parties below are as
follows:
30 June 31 December
2017 2016
RMB million RMB million
Joint ventures 985 658
Associates (ii) 12,734 11,545
Others 10,586 10,669
24,305 22,872
10,669
24,305
22,872
Management monitors the conditions that are subject to the guarantees to identify whether it is probable that a loss has
occurred, and recognises any such losses under guarantees when those losses are estimable. At 30 June 2017 and 31 December
2016, it was not probable that the Group will be required to make payments under the guarantees. Thus no liability has been
accrued for a loss related to the Group's obligation under these guarantee arrangements.
Note:
(ii) The Group provided a guarantee in respect to standby credit facilities granted to Zhongtian Synergetic Energy by
banks amount to RMB 17,050 million. As at 30 June 2017, the amount withdrawn by Zhongtian Synergetic Energy and guaranteed
by the Group was RMB 12,734 million.
Environmental contingencies
Under existing legislation, management believes that there are no probable liabilities that will have a material adverse
effect on the financial position or operating results of the Group. The PRC government, however, has moved, and may move
further towards more rigorous enforcement of applicable laws, and towards the adoption of more stringent environmental
standards. Environmental liabilities are subject to considerable uncertainties which affect management's ability to
estimate the ultimate cost of remediation efforts. These uncertainties include (i) the exact nature and extent of the
contamination at various sites including, but not limited to refineries, oil fields, service stations, terminals and land
development areas, whether operating, closed or sold, (ii) the extent of required cleanup efforts, (iii) varying costs of
alternative remediation strategies, (iv) changes in environmental remediation requirements, and (v) the identification of
new remediation sites. The amount of such future cost is indeterminable due to such factors as the unknown magnitude of
possible contamination and the unknown timing and extent of the corrective actions that may be required. Accordingly, the
outcome of environmental liabilities under proposed or future environmental legislation cannot reasonably be estimated at
present, and could be material. The Group recognized normal routine pollutant discharge fees of approximately RMB 2,786
million for the six-month period in the consolidated financial statements ended 30 June 2017 (2016: RMB 2,508 million).
Legal contingencies
The Group is a defendant in certain lawsuits as well as the named party in other proceedings arising in the ordinary course
of business. Management has assessed the likelihood of an unfavourable outcome of such contingencies, lawsuits or other
proceedings and believes that any resulting liabilities will not have a material adverse effect on the financial position,
operating results or cash flows of the Group.
32 RELATED PARTY TRANSACTIONS
Parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control or
jointly control the party or exercise significant influence over the party in making financial and operating decisions, or
vice versa, or where the Group and the party are subject to control or common control. Related parties may be individuals
(being members of key management personnel, significant shareholders and/or their close family members) or other entities
and include entities which are under the significant influence of related parties of the Group where those parties are
individuals, and post-employment benefit plans which are for the benefit of employees of the Group or of any entity that is
a related party of the Group.
(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures
The Group is part of a larger group of companies under Sinopec Group Company, which is controlled by the PRC government,
and has significant transactions and relationships with Sinopec Group Company and fellow subsidiaries. Because of these
relationships, it is possible that the terms of these transactions are not the same as those that would result from
transactions among wholly unrelated parties.
The principal related party transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures,
which were carried out in the ordinary course of business, are as follows:
Six-month periods ended 30 June
Note 2017 2016
RMB million RMB million
Sales of goods (i) 115,853 83,694
Purchases (ii) 72,881 55,676
Transportation and storage (iii) 3,682 561
Exploration and development services (iv) 5,723 5,701
Production related services (v) 5,501 2,943
Ancillary and social services (vi) 3,209 3,169
Operating lease charges for land (vii) 3,988 5,264
Operating lease charges for buildings (vii) 207 160
Other operating lease charges (vii) 390 189
Agency commission income (viii) 63 60
Interest income (ix) 322 98
Interest expense (x) 228 600
Net deposits (placed with)/withdrawn from related parties (ix) (5,088) 6,538
Net loans obtained from/(repaid to) related parties (xi) 4,449 (1,201)
63
60
Interest income
(ix)
322
98
Interest expense
(x)
228
600
Net deposits (placed with)/withdrawn from related parties
(ix)
(5,088)
6,538
Net loans obtained from/(repaid to) related parties
(xi)
4,449
(1,201)
The amounts set out in the table above in respect of the six-month periods ended 30 June 2017 and 2016 represent the
relevant costs and income as determined by the corresponding contracts with the related parties.
Included in the transactions disclosed above, for the six-month period ended 30 June 2017 are: a) purchases by the Group
from Sinopec Group Company and fellow subsidiaries amounting to RMB 51,507 million (2016: RMB 52,786 million) comprising
purchases of products and services (i.e. procurement, transportation and storage, exploration and development services and
production related services) of RMB 43,875 million (2016: RMB 43,593 million), ancillary and social services provided by
Sinopec Group Company and fellow subsidiaries of RMB 3,209 million (2016: RMB 3,169 million), operating lease charges for
land and buildings paid by the Group of RMB 3,988 million and RMB 207 million (2016: RMB 5,264 million and RMB 160
million), respectively and interest expenses of RMB 228 million (2016: RMB 600 million); and b) sales by the Group to
Sinopec Group Company and fellow subsidiaries amounting to RMB 23,992 million (2016: RMB 20,889 million), comprising RMB
23,659 million (2016: RMB 20,777 million) for sales of goods, RMB 322 million (2016: RMB 98 million) for interest income
and RMB 11 million (2016: RMB 14 million) for agency commission income.
At 30 June 2017 and 31 December 2016, there were no guarantee given to banks by the Group in respect of banking facilities
to related parties, except for the guarantees disclosed in Note 31.
32 RELATED PARTY TRANSACTIONS (Continued)
(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures (Continued)
Note:
(i) Sales of goods represent the sale of crude oil, intermediate petrochemical products, petroleum products and ancillary
materials.
(ii) Purchases represent the purchase of materials and utility supplies directly related to the Group's operations such as
the procurement of raw and ancillary materials and related services, supply of water, electricity and gas.
(iii) Transportation and storage represent the cost for the use of railway, road and marine transportation services,
pipelines, loading, unloading and storage facilities.
(iv) Exploration and development services comprise direct costs incurred in the exploration and development such as
geophysical, drilling, well testing and well measurement services.
(v) Production related services represent ancillary services rendered in relation to the Group's operations such as
equipment repair and general maintenance, insurance premium, technical research, communications, firefighting, security,
product quality testing and analysis, information technology, design and engineering, construction of oilfield ground
facilities, refineries and chemical plants, manufacture of replacement parts and machinery, installation, project
management and environmental protection.
(vi) Ancillary and social services represent expenditures for social welfare and support services such as educational
facilities, media communication services, sanitation, accommodation, canteens, property maintenance and management
services.
(vii) Operating lease charges represent the rental paid to Sinopec Group Company for operating leases in respect of land,
buildings and equipment.
(viii) Agency commission income represents commission earned for acting as an agent in respect of sales of products and
purchase of materials for certain entities owned by Sinopec Group Company.
(ix) Interest income represents interest received from deposits placed with Sinopec Finance Company Limited and Sinopec
Century Bright Capital Investment Limited, finance companies controlled by Sinopec Group Company. The applicable interest
rate is determined in accordance with the prevailing saving deposit rate. The balance of deposits at 30 June 2017 was RMB
45,161 million (2016: RMB 40,073 million).
(x) Interest expense represents interest charges on the loans and advances obtained from Sinopec Group Company and fellow
subsidiaries.
(xi) The Group obtained or repaid loans from or to Sinopec Group Company and fellow subsidiaries.
In connection with the Reorganisation, the Company and Sinopec Group Company entered into a number of agreements under
which 1) Sinopec Group Company will provide goods and products and a range of ancillary, social and supporting services to
the Group and 2) the Group will sell certain goods to Sinopec Group Company. These agreements impacted the operating
results of the Group for the six-month period ended 30 June 2017. The terms of these agreements are summarised as follows:
‧ The Company has entered into a non-exclusive "Agreement for Mutual Provision of Products and Ancillary Services"
("Mutual Provision Agreement") with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group Company has
agreed to provide the Group with certain ancillary production services, construction services, information advisory
services, supply services and other services and products. While each of Sinopec Group Company and the Company is permitted
to terminate the Mutual Provision Agreement upon at least six months notice, Sinopec Group Company has agreed not to
terminate the agreement if the Group is unable to obtain comparable services from a third party. The pricing policy for
these services and products provided by Sinopec Group Company to the Group is as follows:
(1) the government-prescribed price;
(2) where there is no government-prescribed price, the government-guidance price;
(3) where there is neither a government-prescribed price nor a government-guidance price, the market price; or
(4) where none of the above is applicable, the price to be agreed between the parties, which shall be based on a
reasonable cost incurred in providing such services plus a profit margin not exceeding 6%.
‧ The Company has entered into a non-exclusive "Agreement for Provision of Cultural and Educational, Health Care and
Community Services" with Sinopec Group Company effective from 1 January 2000 in which Sinopec Group Company has agreed to
provide the Group with certain cultural, educational, health care and community services on the same pricing terms and
termination conditions as described in the above Mutual Provision Agreement.
‧ The Company has entered into a series of lease agreements with Sinopec Group Company to lease certain lands and
buildings effective on 1 January 2000. The lease term is 40 or 50 years for lands and 20 years for buildings, respectively.
The Company and Sinopec Group Company can renegotiate the rental amount every three years for land. The Company and Sinopec
Group Company can renegotiate the rental amount for buildings every year. However such amount cannot exceed the market
price as determined by an independent third party.
‧ The Company has entered into agreements with Sinopec Group Company effective from 1 January 2000 under which the Group
has been granted the right to use certain trademarks, patents, technology and computer software developed by Sinopec Group
Company.
‧ The Company has entered into a service stations franchise agreement with Sinopec Group Company effective from 1 January
2000 under which its service stations and retail stores would exclusively sell the refined products supplied by the Group.
32 RELATED PARTY TRANSACTIONS (Continued)
(a) Transactions with Sinopec Group Company and fellow subsidiaries, associates and joint ventures (Continued)
Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures included in the following
accounts captions are summarised as follows:
At 30 June At 31 December
2017 2016
RMB million RMB million
Trade accounts receivable 7,594 10,978
Prepaid expenses and other current assets 13,449 13,430
Long-term prepayments and other assets 20,843 20,385
Total 41,886 44,793
Trade accounts payable 11,125 19,419
Accrued expenses and other payables 28,860 21,590
Other long-term liabilities 10,162 9,998
Short-term loans and current portion of long-term loans 22,969 18,580
from Sinopec Group Company and fellow subsidiaries
Long-term loans excluding current portion from Sinopec Group Company 44,832 44,772
and fellow subsidiaries
Total 117,948 114,359
Short-term loans and current portion of long-term loans
from Sinopec Group Company and fellow subsidiaries
22,969
18,580
Long-term loans excluding current portion from Sinopec Group Company
and fellow subsidiaries
44,832
44,772
Total
117,948
114,359
Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates and joint ventures, other than short-term
loans and long-term loans, bear no interest, are unsecured and are repayable in accordance with normal commercial terms.
The terms and conditions associated with short-term loans and long-term loans payable to Sinopec Group Company and fellow
subsidiaries are set out in Note 26.
The long-term borrowings mainly include an interest-free loan with a maturity period of 20 years amounting to RMB 35,560
million from the Sinopec Group Company (a state-owned enterprise) through the Sinopec Finance. This borrowing is a special
arrangement to reduce financing costs and improve liquidity of the Company during its initial global offering in 2000.
As at and for the six-month period ended 30 June 2017, and as at and for the year ended 31 December 2016, no individually
significant impairment losses for bad and doubtful debts were recognised in respect of amounts due from Sinopec Group
Company and fellow subsidiaries, associates and joint ventures.
(b) Key management personnel emoluments
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the Group, directly or indirectly, including directors and supervisors of the Group. The key management
personnel compensation is as follows:
Six-month periods ended 30 June
2017 2016
RMB'000 RMB'000
Short-term employee benefits 2,501 3,066
Retirement scheme contributions 183 268
2,684 3,334
2,684
3,334
(c) Contributions to defined contribution retirement plans
The Group participates in various defined contribution retirement plans organised by municipal and provincial governments
for its staff. The details of the Group's employee benefits plan are disclosed in Note 33. As at 30 June 2017 and 31
December 2016, the accrual for the contribution to post-employment benefit plans was not material.
32 RELATED PARTY TRANSACTIONS (Continued)
(d) Transactions with other state-controlled entities in the PRC
The Group is a state-controlled energy and chemical enterprise and operates in an economic regime currently dominated by
entities directly or indirectly controlled by the PRC government through its government authorities, agencies, affiliations
and other organisations (collectively referred as "state-controlled entities").
Apart from transactions with Sinopec Group Company and fellow subsidiaries, the Group has transactions with other
state-controlled entities, include but not limited to the followings:
‧ sales and purchases of goods and ancillary materials;
‧ rendering and receiving services;
‧ lease of assets;
‧ depositing and borrowing money; and
‧ uses of public utilities.
These transactions are conducted in the ordinary course of the Group's business on terms comparable to those with other
entities that are not state-controlled.
33 EMPLOYEE BENEFITS PLAN
As stipulated by the regulations of the PRC, the Group participates in various defined contribution retirement plans
organised by municipal and provincial governments for its staff. The Group is required to make contributions to the
retirement plans at rates ranging from 17.0% to 24.0% of the salaries, bonuses and certain allowances of its staff. In
addition, the Group provides a supplementary retirement plan for its staff at rates not exceeding 5% of the salaries. The
Group has no other material obligation for the payment of pension benefits associated with these plans beyond the annual
contributions described above. The Group's contributions for the six-month period ended 30 June 2017 were RMB 4,413 million
(2016: RMB 4,113 million).
34 SEGMENT REPORTING
Segment information is presented in respect of the Group's business segments. The format is based on the Group's management
and internal reporting structure.
In a manner consistent with the way in which information is reported internally to the Group's chief operating decision
maker for the purposes of resource allocation and performance assessment, the Group has identified the following five
reportable segments. No operating segments have been aggregated to form the following reportable segments.
(i) Exploration and production, which explores and develops oil fields, produces crude oil and natural gas and sells such
products to the refining segment of the Group and external customers.
(ii) Refining, which processes and purifies crude oil, that is sourced from the exploration and production segment of the
Group and external suppliers, and manufactures and sells petroleum products to the chemicals and marketing and distribution
segments of the Group and external customers.
(iii) Marketing and distribution, which owns and operates oil depots and service stations in the PRC, and distributes and
sells refined petroleum products (mainly gasoline and diesel) in the PRC through wholesale and retail sales networks.
(iv) Chemicals, which manufactures and sells petrochemical products, derivative petrochemical products and other chemical
products mainly to external customers.
(v) Corporate and others, which largely comprises the trading activities of the import and export companies of the Group
and research and development undertaken by other subsidiaries.
The segments were determined primarily because the Group manages its exploration and production, refining, marketing and
distribution, chemicals, and corporate and others businesses separately. The reportable segments are each managed
separately because they manufacture and/or distribute distinct products with different production processes and due to
their distinct operating and gross margin characteristics.
34 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and liabilities
The Group's chief operating decision maker evaluates the performance and allocates resources to its operating segments on
an operating income basis, without considering the effects of finance costs or investment income. Inter-segment transfer
pricing is based on the market price or cost plus an appropriate margin, as specified by the Group's policy.
Assets and liabilities dedicated to a particular segment's operations are included in that segment's total assets and
liabilities. Segment assets include all tangible and intangible assets, except for interest in associates and joint
ventures, investments, deferred tax assets, cash and cash equivalents, time deposits with financial institutions and other
unallocated assets. Segment liabilities exclude short-term, income tax payable, long-term debts, loans from Sinopec Group
Company and fellow subsidiaries, deferred tax liabilities and other unallocated liabilities.
Information of the Group's reportable segments is as follows:
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Turnover
Exploration and production
External sales 33,053 22,960
Inter-segment sales 37,395 26,162
70,448 49,122
Refining
External sales 64,292 49,622
Inter-segment sales 421,539 345,251
485,831 394,873
Marketing and distribution
External sales 589,475 489,025
Inter-segment sales 1,818 1,282
591,293 490,307
Chemicals
External sales 178,665 126,293
Inter-segment sales 22,948 17,415
201,613 143,708
Corporate and others
External sales 272,343 168,896
Inter-segment sales 215,148 143,119
487,491 312,015
Elimination of inter-segment sales (698,848) (533,229)
Turnover 1,137,828 856,796
Other operating revenues
Exploration and production 3,661 3,387
Refining 2,341 2,096
Marketing and distribution 14,667 10,662
Chemicals 6,816 5,478
Corporate and others 524 801
Other operating revenues 28,009 22,424
Turnover and other operating revenues 1,165,837 879,220
Exploration and production
3,661
3,387
Refining
2,341
2,096
Marketing and distribution
14,667
10,662
Chemicals
6,816
5,478
Corporate and others
524
801
Other operating revenues
28,009
22,424
Turnover and other operating revenues
1,165,837
879,220
34 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets and liabilities (Continued)
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Result
Operating (loss)/profit
By segment
- Exploration and production (18,334) (21,929)
- Refining 29,393 32,588
- Marketing and distribution 16,566 15,777
- Chemicals 12,157 9,678
- Corporate and others 739 422
- Elimination (1,212) (1,428)
Total segment operating profit 39,309 35,108
Share of profits/(losses) from associates and joint ventures
- Exploration and production 875 (481)
- Refining 409 1,015
- Marketing and distribution 1,416 869
- Chemicals 4,242 2,547
- Corporate and others 709 648
Aggregate share of profits from associates and joint ventures 7,651 4,598
Investment income/(loss)
- Exploration and production 48 23
- Refining 10 (7)
- Marketing and distribution 48 42
- Chemicals 115 21
- Corporate and others 65 20
Aggregate investment income 286 99
Net finance costs (1,289) (4,284)
Profit before taxation 45,957 35,521
(7)
- Marketing and distribution
48
42
- Chemicals
115
21
- Corporate and others
65
20
Aggregate investment income
286
99
Net finance costs
(1,289)
(4,284)
Profit before taxation
45,957
35,521
At 30 June At 31 December
2017 2016
RMB million RMB million
Assets
Segment assets
- Exploration and production 366,924 402,476
- Refining 259,145 260,903
- Marketing and distribution 295,060 292,328
- Chemicals 139,120 144,371
- Corporate and others 95,730 95,263
Total segment assets 1,155,979 1,195,341
Interest in associates and joint ventures 122,296 116,812
Available-for-sale financial assets 11,325 11,408
Deferred tax assets 9,761 7,214
Cash
- More to follow, for following part double click ID:nRSc0740PnRecent news on China Petroleum & Chemical
See all newsREG - Official List - Removal - China Petroleum & Chemical Corporation
AnnouncementREG - Stock Exch Notice China Pet &Chem Corp - Cancellation - China Petroleum & Chemical Corp
AnnouncementREG - China Pet &Chem Corp - 3rd Quarter Results
AnnouncementREG - China Pet &Chem Corp - Statement re Intention to Delist ADSs from the LSE
AnnouncementREG - China Pet &Chem Corp - Half-year Report
Announcement