REG - China Pet &Chem Corp - Half-year Report <Origin Href="QuoteRef">600028.SS</Origin> - Part 2
29/08/2017 07:07
- Part 2: For the preceding part double click ID:nRSc0740Pa
2017 2016 Change
RMB million (%)
Exploration and Production Segment
Operating revenues 74,109 52,509 41.1
Operating expenses 92,443 74,438 24.2
Operating loss (18,334) (21,929) -
Refining Segment
Operating revenues 488,172 396,969 23.0
Operating expenses 458,779 364,381 25.9
Operating profit 29,393 32,588 (9.8)
Marketing and Distribution Segment
Operating revenues 605,960 500,969 21.0
Operating expenses 589,394 485,192 21.5
Operating profit 16,566 15,777 5.0
Chemicals Segment
Operating revenues 208,429 149,186 39.7
Operating expenses 196,272 139,508 40.7
Operating profit 12,157 9,678 25.6
Corporate and Others
Operating revenues 488,015 312,816 56.0
Operating expenses 487,276 312,394 56.0
Operating profit 739 422 75.1
Elimination of inter-segment
(loss)/profit (1,212) (1,428) -
Corporate and Others
Operating revenues
488,015
312,816
56.0
Operating expenses
487,276
312,394
56.0
Operating profit
739
422
75.1
Elimination of inter-segment
(loss)/profit
(1,212)
(1,428)
-
(1) Exploration and Production Segment
Most of the crude oil and a small portion of the natural gas produced by the exploration and production segment were used
for the Company's refining and chemical operations. Most of the natural gas and a small portion of the crude oil produced
by the Company were sold to external customers.
In the first half of 2017, operating revenues of the segment were RMB 74.1 billion, representing an increase of 41.1% year
on year. This was mainly due to increased crude oil prices and expanded scale of LNG business.
In the first half of 2017, the segment sold 17.61 million tonnes of crude oil, representing a decrease of 5.0%; and 12.26
billion cubic meters of natural gas, representing an increase of 16.0% year on year. The average realised sales prices of
crude oil and natural gas were RMB 2,316 per tonne and RMB 1,276 per thousand cubic meters, representing an increase of
50.5% and 0.1% respectively year on year.
In the first half of 2017, the operating expenses of the segment were RMB 92.4 billion, representing an increase of 24.2%
year on year. This was mainly due to:
‧ Depreciation, depreciation and amortisation increased RMB 5.7 billion year on year;
‧ Oil and gas assets impairment increased RMB 3.5 billion year on year;
‧ LNG business expanded, purchase expense increased RMB 6.1 billion.
In the first half of 2017, the oil and gas lifting cost was RMB 767.3 per tonne, representing an increase of 3.2% year on
year.
In the first half of 2017, the segment applied low-cost development principle throughout its production and operation
processes, and realised good results. Operating loss of this segment was RMB 18.3 billion in the first half of 2017, a
decrease of RMB 3.6 billion compared with the same period of last year.
(2) Refining Segment
Business activities of the refining segment include purchasing crude oil from third parties and the exploration and
production segment of the Company as well as processing crude oil into refined petroleum products. Gasoline, diesel and
kerosene are sold internally to the marketing and distribution segment of the Company; part of the chemical feedstock is
sold to the chemicals segment of the Company; and other refined petroleum products are sold to both domestic and overseas
customers through the refining segment.
In the first half of 2017, operating revenues of the segment were RMB 488.2 billion, representing an increase of 23.0% year
on year. This was mainly attributable to increased prices of products.
The following table sets forth the sales volumes, average realised prices and the respective changes of the Company's major
refined oil products of the segment in the first half of 2017 and of 2016.
Average realised price
Sales Volume (thousand tonnes) (VAT excluded, RMB/tonne)
Six-month periodsended 30 June Change Six-month periodsended 30 June Change
2017 2016 (%) 2017 2016 (%)
Gasoline 26,723 26,010 2.7 6,611 5,704 15.9
Diesel 28,322 28,398 (0.3) 5,070 4,319 17.4
Kerosene 7,403 7,071 4.7 3,579 2,505 42.9
Chemical feedstock 18,024 17,766 1.5 3,197 2,394 33.5
Other refined petroleum products 28,645 27,545 4.0 2,844 2,338 21.6
17,766
1.5
3,197
2,394
33.5
Other refined petroleum products
28,645
27,545
4.0
2,844
2,338
21.6
In the first half of 2017, the sales revenues of gasoline were RMB 176.7 billion, representing an increase of 19.1% year on
year, accounting for 36.2% of the segment's operating revenue.
In the first half of 2017, the sales revenues of diesel were RMB 143.6 billion, representing an increase of 17.1% year on
year, accounting for 29.4% of the segment's operating revenue.
In the first half of 2017, the sales revenues of kerosene were RMB 26.5 billion, representing an increase of 49.6% year on
year, accounting for 5.4% of the segment's operating revenue.
In the first half of 2017, the sales revenues of chemical feedstock were RMB 57.6 billion, representing an increase 35.5%
year on year, accounting for 11.8% of the segment's operating revenue.
In the first half of 2017, the sales revenues of refined petroleum products other than gasoline, diesel, kerosene and
chemical feedstock were RMB 81.5 billion, representing an increase of 26.6% year on year, accounting for 16.7% of the
segment's operating revenue.
In the first half of 2017, the segment's operating expenses were RMB 458.8 billion, representing an increase of 25.9% year
on year, which was mainly attributable to increased purchase costs of crude oil.
In the first half of 2017, the average cost of processed crude oil was RMB 2,790 per tonne, representing an increase of
42.0% year on year. Total crude oil throughput was 110.67 million tonnes (excluding volume processed for third parties),
representing an increase of 1.7% year on year. In the first half of 2017, the total cost of crude oil processed was RMB
308.8 billion, representing an increase of 44.4% year on year, accounting for 67.3% of the segment's operating expenses, an
increase of 8.6 percentage points year on year.
In the first half of 2017, the unit refining cash operating cost (defined as operating expenses less cost of crude oil and
refining feedstock, depreciation and amortisation, taxes other than income tax and other operating expenses, divided by the
throughput of crude oil and refining feedstock) was RMB 168.2 per tonne, representing an increase of 2.5% year on year,
which was mainly attributable to increased operating cost associated with oil products quality upgrading.
In the first half of 2017, the refining margin (defined as sales revenues less crude oil and refining feedstock costs and
taxes other than income tax, divided by the throughput of crude oil and refining feedstock) was RMB 473.7 per tonne,
representing a decrease of 7.9% year on year.In the first of 2016, crude oil prices dropped below the lower threshold
prescribed in the domestic refined oil product pricing mechanism for some period, and domestic refined oil prices were not
cut during the corresponding period. In the first half of 2017, such phenomenon did not occurred, as the result the prices
spread between products and feedstock narrowed compared with the same period of 2017.
Despite the above situations, the segment managed to improve its refining margin by advancing oil products quality
upgrading and optimising product mix. In the first half of 2017, the segment realised an operating profit of RMB 29.4
billion, representing a decrease of RMB 3.2 billion year on year.
(3) Marketing and Distribution Segment
The business activities of the marketing and distribution segment include purchasing refined oil products from the refining
segment and the third parties, conducting direct sales and wholesale to domestic customers and retailing, distributing oil
products through the segment's retail and distribution network, as well as providing related services.
In the first half of 2017, the operating revenues of the segment were RMB 606.0 billion, increased by 21.0% year on year.
This was mainly due to the increasing refined oil products prices and sales revenues.
In the first half of 2017, the sales revenues of gasoline were RMB 288.5 billion, representing an increase of 20.6% year on
year; the sales revenue of diesel was RMB 220.6 billion, up by 11.3% year on year and the sales revenue of kerosene was RMB
45.2 billion, up by 47.9% year on year.
The following table sets forth the sales volumes, average realised prices and respective percentage changes of the
segment's four major refined oil products in the first half of 2017 and 2016, including detailed information about retail,
direct sales and wholesale of gasoline and diesel:
Average realised price
Sales Volume (thousand tonnes) (VAT excluded, RMB/tonne)
Six-month periodsended 30 June Change Six-month periodsended 30 June Change
2017 2016 (%) 2017 2016 (%)
Gasoline 41,413 38,806 6.7 6,966 6,165 13.0
Retail 32,701 31,608 3.5 7,364 6,505 13.2
Direct sales and Wholesale 8,712 7,198 21.0 5,470 4,672 17.1
Diesel 45,107 46,378 (2.7) 4,890 4,274 14.4
Retail 20,954 23,119 (9.4) 5,595 4,898 14.2
Direct sales and Wholesale 24,153 23,259 3.8 4,278 3,653 17.1
Kerosene 12,748 12,241 4.1 3,547 2,497 42.1
Fuel oil 11,808 11,201 5.4 2,218 1,476 50.3
3.8
4,278
3,653
17.1
Kerosene
12,748
12,241
4.1
3,547
2,497
42.1
Fuel oil
11,808
11,201
5.4
2,218
1,476
50.3
In the first half of 2017, the operating expenses of the segment were RMB 589.4 billion, representing an increase of 21.5%
year on year. This was mainly due to increased procurement costs of gasoline, diesel and kerosene.
In the first half of 2017, the segment's marketing cash operating cost (defined as the operating expenses less the purchase
costs, taxes other than income tax, depreciation and amortisation, divided by the sales volume) was RMB 182.2 per tonne,
representing a decrease of 1.2% year on year. This was mainly due to expansion of total sales volume of refined oil
products.
In the first half of 2017, the total sales volume and margin of refined oil products increased as a result of the segment
efforts in expanding market. The segment's operating profit was RMB 16.6 billion, representing an increase of RMB 0.8
billion year on year.
(4) Chemicals Segment
Business activities of the chemicals segment include purchasing chemical feedstock from the refining segment and the third
parties and producing, marketing and distributing petrochemical and inorganic chemical products.
In the first half of 2017, operating revenues of the chemicals segment were RMB 208.4 billion, representing an increase of
39.7% year on year, which was mainly due to significantly increased chemical products prices and sales volume year on
year.
The sales revenue generated by the segment's six major categories of chemical products (namely basic organic chemicals,
synthetic fibre monomer and polymer, synthetic resin, synthetic fibre, synthetic rubber, and chemical fertiliser) totaled
RMB 196.6 billion, representing an increase of 40.0% year on year, accounting for 94.3% of the operating revenues of the
segment.
The following table sets forth the sales volume, average realised price and respective changes of each of the segment's six
categories of chemical products in for the first half of 2017 and 2016.
Average realised price
Sales Volume (thousand tonnes) (VAT excluded, RMB/tonne)
Six-month periodsended 30 June Change Six-month periodsended 30 June Change
2017 2016 (%) 2017 2016 (%)
Basic organic chemicals 21,599 19,162 12.7 4,755 3,765 26.3
Synthetic fibre monomer and 5,050 3,314 52.4 5,956 5,111 16.5
polymer
Synthetic resin 6,311 5,902 6.9 7,993 7,043 13.5
Synthetic fibre 638 666 (4.2) 8,317 6,949 19.7
Synthetic rubber 553 519 6.6 13,465 8,814 52.8
Chemical fertiliser 321 344 (6.7) 1,956 1,541 26.9
Synthetic rubber
553
519
6.6
13,465
8,814
52.8
Chemical fertiliser
321
344
(6.7)
1,956
1,541
26.9
In the first half of 2017, the operating expenses of the segment were RMB 196.3 billion, representing an increase of 40.7%
year on year, which was mainly due to a significant increase of feedstock prices.
The segment's operating profit in the first half of 2017 was RMB 12.2 billion, representing an increase of 25.6% year on
year.
(5) Corporate and Others
The business activities of corporate and others mainly consist of import and export business activities of the Company's
subsidiaries, research and development activities of the Company, and managerial activities of the headquarters.
In the first half of 2017, the operating revenues generated from Corporate and Others were RMB 488.0 billion, representing
an increase of 56.0% year on year, of which, sales revenues from trading of crude oil, refined oil products and other
products amounted to RMB 486.6 billion. This was mainly due to increased crude oil prices.
In the first half of 2017, the operating expenses for corporate and others were RMB 487.3 billion, representing an increase
of 56.0% year on year, of which, trading expenses of crude oil, refined oil products and other products generated by the
trading subsidiaries of the Company amounted to RMB 483.9 billion.
In the first half of 2017, the segment's operating profit amounted to RMB 0.7 billion, of which, operating profit realised
by the specialised subsidiaries such as trading companies was RMB 2.7billion, R&D expenses and headquarters expenses
totaled RMB 2.0 billion.
3 ASSETS, LIABILITIES, EQUITY AND CASH FLOWS
(1) Assets, liabilities and equity
Unit: RMB million
As of As of
30 June 31 December
2017 2016 Change
Total assets 1,487,538 1,498,609 (11,071)
Current assets 434,159 412,261 21,898
Non-current assets 1,053,379 1,086,348 (32,969)
Total liabilities 642,947 667,374 (24,427)
Current liabilities 462,409 485,543 (23,134)
Non-current liabilities 180,538 181,831 (1,293)
Total equity attributable to owners of the Company 717,689 710,994 6,695
Share capital 121,071 121,071 -
Reserves 596,618 589,923 6,695
Non-controlling Interests 126,902 120,241 6,661
Total equity 844,591 831,235 13,356
121,071
-
Reserves
596,618
589,923
6,695
Non-controlling Interests
126,902
120,241
6,661
Total equity
844,591
831,235
13,356
As of 30 June 2017, the Company's total assets were RMB 1,487.5 billion, representing a decrease of RMB 11.1 billion
compared with that at the end of 2016, of which:
‧ Current assets were RMB 434.2 billion, representing an increase of RMB 21.9 billion compared with that at the end of
2016. This was mainly attributable to: cash and cash equivalents and time deposits with financial institutions increased by
RMB 18.3 billion, inventories increased by RMB 10.5 billion, bills receivable decreased by RMB 3.4 billion, prepaid
expenses and other current assets decreased by RMB 3.9 billion.
‧ Non-current assets were RMB 1,053.4 billion, representing a decrease of RMB 33.0 billion compared with that of the end
of 2016. The change was mainly due to: a decrease of RMB 38.3 billion in depreciation, amortisation and etc. of property,
plant and equipment, a decrease of RMB 10.0 billion in construction in progress; an increase of RMB 5.5 billion in
interests in associates and joint ventures, an increase of RMB 2.5 billion in deferred tax assets, an increase of RMB 7.7
billion in long-term prepayment and other non-current assets.
As of 30 June 2017, the Company's total liabilities were RMB 642.9 billion, representing a decrease of RMB 24.4 billion
compared with that at the end of 2016, of which:
‧ Current liabilities were RMB 462.4 billion, representing a decrease of RMB 23.1 billion compared with that at the end
of 2016, of which, short-term debts and loans from Sinopec Group Company and fellow subsidiaries decreased by RMB 7.9
billion, accrued expenses and other payables decreased by RMB 10.5 billion, trade accounts payable decreased by RMB 4.2
billion.
‧ Non-current liabilities were RMB 180.5 billion, representing a decrease of RMB 1.3 billion compared with that at the
end of 2016, of which, long-term debts decreased by RMB 1.7 billion, deferred tax liabilities decreased by RMB 1.5 billion,
provisions increased by RMB 0.9 billion and other non-current liabilities increased by RMB 0.9 billion.
As of 30 June 2017, total equity attributable to owners of the Company was RMB 717.7 billion, representing an increase of
RMB 6.7 billion compared with that of the end of 2016, which was mainly due to an increase of RMB 6.7 billion in reserves.
(2) Cash Flow
The following table sets forth the major items in the consolidated cash flow statements for the first half of 2017 and of
2016.
Unit: RMB million
Six-month periods ended 30 June Changes
Major items of cash flows 2017 2016 in amount
Net cash generated from operating activities 60,847 76,112 (15,265)
Net cash used in investing activities (40,002) (26,059) (13,943)
Net cash used in from financing activities (16,038) (45,930) 29,892
Net increase in cash and cash equivalents 4,807 4,123 684
29,892
Net increase in cash and cash equivalents
4,807
4,123
684
In the first half of 2017, net cash generated from operating activities was RMB 60.8 billion, representing a decrease of
RMB 15.3 billion in net cash inflow year on year.This was mainly due to the payments of deferred tax of RMB 21.0 billion in
the first half of this year.
In the first half of 2017, net cash used in investing activities was RMB 40.0 billion, representing an increase of RMB 13.9
billion in cash outflow year on year. The change was mainly attributable to the net increase of time deposits over three
months by RMB 10.7 billion.
In the first half of 2017 net cash used in financing activities was RMB 16.0 billion, representing a decrease of cash
outflow of RMB 29.9 billion year on year. This was mainly due to net debt payments decreased by RMB 20.6 billion, as well
as the distribution time difference of final cash dividend decreased cash outflow by RMB 7.3 billion as compared with the
corresponding period last year.
(3) Contingent Liabilities
Please refer to "Material Guarantee Contracts and Their Performances" in the "Significant Events" section of this report.
(4) Capital Expenditures
Please refer to "Capital Expenditures" in the "Business Review and Prospects" section of this report.
(5) Research & Development expenses
Research and Development expenses are identified as confirmed expenses which occurred in the reporting period. In the first
half of 2017, the Company's research and development expenses amounted to RMB 2.672 billion.
4 ANALYSIS OF FINANCIAL STATEMENTS PREPARED UNDER ASBE
The major differences between the Company's financial statements prepared under ASBE and IFRS are set out in Section C of
the financial statements of the Company from page 155 in this report.
(1) Under ASBE, the operating income and operating profit or loss by reportable segments were as follows:
Six-month periods ended 30 June
2017 2016
RMB million RMB million
Operating income
Exploration and Production Segment 74,109 52,509
Refining Segment 488,172 396,969
Marketing and Distribution Segment 605,960 500,969
Chemicals Segment 208,429 149,186
Corporate and Others 488,015 312,816
Elimination of inter-segment sales (698,848) (533,229)
Consolidated operating income 1,165,837 879,220
Operating profit/(loss)
Exploration and Production Segment (18,799) (22,293)
Refining Segment 28,320 32,176
Marketing and Distribution Segment 15,977 15,056
Chemicals Segment 11,917 9,473
Corporate and Others 259 71
Elimination of inter-segment sales (1,212) (1,428)
Financial expenses, gain from changes in fair value and investment income 7,232 1,223
Other income 1,321 -
Consolidated operating profit 45,015 34,278
Net profit attributable to equity shareholders of the Company 27,092 19,250
71
Elimination of inter-segment sales
(1,212)
(1,428)
Financial expenses, gain from changes in fair value and investment income
7,232
1,223
Other income
1,321
-
Consolidated operating profit
45,015
34,278
Net profit attributable to equity shareholders of the Company
27,092
19,250
Operating profit: In the first half of 2017, the operating profit of the Company was RMB 45.0 billion, representing an
increase of 31.3% year on year. This was mainly due to that the Company actively responded to volatile market situations,
put our efforts on cost reduction, structure adjustment and quality upgrading, and achieved good operation performance.
Net profit: In the first half of 2017, net profit attributable to the equity shareholders of the Company was RMB 27.1
billion, representing an increase of 40.7% year on year.
(2) Financial data prepared under ASBE:
At 30 June At 31 December
2017 2016 Changes
RMB million RMB million RMB million
Total assets 1,487,538 1,498,609 (11,071)
Non-current liabilities 179,303 180,541 (1,238)
Shareholders' equity 845,826 832,525 13,301
Shareholders' equity
845,826
832,525
13,301
Total assets: As of 30 June 2017, the Company's total assets were RMB 1,487.5 billion, representing a decrease of RMB 11.1
billion compared with that of the end of 2016, of which, cash at bank and in hand, inventories, and long-term equity
investment increased by RMB 18.3 billion, 10.5 billion and 5.5 billion respectively, fixed assets and construction in
progress decreased by RMB 48.3 billion.
Non-current liabilities: As of 30 June 2017, the Company's non-current liabilities were RMB 179.3 billion, decreased by RMB
1.2 billion from that at the end of 2016, of which, long-term loans increased by RMB 5.6 billion, and bonds payable
decreased by RMB 7.2 billion.
Shareholders' equity: As of 30 June 2017, total shareholders' equity of the Company was RMB 845.8 billion, representing an
increase of RMB 13.3 billion compared with that at the end of 2016, of which, retained earnings increased by RMB 6.5
billion and minority interest increased by RMB 6.7 billion.
(3) The results of the principal operations by segments
Increase/ Increase/ Increase/
(decrease) of (decrease) of (decrease) of
operating operating gross profit
Operating Gross profit income on cost on margin on
income Operating cost margin* a year-on-year a year-on-year a year-on-year
Segments (RMB million) (RMB million) (%) basis (%) basis (%) basis (%)
Exploration and Production 74,109 72,976 (4.3) 41.1 24.5 11.3
Refining 488,172 339,859 8.1 23.0 39.2 (3.0)
Marketing and Distribution 605,960 559,971 7.3 21.0 22.2 (1.0)
Chemicals 208,429 184,500 10.7 39.7 43.9 (2.8)
Corporate and Others 488,015 482,932 1.0 56.0 56.9 (0.6)
Elimination of (698,848) (697,636) N/A N/A N/A N/A
inter-segment sales
Total 1,165,837 942,602 9.2 32.6 41.7 (2.3)
56.9
(0.6)
Elimination of
inter-segment sales
(698,848)
(697,636)
N/A
N/A
N/A
N/A
Total
1,165,837
942,602
9.2
32.6
41.7
(2.3)
* Gross profit margin = (Operating income - Operating cost, tax and surcharges)/Operating income
5 REASONS AND EFFECTS OF ACCOUNTING POLICY CHANGE
On 25 May 2017, Ministry of Finance issued Amendment to "Accounting Standards for Business Enterprises No. 16 - Government
Grants", effective from 12 June 2017. An entity shall apply the amendment to new government grants incurred from 1 January
2017 up to the effective date.
In accordance with the above amendment, an item "other income" is separately presented before the item "operating income"
in the Consolidated Income Statement, which reflects the relevant government grants received during enterprise's daily
activities (such business was presented in "non-operating income" before the amendment takes effect).
SIGNIFICANT EVENTS
1 CORPORATE GOVERNANCE
(1) During the reporting period, Sinopec Corp. committed itself to fully complying with domestic and overseas laws and
regulations on securities and continuously improving its corporate governance. It timely adjusted the compositions of the
Board and board of supervisors based on personnel changes, amended its Articles of Association, Rules and Procedures for
Board of Directors' Meetings and the internal control procedures. The independent directors fulfilled their duties
diligently and exerted a positive influence. The improvement of the investor relations and information disclosure quality
earned the capital market's recognition. Sinopec Corp. actively participated in the UN Global Compact activities and
achieved positive results.
During the reporting period, on 28 June 2017, Sinopec Corp. convened 2016 Annual General Meeting, 2017 First A Shareholders
Class Meeting and 2017 First H Shareholders Class Meeting in Beijing, China in accordance with relevant laws, regulations
and the notice, convening and holding procedures under the Articles of Association. For the details of the meetings, please
refer to the poll results announcement published in China Securities Journal, Shanghai Securities News, and Securities
Times on 29 June 2017 and on the websites of Hong Kong Stock Exchange on 28 June 2017.
(2) During the reporting period, none of Sinopec Corp., the Board, directors, supervisors, senior management, controlling
shareholders, or de facto controllers of Sinopec Corp. was investigated by the CSRC, administratively punished or publicly
reprimanded by the CSRC, the Hong Kong Securities and Futures Commission, and the Securities and Exchange Commission of the
United States, or public censured by the Shanghai Stock Exchange, the Hong Kong Stock Exchange, the New York Stock
Exchange, or the London Stock Exchange.
(3) Equity interests of directors, supervisors, and other senior management
As of 30 June 2017, apart from 13,000 A shares of Sinopec Corp. held by Vice President Mr. Ling Yiqun, none of the
directors, supervisors, or other senior management of Sinopec Corp. held any shares of Sinopec Corp.
Save as disclosed above, the directors, supervisors or other senior management of Sinopec Corp. confirmed that none of them
had any interest or short positions in any shares, underlying shares or debentures of Sinopec Corp. or any of its
associated corporations (within the meaning of Part XV of the SFO), as recorded in the registry pursuant to Section 352 of
the SFO or as otherwise notified to Sinopec Corp. and the Hong Kong Stock Exchange pursuant to the Model Code for
Securities Transactions by Directors of Listed Companies (Model Code) contained in Appendix 10 to the Hong Kong Listing
Rules.
As required by the Hong Kong Stock Exchange, Sinopec Corp. has formulated the Rules Governing Shares and Changes in Shares
Held by Company Directors, Supervisors and Senior Management and the Model Code of Securities Transactions by Company
Employees (the Rules and the Code) to stipulate securities transaction by relevant employees. The standards of the Rules
and the Code are no less strict than those set out in the Model Code. Upon the specific inquiries made by Sinopec Corp.,
all the directors confirmed that they had complied with the required standards of the Model Code as well as those set out
in the Rules and the Code during the reporting period.
(4) Compliance with the Corporate Governance Code
Based on its actual situations, Sinopec Corp. did not establish a nomination committee under the Board in accordance with
A.5 of the code provisions set out in the Corporate Governance Code and Corporate Governance Report (Corporate Governance
Code) contained in Appendix 14 of the Hong Kong Listing Rules. Sinopec Corp. is of the view that the director candidates
nominated by all the members of the Board will better serve Sinopec Corp.'s operation. The Board will perform the duties of
the nomination as the nomination committee under the Corporate Governance Code.
Save as disclosed above, during the reporting period, Sinopec Corp. have complied with all the code provisions set out in
the Corporate Governance Code.
(5) Review of the Interim Report
The Audit Committee of Sinopec Corp. has reviewed and confirmed the Interim Report.
2 DIVIDEND
(1) Dividend distribution for the year ended 31 December 2016
Upon the approval at its 2016 Annual General Meeting, the final cash dividend of Sinopec Corp. for 2016 was RMB 0.17 per
share (tax inclusive). The final dividend for 2016 has been distributed on or before 28 July 2017 to shareholders who were
registered as existing shareholders as at 18 July 2017. Combined with the 2016 interim cash dividend of RMB 0.079 per share
(tax inclusive), the total cash dividend for 2017 amounted to RMB 0.249 per share (tax inclusive).
(2) Interim dividend distribution plan for the six months ended 30 June 2017
As approved at the 14th meeting of the sixth session of the Board, the interim dividend for the six months ended 30 June
2017 of RMB 0.10 per share (tax inclusive) will be distributed based on the total number of shares as of 19 September 2017
(record date) in cash.
The 2017 interim dividend distribution plan, with the consideration of interest of shareholders and development of the
Company, is in compliance with the Articles of Association and relevant procedures. The independent non-executive directors
have issued independent opinions on it.
The interim cash dividend will be distributed on or before 29 September 2017 (Friday) to all shareholders whose names
appear on the register of members of Sinopec Corp. on 19 September 2017 (Tuesday). To be entitled to the interim dividend,
holders of H shares shall lodge their share certificates and transfer documents for registration with Hong Kong Registrars
Limited at 1712-1716, 17th floor, Hopewell Centre, No. 183 Queen's Road East, Wanchai, Hong Kong, no later than 4:30 p.m.
on 12 September 2017 (Tuesday). The register of members of the H shares of Sinopec Corp. will be closed from 13 September
2017 (Wednesday) to 19 September 2017 (Tuesday) (both days inclusive).
The dividend will be denominated and declared in RMB and distributed to domestic shareholders and Shanghai-Hong Kong Stock
Connect shareholders in RMB and to foreign shareholders in Hong Kong Dollars. The exchange rate for dividend to be paid in
Hong Kong dollars is based on the average benchmark exchange rate of RMB against Hong Kong Dollar as published by the
People's Bank of China one week ahead of the date of declaration of the interim dividend, i.e. 25 August 2017 (Friday).
In accordance with the Enterprise Income Tax Law of the People's Republic of China and its implementation regulations which
came into effect on 1 January 2008, Sinopec Corp. is required to withhold and pay enterprise income tax at the rate of 10%
on behalf of the non-resident enterprise shareholders whose names appear on the register of members for H Shares of Sinopec
Corp. when distributing the cash dividends to them. Any H Shares of the Sinopec Corp. registered not under the name of an
individual shareholder, including HKSCC Nominees Limited, other nominees, agents or trustees, or other organisations or
groups, shall be deemed as shares held by non-resident enterprise shareholders. Therefore, enterprise income tax shall be
withheld from dividends payable to such shareholders. If holders of H Shares intend to change their shareholder status,
they should enquire about the relevant procedures from their agents or trustees. Sinopec Corp. will withhold and pay
enterprise income tax on behalf of the relevant shareholders based on the register of members for H shares of Sinopec Corp.
as at the record date in accordance with the laws or the requirements of relevant government authorities.
Where the individual holders of the H shares are residents of Hong Kong, Macau or a country which had an agreed tax rate of
10% for cash dividends to them with China under relevant tax agreement, Sinopec Corp. should withhold and pay individual
income tax on behalf of the relevant shareholders at a rate of 10%. Where the individual holders of the H Shares are
residents of a country which had an agreed tax rate of less than 10% with China under relevant tax agreement, Sinopec Corp.
shall withhold and pay individual income tax on behalf of the relevant shareholders at a rate of 10%. In that case, if the
relevant individual holders of the H Shares wish to reclaim the extra amount withheld (Extra Amount) by the application of
10% tax rate, Sinopec Corp. can apply for the relevant agreed preferential tax treatment provided that the relevant
shareholders submit the evidence required by the notice of the tax agreement to the share register for H shares of Sinopec
Corp. Sinopec Corp. will assist with the tax refund after the approval of the competent tax authority. Where the individual
holders of the H Shares are residents of a country which has an agreed tax rate of over 10% but less than 20% with China
under the tax agreement, Sinopec Corp. shall withhold and pay the individual income tax at the agreed actual rate in
accordance with relevant tax agreements. Where the individual holders of the H Shares are residents of a country which has
an agreed tax rate of 20% with China, or has not entered into any tax agreement with China, or under any other
circumstances, Sinopec Corp. shall withhold and pay the individual income tax at a rate of 20%.
Pursuant to the Notice on the Tax Policies Related to the Pilot Program of the Shanghai-Hong Kong Stock Connect
(關於滬港股票市場交易互聯互通機制試點有關稅收政策的通知) (Caishui 2014 No. 81):
For domestic investors of H Shares of Sinopec Corp. through Shanghai-Hong Kong Stock Connect, Sinopec Corp. shall withhold
and pay income tax at the rate of 20% on behalf of individual investors and securities investment funds. Sinopec Corp. will
not withhold or pay the income tax of dividends for domestic enterprise investors and those domestic enterprise investors
shall report and pay the relevant tax themselves.
For investors in the Hong Kong Stock Exchange (including enterprises and individuals) of A Shares of Sinopec Corp. through
Shanghai-Hong Kong Stock Connect Program, the Company will withhold and pay income taxes at the rate of 10% on behalf of
those investors and will report to the tax authorities for the withholding. For investors who are tax residents of other
countries, whose country of domicile is a country having entered into a tax treaty with the PRC stipulating a dividend tax
rate of lower than 10%, the enterprises and individuals may, or may entrust a withholding agent to, apply to the competent
tax authorities for the entitlement of the rate under such tax treaty. Upon approval by the tax authorities, the amount
paid in excess of the tax payable based on the tax rate under such tax treaty will be refunded.
3 RESOLUTIONs ON THE PLAN OF OVERSEAS LISTING OF SINOPEC MARKETING CO., LTD.
On 27 April 2017, the 13th meeting of sixth session of Board considered and approved the resolution on the plan of overseas
listing of Sinopec Marketing Co., Ltd. and other relevant resolutions. On 28 June 2017, the aforesaid resolutions were
considered and approved on the annual general meeting for 2016, the first A shareholders class meeting for 2017 and the
first H shareholders class meeting for 2017, respectively. For more details, please refer to the announcements published in
China Securities Journal, Shanghai Securities News and Securities Times by Sinopec Corp. on 28 April 2017 and 29 June 2017
respectively, as well as announcements on the website of the Hong Kong Stock Exchange on 27 April 2017 and 28 June 2017
respectively.
4 acquisition of SHAREHOLDINGS OF SHANGHAI SECCO by GAOQIAO PETROCHEMICAL, A SUBSIDIARY OF SINOPEC CORP.
On 27 April 2017, Sinopec Corp., Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd. (Gaoqiao Petrochemical) and BP Chemicals
East China Investments Limited (BP Chemicals) entered into an equity interest purchase agreement. Pursuant to the
agreement, Gaoqiao Petrochemical purchased 50% shareholdings of Shanghai SECCO Petrochemical Company Limited (Shanghai
Secco) from BP Chemicals (Acquisition) and Sinopec Corp., as the controlling shareholder of Gaoqiao Petrochemical, shall
use its commercially reasonable endeavor to procure the completion of the Acquisition. Upon the completion of the
Acquisition, Shanghai Secco will be held as to 50% by Gaoqiao Petrochemical, 30% by Sinopec Corp. and 20% by Sinopec
Shanghai Petrochemical Company Limited. For more details, please refer to the announcement published in China Securities
Journal, Shanghai Securities News and Securities Times by Sinopec Corp. on 28 April 2017 and the announcement on the
website of Hong Kong Stock Exchange on 27 April 2017.
5 MAJOR PROJECTS
(1) Fuling shale gas project
Under the guidance of "overall deployment and stage-wise implementation", the second phase of production capacity building
was promoted comprehensively in 2017. The Company's self-owned fund accounts for 50% of the project investment, bank loans
are the main source for the remaining 50%. As of 30 June 2017, the cumulative realised investment was RMB 29.4 billion with
production capacity of 7 billion cubic meters per year completed.
(2) Tianjin LNG project
The Tianjin LNG project with designed receiving capacity of 3 million tonnes per year consists mainly of the construction
of wharf, terminal and transportation pipelines. It is expected to be completed and in operation in December 2017. The
Company's self-owned fund accounts for 40% of the project investment, bank loans are the main source for the remaining 60%.
As of 30 June 2017, the cumulative realised investment was RMB 9.3 billion.
(3) Zhongke integrated refining and petrochemical project
Zhongke integrated refining and petrochemical project consists mainly of a 10 million tonnes per year refinery, 800
thousand tonnes per year ethylene project, a wharf with crude oil receiving capacity of 300 thousand tonnes per year and
relevant utilities. The mechanical completion is expected to be achieved in June 2020. The Company's self-owned fund
accounts for 40% of the project investment, bank loans are the main source for the remaining 60%. As of 30 June 2017, the
cumulative realised investment was RMB 4.8 billion.
6 CORPORATE BONDS ISSUED AND INTEREST PAYMENTS
Basic information of corporate bonds
Bond name Sinopec Corp2010 Corporate bond Sinopec Corp2012 Corporate bond Sinopec Corp.2015 Corporate bond (first issue)
Abbreviation 10石化02 12石化01 12石化02 15石化01 15石化02
Code 122052 122149 122150 136039 136040
Issuance date 21 May 2010 1 June 2012 19 November 2015
Maturity date 21 May 2020 1 June 2017 1 June 2022 19 November 2018 19 November 2020
Amount issued (RMB billion) 9 13 7 16 4
Outstanding balance (RMB billion) 9 0 7 16 4
Interest rate (%) 4.05 4.26 4.90 3.3 3.7
Principal and interest repayment Simple interest is calculated and paid on an annual basis without compounding
interests. The principal will be paid at maturity with last installment of interest.
Payment of interests Sinopec Corp. had paid in full the interest accrued of "10石化02", "12石化01" and
"12石化02" during the reporting period, among which Bond "12石化01" had been repaid and
delisted from the Shanghai Stock Exchange.
Investor Qualification Arrangement 15石化01 and 15石化02 were publicly offered to qualified investors in accordance with
Administration of the Issuance and Trading of Corporate Bonds
Listing place Shanghai Stock Exchange
Corporate bonds trustee China International Capital Corporation Limited
27th-28th Floor, China World Office 2, 1 Jianguomenwai Avenue, Chaoyang District,
Beijing
Huang Xu, Zhai Ying
(010) 6505 1166
Credit rating agency United Credit ratings Co., Ltd.
12th Floor, PICC building, No. 2 Jianguomenwai Avenue, Chaoyang District, Beijing
Use of proceeds Proceeds from the above-mentioned corporate bonds have been used for their designated
purpose disclosed in the relevant announcements. All the proceeds have been
completely used.
Credit rating agency During the reporting period, United Credit ratings Co., Ltd. provided continuing
credit rating for 10石化02, 12石化01, 12石化02, 15石化01 and 15石化02 and reaffirmed AAA credit
rating in the continuing credit rating report dated 25 May 2017. The long term credit
rating of Sinopec Corp. remained AAA with its outlook being stable. The aforesaid
credit rating results have no changes compared with last year.
Credit addition mechanism, repayment schemeand other relative events for corporate During the reporting period, there is no credit addition mechanism and change of the
bondsduring the reporting period repayment arrangement for the above-mentioned corporate bonds Sinopec Corp. strictly
followed the provisions in the corporate bond prospectus to repay principals and
interests of the corporate bonds.
Convening of corporate bond holders' meeting During the reporting period, the bondholders' meeting was not convened.
Performance of corporate bonds trustee During the durations of the above-mentioned bonds, the bond trustee, China
International Capital Corporation Limited, has strictly followed the Bond Trustee
Management Agreement and continuously tracked the company's credit status,
utilisation of bond proceeds and repayment of principals and interests of the bond.
The bond trustee has also advised the company to fulfill obligations as described in
the corporate bond prospectus and exercised its duty to protect the bondholders'
legitimate rights and interests. The bond trustee disclosed the Trustee Management
Affairs Report. The full disclosure is available on the website of Shanghai Stock
Exchange (http://www.sse.com.cn)
27th-28th Floor, China World Office 2, 1 Jianguomenwai Avenue, Chaoyang District, Beijing
Huang Xu, Zhai Ying
(010) 6505 1166
Credit rating agency
United Credit ratings Co., Ltd.
12th Floor, PICC building, No. 2 Jianguomenwai Avenue, Chaoyang District, Beijing
Use of proceeds
Proceeds from the above-mentioned corporate bonds have been used for their designated purpose disclosed in the relevant
announcements. All the proceeds have been completely used.
Credit rating agency
During the reporting period, United Credit ratings Co., Ltd. provided continuing credit rating for 10石化02, 12石化01, 12石化02,
15石化01 and 15石化02 and reaffirmed AAA credit rating in the continuing credit rating report dated 25 May 2017. The long term
credit rating of Sinopec Corp. remained AAA with its outlook being stable. The aforesaid credit rating results have no
changes compared with last year.
Credit addition mechanism, repayment schemeand other relative events for corporate
bondsduring the reporting period
During the reporting period, there is no credit addition mechanism and change of the repayment arrangement for the
above-mentioned corporate bonds Sinopec Corp. strictly followed the provisions in the corporate bond prospectus to repay
principals and interests of the corporate bonds.
Convening of corporate bond holders' meeting
During the reporting period, the bondholders' meeting was not convened.
Performance of corporate bonds trustee
During the durations of the above-mentioned bonds, the bond trustee, China International Capital Corporation Limited, has
strictly followed the Bond Trustee Management Agreement and continuously tracked the company's credit status, utilisation
of bond proceeds and repayment of principals and interests of the bond. The bond trustee has also advised the company to
fulfill obligations as described in the corporate bond prospectus and exercised its duty to protect the bondholders'
legitimate rights and interests. The bond trustee disclosed the Trustee Management Affairs Report. The full disclosure is
available on the website of Shanghai Stock Exchange (http://www.sse.com.cn)
Principal accounting data and financial indicators as of 30 June 2017
As of 30 June As of 31 December
Principal data 2017 2016 Change Reasons for change
Current ratio 0.94 0.85 0.09 Due to the increase of deposits and decrease of short-term debts
Quick ratio 0.58 0.53 0.05 Due to the increase of deposits and decrease of short-term debts
Liability-to-asset ratio 43.14% 44.45% (1.31) Due to the decrease of interest-bearing debts
percentage points
Loan repayment rate 100% 100% -
44.45%
(1.31)
percentage points
Due to the decrease of interest-bearing
debts
Loan repayment rate
100%
100%
-
Six-month period ended 30 June
2017 2016 Change Reasons for change
EBITDA-to-interest coverage ratio 28.75 17.43 11.32 Due to the increase of profit and decrease of interest expense
Interest payment rate 100% 100% -
100%
100%
-
During the reporting period, the Company paid in full the interest accrued for the other bonds and debt financing
instruments. As at 30 June 2017, the standby credit line provided by several domestic financial
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