REG - China Pet &Chem Corp - Half-year Report
30/08/2022 07:18
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RNS Number : 4518X China Petroleum & Chemical Corp 30 August 2022
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong
Limited take no responsibilities for the contents of this announcement, make
no representation as to its accuracy or completeness and expressly disclaim
any liability whatsoever for any loss howsoever arising from or in reliance
upon the whole or any part of the contents of this announcement.
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code: 00386)
Interim Results Announcement for the Six Months Ended 30 June 2022
The board of directors (the "Board") of China Petroleum & Chemical
Corporation ("Sinopec Corp." or the "Company") hereby announces the unaudited
results of Sinopec Corp. and its subsidiaries for the six months ended 30 June
2022. This announcement, containing the full text of the 2022 Interim Report
of Sinopec Corp., complies with the relevant requirements of the Rules
Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
in relation to information to accompany preliminary announcement of interim
results. Printed version of the 2022 Interim Report of Sinopec Corp. will be
delivered to the shareholders of H shares of Sinopec Corp. in September 2022.
Publication of Results Announcement
Both the Chinese and English versions of this results announcement are
available on the websites of Sinopec Corp. (www.sinopec.com/listco/) and The
Stock Exchange of Hong Kong Limited (www.hkex.com.hk). In the event of any
discrepancies in interpretations between the English version and Chinese
version, the Chinese version shall prevail.
By Order of the Board
China Petroleum & Chemical Corporation
Huang Wensheng
Vice President and Secretary to the Board of Directors
Beijing, the PRC,
26 August 2022
As of the date of this announcement, directors of the Company are: Ma
Yongsheng(*), Zhao Dong(*), Yu Baocai(#), Ling Yiqun(#), Li Yonglin(#), Liu
Hongbin(#), Cai Hongbin(+), Ng, Kar Ling Johnny(+), Shi Dan(+) and Bi
Mingjian(+).
# Executive Director
* Non-executive Director
+ Independent Non-executive Director
CONTENTS
2 Company Profile
4 Principal Financial Data and Indicators
8 Business Review and Prospects
12 Management's Discussion and Analysis
23 Corporate Governance
26 Environment and Social Responsibilities
28 Significant Events
36 Changes in Share Capital and Shareholdings
of Shareholders
37 Bond General Information
40 Financial Statements
144 Index of Documents for Inspection
This interim report contains forward-looking statements. Except for statements
of historical facts, all statements contained herein that address business
activities, events or developments that the Company expects or anticipates
will or may occur in the future (including, but not limited to projections,
targets, reserves and other estimates and business plans) are forward-looking
statements. The actual results or developments of the Company in future
periods may differ materially from those anticipated in such statements as a
result of various factors and uncertainties. None of such forward-looking
statements shall be deemed or construed to constitute or imply any commitment
of substance on the part of the Company to investors. Investors and relevant
parties are cautioned to maintain due awareness of potential risks and to
distinguish the difference among plans, projections and commitments. The
Company made the forward-looking statements referred to herein as at 26 August
2022 and undertakes no obligation to update these statements except as
required by relevant regulatory authorities.
COMPANY PROFILE
IMPORTANT NOTICE: THE BOARD OF DIRECTORS (BOARD) AND THE BOARD OF SUPERVISORS
OF CHINA PETROLEUM & CHEMICAL CORPORATION (SINOPEC CORP.) AND ITS
DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT WARRANT THAT THERE ARE NO FALSE
REPRESENTATIONS, MISLEADING STATEMENTS OR MATERIAL OMISSIONS CONTAINED IN THIS
INTERIM REPORT, AND SEVERALLY AND JOINTLY ACCEPT FULL RESPONSIBILITY FOR THE
AUTHENTICITY, ACCURACY AND COMPLETENESS OF THE INFORMATION CONTAINED IN THIS
INTERIM REPORT. THERE IS NO OCCUPANCY OF NON-OPERATING FUNDS BY THE
CONTROLLING SHAREHOLDERS OF SINOPEC CORP. Mr. MA YONGSHENG, CHAIRMAN OF THE
BOARD, MR. YU BAOCAI, DIRECTOR AND PRESIDENT, AND MS. SHOU DONGHUA, CHIEF
FINANCIAL OFFICER AND HEAD OF CORPORATE ACCOUNTING DEPARTMENT WARRANT THE
AUTHENTICITY, ACCURACY AND COMPLETENESS OF THE INTERIM FINANCIAL STATEMENTS
CONTAINED IN THIS INTERIM REPORT. THE AUDIT COMMITTEE OF SINOPEC CORP. HAS
REVIEWED THE INTERIM REPORT OF SINOPEC CORP. FOR THE SIX-MONTH PERIOD ENDED 30
JUNE 2022.
THE INTERIM FINANCIAL STATEMENTS OF THE COMPANY, PREPARED IN ACCORDANCE WITH
THE ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES (CASs) OF THE PEOPLES
REPUBLIC OF CHINA (PRC), AND INTERNATIONAL FINANCIAL REPORTING STANDARDS
(IFRS), HAVE NOT BEEN AUDITED.
COMPANY PROFILE
Sinopec H shares were listed on stock exchanges in Hong Kong, New York and
London on 18 and 19 October 2000, respectively, and A shares were listed on
the Shanghai Stock Exchange on 8 August 2001.Sinopec Corp. is one of the
largest integrated energy and chemical companies in China. Its principal
operations include the exploration and production, pipeline transportation and
sale of petroleum and natural gas; the production, sale, storage and
transportation of refinery products, petrochemical products, coal chemical
products, synthetic fibre, and other chemical products; the import and export,
including an import and export agency business, of petroleum, natural gas,
petroleum products, petrochemical and chemical products, and other commodities
and technologies; and research, development and application of technologies
and information; hydrogen energy business and related services such as
hydrogen production, storage, transportation and sales; battery charging and
swapping, solar energy, wind energy and other new energy business and related
services.
DEFINITIONS
In this interim report, unless the context otherwise requires, the following
terms shall have the meaning set out below:
Sinopec Corp.: China Petroleum & Chemical Corporation;
Company: Sinopec Corp. and its subsidiaries;
China Petrochemical Corporation: The controlling shareholder of Sinopec Corp.,
China Petrochemical Corporation;
Sinopec Group: China Petrochemical Corporation and its subsidiaries;
Sinopec Finance Co.: Sinopec Finance Co., Ltd.;
Century Bright: Sinopec Century Bright Capital Investment Ltd.;
CSRC: China Securities Regulatory Commission;
Hong Kong Stock Exchange: The Stock Exchange of Hong Kong Limited;
Hong Kong Listing Rules: Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited.
CONVERSIONS
The conversion factors for production volume of crude oil and natural gas and
crude oil processing volume are set out as follows:
For domestic production of crude oil: 1 tonne = 7.1 barrels;
For overseas production of crude oil: 1 tonne = 7.26 barrels in the first half
of 2022, 1 tonne = 7.21 barrels in the first half of 2021;
For production of natural gas: 1 cubic meter = 35.31 cubic feet;
Refinery throughput: 1 tonne = 7.35 barrels.
BASIC INFORMATION
LEGAL NAME
中國石油化工股份有限公司
CHINESE ABBREVIATION
中國石化
ENGLISH NAME
China Petroleum & Chemical Corporation
ENGLISH ABBREVIATION
Sinopec Corp.
LEGAL REPRESENTATIVE
Mr. Ma Yongsheng
AUTHORISED REPRESENTATIVES UNDER THE HONG KONG LISTING RULES
Mr. Yu Baocai
Mr. Huang Wensheng
SECRETARY TO THE BOARD
Mr. Huang Wensheng
REPRESENTATIVE ON SECURITIES MATTERS
Mr. Zhang Zheng
REGISTERED ADDRESS, PLACE OF BUSINESS AND CORRESPONDENCE ADDRESS
22 Chaoyangmen North Street,
Chaoyang District, Beijing, China
Postcode: 100728
Tel: 86-10-59960028
Fax: 86-10-59960386
Website: http://www.sinopec.com
E-mail: ir@sinopec.com
CHANGE OF INFORMATION DISCLOSURE MEDIA AND ACCESS PLACES
There was no change to Sinopec Corp.'s information disclosure media and access
place during the reporting period.
PLACES OF LISTING OF SHARES, STOCK NAMES AND STOCK CODES
A Shares: Shanghai Stock Exchange
Stock name: 中國石化
Stock code: 600028
H Shares: Hong Kong Stock Exchange
Stock code: 00386
ADRs: New York Stock Exchange
Stock code: SNP
London Stock Exchange
Stock code: SNP
CHANGE OF REGISTERED ADDRESS IN THE REPORTING PERIOD
There was no change to the registered address in the reporting period.
PRINCIPAL FINANCIAL DATA AND INDICATORS
1 FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH CASs
(1) Principal accounting data
Items Six-month period ended 30 June
2022 2021 2021 Changes
RMB million RMB million RMB million over the same
(adjusted) (before period of the
adjustment) preceding year
(%)
Operating income 1,612,126 1,260,773 1,261,603 27.9
Net profit attributable to equity shareholders of the Company 43,530 39,426 39,153 10.4
Net profit attributable to equity shareholders of the Company 42,960 38,420 38,420 11.8
excluding extraordinary gains and losses
Net cash flow from operating activities 4,947 48,347 47,736 (89.8)
As of As of Changes
30 June 31 December from the end
2022 2021 of last year
RMB million RMB million (%)
Total equity attributable to shareholders of the Company 787,134 775,102 1.6
Total assets 2,059,814 1,889,255 9.0
Note: The Company has completed the purchase of certain assets and
equity of Sinopec Group on 1 July 2021 and 1 December 2021, for details please
refer to Sinopec Corp.'s related announcements. The transactions described
above have been accounted as business combination under common control, thus,
the Company retroactively adjusted the relevant financial data.
(2) Principal financial indicators
Items Six-month period ended 30 June
2022 2021 2021 Changes
RMB RMB RMB over the same
(adjusted) (before period of the
adjustment) preceding year
(%)
Basic earnings per share 0.360 0.326 0.323 10.4
Diluted earnings per share 0.360 0.326 0.323 10.4
Basic earnings per share (excluding extraordinary gains 0.355 0.317 0.317 12.0
and losses)
Weighted average return on net assets (%) 5.57 5.20 5.19 0.37
percentage points
Weighted average return (excluding extraordinary gains 5.50 5.06 5.10 0.44
and losses) on net assets (%)
percentage points
(3) Extraordinary items and corresponding amounts
Items Six-month period
ended 30 June 2022
(income)/expenses
RMB million
Net gain on disposal of non-current assets (135)
Donations 101
Government grants (1,340)
Gain on holding and disposal of various investments (125)
Other extraordinary income/(expenses), net 288
Subtotal (1,211)
Tax effect 475
Total (736)
Attributable to:
Equity shareholders of the Company (570)
Minority interests (166)
(4) Significant changes of items in the financial statements
The table below sets forth reasons for those changes where the fluctuation was
more than 30% during the reporting period:
Increase/(Decrease)
Items of Consolidated As of As of Amount Percentage Main reasons for changes
Balance Sheet 30 June 31 December RMB million (%)
2022 2021
RMB million RMB million
Financial assets held for 1,012 - 1,012 - The increase of structured deposits in the first half of 2022.
trading
Derivative financial assets 40,389 18,371 22,018 119.9
Impact of changes in profit and loss of crude oil and other products hedging
business.
Derivative financial liabilities 15,367 3,223 12,144 376.8
Accounts receivable 63,717 34,861 28,856 82.8 Increase in accounts receivable resulting from increased prices of crude oil
and refined oil products.
Prepayments 13,011 9,267 3,744 40.4 Prepayment for goods increased
year-on-year.
Inventories 285,032 207,433 77,599 37.4 Increase in inventory value of crude oil and refined oil products resulting
from the significant increase of international crude oil prices.
Short-term loans 43,169 27,366 15,803 57.7 The Company increased short-term loans for supplementary of liquidity during
the reporting period.
Employee benefits payable 23,000 14,048 8,952 63.7 The impact of increase in payable performance-based income.
Taxes payable 36,566 81,267 (44,701) (55.0) The impact of centralized payment for deferred taxes happened in the fourth
quarter of last year.
Non-current liabilities due 66,409 28,651 37,758 131.8 Increase in debentures payable and long-term loans due within one year.
within one year
Other current liabilities 114,002 31,762 82,240 258.9 Increase in low-interest debentures for supplementary of liquidity during the
reporting period.
Long-term loans 77,556 49,341 28,215 57.2 Increase in project loan of holding subsidiaries for capitalised expenditures.
Debentures payable 14,868 42,649 (27,781) (65.1) Some of the amounts were reclassified to the item of non-current liabilities
due within one year.
Other comprehensive income 6,557 (690) 7,247 - The impact on translation of foreign currency statements and changes in
effective hedging business.
Specific reserve 3,566 2,664 902 33.9 The impact of changes in the balance of safety fund reserve.
Items of Consolidated Increase/ (Decrease) Main reasons for changes
Income Statement For
For six-month Amount Percentage
six-month period ended RMB Million (%)
period ended 30 June
30 June 2021
2022 RMB Million
RMB Million
Operating costs 1,330,825 998,286 332,539 33.3 Increase in procurement cost of crude oil due to the increased international
oil prices.
Other income 2,121 1,244 877 70.5 Increase in VAT refunds on
imported LNG.
Investment (loss)/income (10,307) 4,890 (15,197) - Decrease in investment income of associates and joint ventures and the impact
of profit and loss of derivative financial instruments.
(losses)/gains from changes (1,558) 116 (1,674) - Impact of floating profit and loss of derivative financial instruments.
in fair value
Impairment losses (1,456) (926) (530) 57.2 Allowance for diminution in value of inventories increased year-on-year.
Items of Consolidated For For Increase/ (Decrease) Main reasons for changes
Cash Flow Statement six-month six-month
period ended period ended Amount Percentage
30 June 30 June RMB Million (%)
2022 2021
RMB Million RMB Million
Cash received from sale of 1,704,813 1,310,197 394,616 30.1 Increase in sales revenue due to the higher prices of petroleum and
goods and rendering of petrochemical products.
services
Refund of taxes and levies 3,442 788 2,654 336.8 Increase in VAT refunds on
imported LNG.
Other cash received relating 128,034 65,782 62,252 94.6 Increase in derivative margins received.
to operating activities
Cash paid for goods and (1,420,335) (1,030,400) (389,935) 37.8 Increase in procurement cost of crude oil and other feedstocks.
services
Other cash paid relating to (159,834) (64,700) (95,134) 147.0 Increase in payment of derivative
operating activities
margins.
Cash received from disposal 442 3,341 (2,899) (86.8) Decrease in structured deposits received year-over-year.
of investments
Net cash received from 1 4,296 (4,295) (100.0) Payment of pipeline transaction received in the same period of 2021 and no
disposal of subsidiaries such item in the reporting period.
and other business entities
Other cash received relating 37,189 21,019 16,170 76.9 Increase in amount received of
to investing activities
time deposits with maturities over three months.
Net cash paid for the (7,628) - (7,628) - Cash paid for the prior year-end asset acquisition.
acquisition of subsidiaries
and other business entities
Other cash paid relating (16,544) (33,016) 16,472 (49.9) Decrease in time deposits with maturities over three months
to investing activities
year-on-year.
Cash received from borrowings 348,900 170,144 178,756 105.1 Increase in loans.
Cash repayments of borrowings (224,161) (130,857) (93,304) 71.3 The scale of interest-bearing expanded and the corresponding repayment of
borrowings increased.
Cash paid for dividends, (41,606) (19,559) (22,047) 112.7 The payment of dividends for the period increased year on year.
profits distribution or interest
2 FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH IFRS
(1) Principal accounting data
Items Six-month period ended 30 June
2022 2021 2021 Changes
RMB million RMB million RMB million over the same
(adjusted) (before period of the
adjustment) preceding year
(%)
Operating profit 62,924 58,486 58,109 7.6
Profit attributable to shareholders of the Company 44,451 40,227 39,954 10.5
Net cash generated from operating activities 4,947 48,347 47,736 (89.8)
As of As of Changes
30 June 31 December from the end
2022 2021 of last year
RMB million RMB million (%)
Total equity attributable to shareholders of the Company 786,249 774,182 1.6
Total assets 2,059,814 1,889,255 9.0
Note: The Company has completed the purchase of certain assets and
equity of Sinopec Group on 1 July 2021 and 1 December 2021, for details please
refer to Sinopec Corp.'s related announcements. The transactions described
above have been accounted as business combination under common control, thus,
the Company retroactively adjusted the relevant financial data.
(2) Principal financial indicators
Items Six-month period ended 30 June
2022 2021 2021 Changes
RMB RMB RMB over the same
(adjusted) (before period of the
adjustment) preceding year
(%)
Basic earnings per share 0.367 0.332 0.330 10.5
Diluted earnings per share 0.367 0.332 0.330 10.5
Return on capital employed (%) 5.75 6.14 6.14 (0.39)
percentage points
BUSINESS REVIEW AND PROSPECTS
BUSINESS REVIEW
In the first half of 2022, the world economic growth slowed down. China
effectively coordinated pandemic prevention and control with economic and
social development, registering a GDP growth of 2.5% year-on-year. Domestic
demand for natural gas remained stable. Based on the statistics of the
Company, the overall domestic demand for refined oil products was weak due to
high crude oil price and the pandemic, with a slight increase in the first
quarter and a sharp decrease in the second quarter, compared with the same
period of last year. The demand for major chemical products in China remained
stable, and the ethylene equivalent consumption increased by 0.1% compared
with that of the previous year.
In the first half of 2022, international crude oil prices rose sharply and
fluctuated drastically. The average spot price of Platts Brent was USD107.69
per barrel, up by 66% year-on-year.
Confronted with severe and complex environment of production and operation,
the Company gave full play to its integration advantages, actively responded
to market changes, carried out in-depth optimisation of the whole industrial
chain, enhanced production and marketing coordination, endeavoured to expand
the market and sales, and achieved high-quality results.
1 PRODUCTION & OPERATIONS REVIEW
(1) Exploration and Production
In the first half of 2022, the Company seized the favourable opportunity of
high oil price, intensified efforts in exploration and development,
consolidated the foundation of resources, improved operational performance,
and realised growth in production and profit. In terms of exploration, we
enhanced basic research, strengthened risk exploration and trap
pre-exploration in new regions and areas, and achieved a number of oil and gas
discoveries, including breakthroughs in Shunbei oil and gas in Tarim Basin,
shale oilfield exploration in Bohai Bay Basin and Subei Basin, deep
exploration of natural gas in Sichuan Basin and continental facies shale gas
exploration in Puguang. In terms of development, we accelerated the capacity
building of major oilfields, such as Shunbei, Tahe and offshore blocks, and
strengthened efficiency adjustment and fine-tuned development of mature oil
fields. We also actively promoted the capacity building of key natural gas
blocks in Sichuan and Erdos Basin, and enhanced optimisation and profitability
improvement of whole natural gas business chain. In the first half of the
year, the Company's production of oil and gas reached 242 million barrels of
oil equivalent, up by 2.9% year-on-year, with domestic crude oil production
reaching 124.6 million barrels, up by 0.8% and natural gas production totalled
613.92 billion cubic feet, up by 5.4% year-on-year.
Exploration and Production: Summary of Operations
Six-month period ended 30 June Changes
2022 2021 (%)
Oil and gas production (mmboe) 242.01 235.29 2.9
Crude oil production (mmbbls) 139.65 138.15 1.1
China 124.63 123.62 0.8
Overseas 15.02 14.53 3.4
Natural gas production (bcf) 613.92 582.60 5.4
(2) Refining
In the first half of 2022, facing the challenges brought by high crude oil
price and the pandemic, the Company insisted on optimisation and integration
of production and marketing, flexibly adjusted the utilisation rate and
product structure, and maintained stable operation. In the first quarter, we
seized the good opportunity with high refining margin and comprehensively
increased utilisation rate. In the second quarter, we adjusted the structure
and increased exports of refined oil products in line with the pandemic
situation. The Company optimised the crude oil procurement and resource
allocation to reduce procurement costs. We expedited adjustment to increase
the yield of chemical feedstock and refining specialities with proportion of
high-grade lubricants further increased. We accelerated the construction of
advanced capacity and promoted structural adjustment projects in an orderly
manner. The Company ensured the supply of hydrogen for the Beijing Winter
Olympic Games and the Winter Paralympic Games and continued to promote the
hydrogen supply projects. In the first half, the Company processed 121 million
tonnes of crude oil, down by 4.2% year-on-year, yielding 68.99 million tonnes
of refined oil products, among which diesel output increased by 7.4%
year-on-year.
Refining: Summary of Operations
Unit: million tonnes
Six-month period ended 30 June Changes
2022 2021 (%)
Refinery throughput 120.76 126.11 (4.2)
Gasoline, diesel and kerosene production 68.99 72.19 (4.4)
Gasoline 30.03 32.40 (7.3)
Diesel 30.65 28.54 7.4
Kerosene 8.31 11.24 (26.1)
Light chemical feedstock production 22.01 22.26 (1.1)
Note: Includes 100% of production of domestic joint ventures.
(3) Marketing and Distribution
In the first half of 2022, facing fierce market competition and once severe
pandemic situation, the Company strengthened the integration of production and
marketing, adjusted business strategy in a timely manner, dynamically
optimised the allocation of resources, and spared no effort to expand sales
and increase profitability. We focused on customer experience and carried out
targeted marketing strategies. We actively expanded the low-sulphur bunker
fuel market and further consolidated our market position. We also promoted
company branding products and improved the quality and profitability of
non-fuel business. In addition, Efforts were made to accelerate sales network
development, digitisation and transformation to an integrated energy service
provider of petrol, gas, hydrogen, power and services. In the first half,
total sales volume of refined oil products was 98.42 million tonnes, of which
total domestic sales volume accounted for 78.46 million tonnes.
Marketing and Distribution: Summary of Operations
Six-month period ended 30 June Change
2022 2021 (%)
Total sales volume of refined oil products (million tonnes) 98.42 109.13 (9.8)
Total domestic sales volume of refined oil products (million tonnes) 78.46 84.01 (6.6)
Retail (million tonnes) 51.23 55.50 (7.7)
Direct sales and Distribution (million tonnes) 27.23 28.51 (4.5)
Annualised average throughput per station (tonne/station) 3,333 3,614 (7.8)
Note: The total sales volume of refined oil products includes the amount of
refined oil marketing and trading sales volume.
As of As of Change
30 June 31 December from the end
2022 2021 of last year
(%)
Total number of Sinopec-branded service stations 30,740 30,725 0.05
Number of convenience stores 27,950 27,618 1.2
(4) Chemicals
In the first half of 2022, facing difficult situation of high cost, high
inventory, low utilisation and low margin in domestic chemical industry, the
Company optimised the structure of facilities, feedstock and products,
properly scheduled maintenance operations, and maintained high utilisation
rate in profitable facilities, responding to market demand. We comprehensively
promoted the construction of advanced capacity in Zhenhai, Jiujiang, Tianjin
Nangang and Hainan. We also promoted operation stabling and production
increasing in coal chemical business, and its profits realised an significant
increase. The proportion of high value-added products continued to increase,
with ratio of new and specialty products of synthetic resin reached 69.5%,
increased by 1.4 percentage points year-on-year, ratio of high-value-added
products of synthetic rubber and fibre reached 36.8% and 40.7%, increased by
0.7 and 6.8 percentage points year-on-year respectively, and ratio of fine
chemicals reached 35.8%, increased by 1.1 percentage points over the previous
year. Ethylene production in the first half was 6.85 million tonnes, with a
year-on-year increase of 5.9%. We made full efforts to ensure sufficient
supply to our strategic customers, actively increased export, and vigorously
expanded high-end markets. In the first half, the total sales volume of
chemical products was 40.38 million tonnes, up by 1% year-on-year.
Major Chemical Products: Summary of Operations Unit: 1,000
tonnes
Six-month period ended 30 June Changes
2022 2021 (%)
Ethylene 6,846 6,463 5.9
Synthetic resin 9,275 9,292 (0.2)
Synthetic fiber monomer and polymer 4,656 4,507 3.3
Synthetic fiber 555 676 (17.9)
Synthetic rubber 646 594 8.8
Note: Includes 100% of production of domestic joint ventures.
2 HEALTH AND SAFETY
In the first half of 2022, the Company spared no effort to promote the HSE
management system, further promoted the centralised management of safety risks
and gas safety, and put in place special programme of contractors' safety
management. We strengthened pandemic prevention and control, continuously
consolidated the foundation of employee health management, and safeguarded the
occupational, physical and psychological health of employees at home and
abroad.
3 SCIENCE AND TECHNOLOGY INNOVATION
In the first half of 2022, the Company deepened the reform of its science and
technology system and mechanism, enhanced investment in science and
technology, and strengthened the protection of intellectual property rights,
leading to the overall results of science and technology innovation continuing
to improve and scientific research payoffs emerging. In upstream,
breakthroughs were made in the geological theory and exploration and
production of continental facies shale oil, high-efficiency exploration and
production of ultra-deep oil and gas, and EOR in mature oilfields. In
refining, new progress was made in core technologies such as direct crude oil
cracking to ethylene, high-end carbon materials, high-end lubricants, and
catalytic materials for fuel cells. In chemicals, the first unit of the third
generation aromatics was completed and put into operation. New progress was
made in the research and development of key technologies, such as the high
isotactic polybutene-1. The one-million-tonne CCUS project was completed and
commissioned. Bio-jet fuel achieved large-scale trial production. National
pilot demonstration projects such as "Industrial Internet+" and the
construction of smart "fields, plants, stations and institutes" progressed
smoothly.
4 CAPITAL EXPENDITURES
The Company continued to optimise its investment management and focused on
improving the quality and return of its investments. Capex in the first half
of 2022 was RMB64.65 billion, of which RMB33.34 billion was spent in the
E&P segment, mainly on the crude oil production capacity building in
Shunbei and Tahe, natural gas capacity building in western Sichuan and
Dongsheng, and the construction of storage and transportation facilities such
as the relocation of Dongying crude oil depot and Longkou LNG projects;
RMB8.93 billion was spent in the refining segment, mainly for Anqing and
Yangzi refining upgrading projects and the second phase of Zhenhai refining
and chemical project; RMB3.07 billion was spent in the marketing and
distribution segment, mainly for the construction of gas stations, integrated
energy stations covering gasoline, gas, hydrogen, power and service and
logistics facilities; RMB18.21 billion was spent in the chemicals segment,
mainly for Hainan and Tianjin Nangang ethylene projects, Jiujiang aromatics
project, Zhenhai Refining and Chemical project Phase II and Yizheng PTA
project; RMB1.10 billion was used on corporate and others, mainly for science
and technology research and IT.
BUSINESS OUTLOOK
Looking ahead to the second half of the year, the risk of stagflation in the
global economy is expected to rise, while China's economic growth is
anticipated to rebound and remain within a reasonable range. Domestic demands
for refined oil products and chemical products are expected to pick up, and
demand for natural gas will maintain growth. Taking into account the
comprehensive impact of geopolitics and changes in global supply and demand,
international crude oil prices are expected to remain high and volatile.
In the face of the current situation, the Company will pay more attention to
enhancing market foresight, strengthening operational synergies, prioritising
innovation and development, synergy and optimisation, market expansion, reform
management and safety and environmental protection. We will focus on the
following aspects:
In E&P, the Company will continue to increase exploration efforts, strive
to achieve strategic breakthroughs in exploration and increase reserves with
scale and profit, boost oil and gas production and profitability, and lower
the oil and gas break-even point. We will accelerate the oil and gas
production capacity building in Shunbei, Tahe, western Sichuan and Zhongjiang,
promote the construction of the national demonstration area for continental
shale oil in Jiyang, strengthen the research and application of EOR
technologies, and continue to promote profitable oil and gas production. In
the second half of the year, we plan to produce 141 million barrels of crude
oil and 642.9 billion cubic feet of natural gas.
In refining, the Company will integrate and coordinate production and
marketing, optimise utilisation rate closely in line with the market and
flexibly adjust the product slate. We will dynamically optimise the
procurement structure and pace and strive to reduce procurement cost. We will
vigorously shift from producing refined oil products to chemicals and
specialty products, increase production of high value-added products and
specialty products, and promote the growth of lubricants, sulphur and asphalt.
In the second half of the year, we plan to process 120 million tonnes of crude
oil.
In marketing and distribution, the Company will seize the opportunity of
rebounding market demand, with leverage on our integration advantages, to
precisely implement targeted marketing strategy, improve retail volume and
profits, provide tailor-made services for direct sale and distribution
customers, and strive to increase the total sales volume and market share. We
will further optimise the network layout and consolidate and reinforce network
advantages, seize market opportunities and further expand low-sulphur bunker
fuel sales, enhance the comprehensive service capability and synergy of
non-fuel business. In the second half of the year, we plan to sell 87.1
million tonnes of refined oil products in domestic market.
In chemicals, the Company will closely follow market demand, optimise
feedstocks, products, facilities and regional resources, and strive to achieve
efficient plant operation. We will integrate production, marketing, research
and application, strengthen the research and development of high-end products
and new materials. We will improve the quality and profitability of coal
chemical business and maintain good profit momentum. We will also strengthen
the integration of internal and external resources, improve export business
and make every effort to expand the market and increase the volume. In the
second half of the year, we plan to produce 7.2 million tonnes of ethylene.
In Capex, the Company plans to spend RMB133.35 billion in the second half of
the year, and will dynamically optimise and adjust its investment projects in
the future in accordance with market changes. RMB48.16 billion will be spent
in the E&P segment, mainly for the crude oil production capacity building
in Shunbei and Tahe, natural gas production capacity building in western
Sichuan and Dongsheng, and LNG storage and transportation facilities. RMB11.47
billion will be spent in the refining segment, mainly for Anqing and Yangzi
refining upgrading projects and the second phase of Zhenhai refining and
chemical project. RMB20.63 billion will be spent in the marketing and
distribution segment, mainly for the construction of gas stations, "petrol,
gas, hydrogen, power and services" integrated energy stations and logistics
facilities. RMB47.89 billion will be spent in the chemicals segment, mainly
for the construction of ethylene projects in Hainan and Tianjin Nangang, the
second phase of Zhenhai refining and chemical project and the PTA project in
Yizheng. RMB5.20 billion will be spent for corporate and others, mainly for
the scientific and technological research and IT.
MANAGEMENT'S DISCUSSION AND ANALYSIS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
COMPANY'S INTERIM FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES. PARTS OF
THE FOLLOWING FINANCIAL DATA, UNLESS OTHERWISE STATED, WERE CONSISTENT WITH
THE COMPANY'S INTERIM FINANCIAL STATEMENTS THAT HAVE BEEN PREPARED ACCORDING
TO THE IFRS. THE PRICES IN THE FOLLOWING DISCUSSION DO NOT INCLUDE VALUE-ADDED
TAX.
1 CONSOLIDATED RESULTS OF OPERATIONS
In the first half of 2022, facing the situation of significant increase and
drastic fluctuation of international crude oil price, resurging of domestic
pandemic, and weak demand for petroleum and petrochemical products, the
Company fully leveraged on the advantages of integration and coordination,
flexibly adjusted structure of feedstock, products and facilities, expanded
market and sales, and realised revenue and operating profit of RMB1,612.1
billion and RMB62.9 billion, increased by 27.9% and 7.6% year-on-year
respectively.
The following table sets forth the principal revenue and expense items from
the Company's consolidated income statement for the first half of 2022 and the
corresponding period in 2021:
Six-month period ended 30 June
2022 2021 Change
RMB million RMB million (%)
Revenue 1,612,126 1,260,773 27.9
Revenue from primary business 1,582,236 1,231,523 28.5
Other operating revenues 29,890 29,250 2.2
Operating expenses (1,549,202) (1,202,287) 28.9
Purchased crude oil, products and operating supplies and expenses (1,262,183) (945,555) 33.5
Selling, general and administrative expenses (26,797) (25,810) 3.8
Depreciation, depletion and amortisation (53,638) (54,466) (1.5)
Exploration expenses, including dry holes (5,738) (4,846) 18.4
Personnel expenses (49,223) (45,195) 8.9
Taxes other than income tax (134,409) (120,900) 11.2
Impairment reversal on trade and other receivables 72 55 30.9
Other operating expenses, net (17,286) (5,570) 210.3
Operating profit 62,924 58,486 7.6
Net finance costs (5,337) (4,902) 8.9
Investment income and share of profits less losses from associates and 7,453 11,247 (33.7)
joint ventures
Profit before taxation 65,040 64,831 0.3
Income tax expense (14,461) (15,052) (3.9)
Profit for the period 50,579 49,779 1.6
Attributable to:
Shareholders of the Company 44,451 40,227 10.5
Non-controlling interests 6,128 9,552 (35.8)
(1) Revenue
In the first half of 2022, the Company's revenue from primary business was
RMB1,582.2 billion, representing an increase of 28.5% year-on-year. This was
mainly due to the increased prices of major refined oil and chemical products
and the increased sales volume of some petroleum and petrochemical products.
The following table sets forth the external sales volume, average realised
prices and respective change rates of the Company's major products in the
first half of 2022 as compared with the first half of 2021.
Sales Volume (thousand tonnes) Average realised price
(VAT excluded)
(RMB/tonne, RMB/thousand cubic meters)
Six-month period Change Six-month period Change
ended 30 June ended 30 June
2022 2021 (%) 2022 2021 (%)
Crude oil 4,280 3,537 21.0 4,513 2,794 61.5
Natural gas (million cubic meters) 14,824 14,371 3.2 1,736 1,522 14.1
Gasoline 39,525 45,597 (13.3) 9,272 7,307 26.9
Diesel 36,668 34,648 5.8 7,558 5,388 40.3
Kerosene 8,575 11,016 (22.2) 5,771 3,397 69.9
Basic chemical feedstock 18,063 17,665 2.3 6,475 5,159 25.5
Synthetic fibre monomer 3,812 3,408 11.9 6,607 6,216 6.3
and polymer
Synthetic resin 8,595 8,652 (0.7) 8,662 8,174 6.0
Synthetic fibre 588 714 (17.6) 8,347 7,356 13.5
Synthetic rubber 663 622 6.6 11,720 10,584 10.7
Most of the crude oil and a small portion of natural gas produced by the
Company were internally used for refining and chemical production with the
remaining sold to other customers. In the first half of 2022, the revenue from
crude oil, natural gas and other upstream products sold externally amounted to
RMB95.8 billion, up by 41.5% year-on-year, accounting for 5.9% of the
Company's revenue from primary business and other operating revenues. This
change was mainly due to the increased crude oil and natural gas prices and
sales volume.
Petroleum products (mainly consisting of refined oil products and other
refined petroleum products) sold externally by the refining segment and the
marketing and distribution segment achieved external sales revenues of
RMB866.1 billion, representing an increase of 24.9% year-on-year and
accounting for 53.7% of the Company's revenue from primary business and other
operating revenues. This change was mainly due to the increased price of
refined oil products and the increased diesel sales volume. The sales revenue
of gasoline, diesel and kerosene was RMB693.1 billion, representing an
increase of 24.4% year-on-year, accounting for 80.0% of the total sales
revenue of petroleum products. The sales revenue of other refined petroleum
products was RMB173.0 billion, accounting for 20.0% of the sales revenue of
petroleum products, up by 27.2% year-on-year.
The Company's external sales revenue of chemical products was RMB234.2
billion, accounting for 14.5% of its revenue from primary business and other
operating revenues, up by 18.4% year-on-year. The change was mainly due to the
increased chemical products price and sales volume of some chemical products.
(2) Operating expenses
In the first half of 2022, the Company's operating expenses were RMB1,549.2
billion, up by 28.9% year-on-year, mainly due to the increased price of
outsourced crude oil, refined oil products and chemical feedstock resulting
from the significant increase in international commodities and raw materials
price. The operating expenses mainly consisted of the following:
Purchased crude oil, products and operating supplies and expenses were
RMB1,262.2 billion, representing an increase of 33.5% year-on-year, accounting
for 81.5% of total operating expenses, of which:
‧ Crude oil purchasing expenses were RMB471.6 billion, representing an
increase of 57.2% year-on-year. Throughput of outsourced crude oil in the
first half of 2022 was 112.79 million tonnes (excluding the volume processed
for third parties), down by 4.4% year-on-year. The average unit processing
cost of outsourced crude oil was RMB4,649 per tonne, up by 63.3% year-on-year.
‧ The Company's purchasing expenses of refined oil products were RMB138.2
billion, up by 1.7% year-on-year.
‧ The Company's purchasing expenses related to trading activities were
RMB354.7 billion, up by 36.4% year-on-year, mainly due to the increased prices
of outsourced crude oil and refined oil products.
‧ Other purchasing expenses were RMB297.7 billion, up by 19.3%
year-on-year, mainly due to the increased price of raw materials.
Selling, general and administrative expenses of the Company totalled RMB26.8
billion, representing an increase of 3.8% year-on-year.
Depreciation, depletion and amortisation of the Company were RMB53.6 billion,
representing a decrease of 1.5% year-on-year. This was mainly due to the
decreased depreciation and depletion of oil and gas assets resulting from the
increase of proved reserves.
Exploration expenses were RMB5.7 billion, representing an increase of 18.4%
year-on-year. This was mainly because the Company accordingly increased high
efficient exploration investment for discovering good quality reserves.
Personnel expenses were RMB49.2 billion, representing an increase of 8.9%
year-on-year. This was mainly due to the increased payment base, which led to
the increase in social insurance and other wage surcharges, and the increased
performance wages.
Taxes other than income tax were RMB134.4 billion, representing an increase of
11.2% year-on-year, mainly due to the increased special oil income levy, as
well as the increase of resource tax on oil and gas products and consumption
tax on refined oil products.
Other operating expenses, net was RMB17.3 billion, representing an increase of
RMB11.7 billion over the same period of 2021, mainly due to the loss on
derivative financial instruments.
(3) Operating profit
In the first half of 2022, the Company's operating profit was RMB62.9 billion,
representing an increase of 7.6% year-on-year. This was mainly due to the
significant improve in upstream profitability. In addition, the Company fully
leveraged on its integration advantages, strengthened optimisation of
industrial chain, and maintained stable operation in downstream business.
(4) Net finance costs
In the first half of 2022, the Company's net finance costs were RMB5.3
billion, up by RMB0.4 billion or 8.9% over the same period of last year,
mainly due to the increased interest-bearing debt scale led to the increase of
interest expenses year-on-year.
(5) Profit before taxation
In the first half of 2022, the Company's profit before taxation amounted to
RMB65.0 billion, representing an increase of 0.3% year-on-year.
(6) Income tax expense
In the first half of 2022, the Company's income tax expense totalled RMB14.5
billion, representing a decrease of 3.9% year-on-year.
(7) Profit attributable to non-controlling interests of the Company
In the first half of 2022, profit attributable to non-controlling interests
was RMB6.1 billion, representing a decrease of RMB3.4 billion and 35.8%
year-on-year, mainly due to the decreased profits of non-controlling
enterprises of the Company.
(8) Profit attributable to shareholders of the Company
In the first half of 2022, profit attributable to shareholders of the Company
was RMB44.5 billion, representing an increase of 10.5% year-on-year.
2 RESULTS OF SEGMENT OPERATIONS
The Company manages its operations by four business segments, namely
exploration and production segment, refining segment, marketing and
distribution segment and chemicals segment, as well as corporate and others.
Unless otherwise specified, the inter-segment transactions have not been
eliminated from financial data discussed in this section. In addition, the
operating revenue data of each segment includes other operating revenues.
The following table shows the operating revenues by each segment, the
contribution of external sales and inter-segment sales as a percentage of
operating revenues before elimination of inter-segment sales, and the
contribution of external sales as a percentage of consolidated operating
revenues (i.e. after elimination of inter-segment sales) for the periods
indicated.
Operating revenues As a percentage of As a percentage of
consolidated operating consolidated operating
revenues before elimination of revenues after elimination of
inter-segment sales inter-segment sales
Six-month period Six-month period Six-month period
ended 30 June ended 30 June ended 30 June
2022 2021 2022 2021 2022 2021
RMB million (%) (%)
Exploration and Production Segment
External sales* 97,854 70,135 3.4 3.2 6.1 5.6
Inter-segment sales 60,314 39,391 2.1 1.8
Operating revenues 158,168 109,526 5.5 5.0
Refining Segment
External sales* 100,845 82,184 3.5 3.7 6.3 6.5
Inter-segment sales 674,791 543,681 23.0 24.5
Operating revenues 775,636 625,865 26.5 28.2
Marketing and Distribution Segment
External sales* 787,077 632,203 27.0 28.5 48.8 50.1
Inter-segment sales 4,916 2,967 0.2 0.1
Operating revenues 791,993 635,170 27.2 28.6
Chemicals Segment
External sales* 239,121 202,613 8.2 9.1 14.8 16.1
Inter-segment sales 39,089 30,030 1.3 1.4
Operating revenues 278,210 232,643 9.5 10.5
Corporate and Others
External sales* 387,229 273,638 13.3 12.3 24.0 21.7
Inter-segment sales 525,043 340,701 18.0 15.4
Operating revenues 912,272 614,339 31.3 27.7
Operating revenue before elimination 2,916,279 2,217,543 100.0 100.0
of inter-segment sales
Elimination of inter-segment sales (1,304,153) (956,770)
Consolidated operating revenues 1,612,126 1,260,773 100.0 100.0
* Other operating revenues are included.
The following table sets forth the operating revenues, operating expenses and
operating profit/(loss) by each segment before elimination of the
inter-segment transactions for the periods indicated, and the percentage
change between the first half of 2022 and the first half of 2021.
Six-month period ended 30 June
2022 2021 Change
RMB million (%)
Exploration and Production Segment
Operating revenues 158,168 109,526 44.4
Operating expenses 131,866 103,293 27.7
Operating profit 26,302 6,233 322.0
Refining Segment
Operating revenues 775,636 625,865 23.9
Operating expenses 745,868 586,467 27.2
Operating profit 29,768 39,398 (24.4)
Marketing and Distribution Segment
Operating revenues 791,993 635,170 24.7
Operating expenses 775,138 619,102 25.2
Operating profit 16,855 16,068 4.9
Chemicals Segment
Operating revenues 278,210 232,643 19.6
Operating expenses 277,400 219,261 26.5
Operating profit 810 13,382 (93.9)
Corporate and Others
Operating revenues 912,272 614,339 48.5
Operating expenses 911,873 618,074 47.5
Operating profit/(loss) 399 (3,735) −
Elimination (11,210) (12,860) −
(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 2022, operating revenues of the segment were RMB158.2
billion, representing an increase of 44.4% year-on-year. This was mainly due
to the increased sales prices and volume of domestic crude oil and natural
gas.
In the first half of 2022, the segment sold 16.97 million tonnes of crude oil,
representing an increase of 0.2% year-on-year. Natural gas sales volume was
15.3 bcm, representing an increase of 3.3% year-on-year. Regasified LNG sales
volume was 11.2 bcm, representing an increase of 20.3% year-on-year. LNG sales
volume was 0.91 million tonnes, representing a decrease of 72.6% year-on-year.
This was mainly because the Company flexibly adjusted marketing strategy in
line with market demand and resource situation. Average realised prices of
crude oil, natural gas, regasified LNG, and LNG were RMB4,391 per tonne,
RMB1,743 per thousand cubic meters, RMB3,037 per thousand cubic meters, and
RMB5,695 per tonne respectively, representing an increase of 64.1%, 14.5%,
57.1% and 83.3% year-on-year respectively.
In the first half of 2022, the operating expenses of the segment were RMB131.9
billion, representing an increase of 27.7% year-on-year. This was mainly
because that LNG procurement cost increased by RMB16.4 billion year-on-year,
special oil income levy and resource tax increased by RMB9.8 billion
year-on-year, personnel expenses increased by RMB2.2 billion year-on-year,
exploration expenses increased by RMB900 million year-on-year, and
depreciation, depletion and amortization decreased by RMB2.1 billion
year-on-year resulting from increased proved reserves.
In the first half of 2022, the oil and gas lifting cost was RMB767.08 per
tonne, representing an increase of 3.6% year-on-year. This was mainly due to
the increased cost of outsourced raw materials and fuel.
In the first half of 2022, the segment seized the opportunity of high oil
price, enhanced exploration and production, accelerated capacity building,
strengthened optimisation of the whole natural gas industry chain, and
improved profitability. In the first half, the segment realised an operating
profit of RMB26.3 billion, representing an increase of RMB20.1 billion or
322.0% year-on-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 internally 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 2022, operating revenues of the segment were RMB775.6
billion, representing an increase of 23.9% year-on-year. This was mainly
because of an increase in price of refined oil products, as well as an
increase in diesel sales volume.
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 2022 and that of the same period of 2021.
Sales Volume (thousand tonnes) Average realised price
(VAT excluded)
(RMB/tonne)
Six-month period Change Six-month period Change
ended 30 June ended 30 June
2022 2021 (%) 2022 2021 (%)
Gasoline 28,945 31,795 (9.0) 8,919 6,786 31.4
Diesel 29,388 28,021 4.9 7,317 5,056 44.7
Kerosene 6,629 8,991 (26.3) 5,662 3,371 68.0
Chemical feedstock 20,902 22,337 (6.4) 5,311 3,609 47.2
Other refined petroleum products 32,785 33,752 (2.9) 4,637 4,596 0.9
In the first half of 2022, the sales revenues of gasoline were RMB258.2
billion, representing an increase of 19.6% year-on-year, accounting for 33.3%
of the segment's operating revenues.
In the first half of 2022, the sales revenues of diesel were RMB215.0 billion,
representing an increase of 51.8% year-on-year, accounting for 27.7% of the
segment's operating revenues.
In the first half of 2022, the sales revenues of kerosene were RMB37.5
billion, representing an increase of 23.9% year-on-year, accounting for 4.8%
of the segment's operating revenues.
In the first half of 2022, the sales revenues of chemical feedstock were
RMB111.0 billion, representing an increase of 37.7% year-on-year, accounting
for 14.3% of the segment's operating revenues.
In the first half of 2022, the sales revenues of refined petroleum products
other than gasoline, diesel, kerosene and chemical feedstock were RMB152.0
billion, representing a decrease of 2.0% year-on-year, accounting for 19.6% of
the segment's operating revenues.
In the first half of 2022, the segment's operating expenses were RMB745.9
billion, representing an increase of 27.2% year-on-year, which was mainly
attributable to the significant increase in the cost of outsourced crude,
fuels and power resulting from increased international crude oil price.
In the first half of 2022, the average processing cost of refining feedstock
was RMB4,754 per tonne, representing an increase of 60.7% year-on-year. Total
refining feedstock throughput was 123.07 million tonnes (excluding volume
processed for third parties), representing a decrease of 5.5% year-on-year. In
the first half of 2022, the total processing cost for crude oil was RMB585.1
billion, representing an increase of 51.8% year-on-year. This was mainly due
to the increased crude procurement cost.
In the first half of 2022, the refining margin was RMB533 per tonne, decreased
by RMB28 per tonne year-on-year, representing a decrease of 5.1% year-on-year.
This was mainly due to the increased crude procurement cost, overseas
transportation and insurance cost, and decreased refined oil products margin
ratio under the high crude price circumstance.
In the first half of 2022, 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 RMB222.76
per tonne, representing an increase of 18.2% year-on-year, which was mainly
due to the increased cost of auxiliary material and fuels resulting from
increased international commodity prices.
In the first half of 2022, the segment proactively reduced the utilisation
rate to address the resurging pandemic and weak demand of refined oil
products, but impacted by the increased processing cost of crude oil and
shrank margin ratio, operating profit was RMB29.8 billion, decreased by RMB9.6
billion or 24.4% 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 wholesale and direct sales 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 2022, the operating revenues of this segment were
RMB792.0 billion, increased by 24.7% year-on-year. This was mainly
attributable to increased prices of refined oil products. Among which, sales
revenues of gasoline were RMB366.7 billion, increased by 10.0% year-on-year,
sales revenues of diesel were RMB278.0 billion, increased by 48.5%
year-on-year and sales revenues of kerosene were RMB49.5 billion, increased by
32.2% year-on-year.
The following table sets forth the sales volume, average realised prices and
respective changes of the segment's four major refined oil products in the
first half of 2022 and 2021, including the detailed information about the
retail, direct sales and distribution of gasoline and diesel.
Sales volume Average realised price
(thousand tonnes) (VAT excluded, RMB/tonne)
Six-month period Change Six-month period Change
ended 30 June ended 30 June
2022 2021 (%) 2022 2021 (%)
Gasoline 39,554 45,606 (13.3) 9,271 7,307 26.9
Retail 28,669 32,383 (11.5) 9,783 7,807 25.3
Direct sales and distribution 10,885 13,222 (17.7) 7,925 6,082 30.3
Diesel 36,792 34,742 5.9 7,556 5,388 40.2
Retail 15,212 15,065 1.0 8,072 6,079 32.8
Direct sales and distribution 21,580 19,677 9.7 7,192 4,860 48.0
Kerosene 8,575 11,016 (22.2) 5,771 3,397 69.9
Fuel oil 11,159 12,751 (12.5) 5,122 3,103 65.1
In the first half of 2022, the operating expenses of this segment were
RMB775.1 billion, representing an increase of RMB156.0 billion, up by 25.2%
year-on-year. This was mainly due to increased procurement cost of refined oil
products resulting from increased international crude oil price.
In the first half of 2022, the segment's marketing cash operating cost
(defined as the operating expenses less the purchase costs, taxed other than
income tax, depreciation and amortization, divided by sales volume) was
RMB198.71 per tonne, up by 13.0% year-on-year. This was mainly attributable to
the increased unit fixed cost as a result of resurging pandemic, weak demand
for refined oil products and decreased sales volume.
In the first half of 2022, the operating revenues of non-fuel business of this
segment were RMB19.3 billion, representing an increase of RMB1.3 billion
year-on-year, and the profit of non-fuel business was RMB2.6 billion,
representing an increase of RMB300 million year-on-year. This was mainly
because the Company proactively promoted the sales volume of company branding
products and expanded new business models.
In the first half of 2022, the segment proactively integrated and coordinated
production and marketing, expanded market to address the severe situation of
resurging pandemic, and realised an operating profit of RMB16.9 billion,
representing an increase of RMB800 million or 4.9% year-on-year.
(4) Chemicals
The business activities of the chemicals segment include purchasing chemical
feedstock from the refining segment and third parties and producing, marketing
and distributing petrochemical and inorganic chemical products.
In the first half of 2022, the operating revenues of this segment were
RMB278.2 billion, increased by 19.6% year-on-year. This was mainly due to the
increased chemical prices, as well as sales volume growth of some products.
In the first half of 2022, the operating revenue generated by the segment's
six major categories of chemical products (namely basic organic chemicals,
synthetic resin, synthetic fiber monomer and polymer, synthetics fibre,
synthetic rubber and chemical fertiliser) was RMB262.4 billion, increased by
18.5% year-on-year, accounting for 94.3% of the operating revenues of the
segment.
The following table sets forth the sales volume, average realised prices and
respective changes of each of the segment's six categories of chemical
products in the first half of 2022 and 2021.
Sales volume Average realised price
(thousand tonnes) (VAT excluded, RMB/tonne)
Six-month period Change Six-month period Change
ended 30 June ended 30 June
2022 2021 (%) 2022 2021 (%)
Basic organic chemicals 23,105 23,377 (1.2) 6,423 4,961 29.5
Synthetic fibre monomer 3,843 3,432 12.0 6,633 6,253 6.1
and polymer
Synthetic resin 8,596 8,652 (0.6) 8,662 8,174 6.0
Synthetics fibre 588 714 (17.7) 8,350 7,356 13.5
Synthetic rubber 664 624 6.5 11,728 10,589 10.8
Chemical fertiliser 408 505 (19.3) 3,329 2,666 24.9
In the first half of 2022, the operating expenses of this segment were
RMB277.4 billion, increased by 26.5% year-on-year, mainly due to the increased
cost of outsourced feedstock and fuels as a result of increased international
crude oil price.
In the first half of 2022, The segment vigorously optimised structural of
feedstock, product and facilities, increased production of high value-added
products, but impacted by significant decrease in chemical margin, resulting
from significant increase of naphtha and other feedstock prices, weak chemical
demand, and relatively low downstream utilisation rate, operating profit was
RMB800 million, decreased by RMB12.6 billion year-on-year.
(5) Corporate and Others
The business activities of corporate and others mainly consists of import and
export business activities of Sinopec Corp.'s subsidiaries, research and
development activities of the Company, and managerial activities of the
headquarters.
In the first half of 2022, the operating revenue generated from the corporate
and others was RMB912.3 billion, increased by 48.5% year-on-year, mainly due
to a significant increase in the trading prices of crude oil and refined oil
products.
In the first half of 2022, the operating expenses for corporate and others
were RMB911.9 billion, increased by 47.5% year-on-year.
In the first half of 2022, the segment's operating profit was RMB400 million.
3 ASSETS, LIABILITIES, EQUITY AND CASH FLOWS
The major funding resources of the Company are its operating activities,
short-term and long-term loans. The major use of funds includes operating
expenses, capital expenditures, and repayment of short-term and long-term
debts.
(1) Assets, Liabilities and Equity Unit：RMB million
As of As of Change
30 June 31 December
2022 2021
Total assets 2,059,814 1,889,255 170,559
Current assets 706,433 558,024 148,409
Non-current assets 1,353,381 1,331,231 22,150
Total liabilities 1,129,073 974,181 154,892
Current liabilities 793,623 641,280 152,343
Non-current liabilities 335,450 332,901 2,549
Total equity attributable to the shareholders of the Company 786,249 774,182 12,067
Share capital 121,071 121,071 −
Reserves 665,178 653,111 12,067
Non-controlling interests 144,492 140,892 3,600
Total equity 930,741 915,074 15,667
As of 30 June 2022, the Company's total assets were RMB2,059.8 billion,
representing an increase of RMB170.6 billion compared with the 2021 year-end
balance, of which:
Current assets were RMB706.4 billion, representing an increase of RMB148.4
billion compared with the 2021 year-end balance, mainly because inventories
and accounts receivable increased by RMB77.6 billion and RMB28.9 billion
respectively resulting from the increase of international crude oil price, as
well as cash and cash equivalents increased by RMB30.6 billion.
Non-current assets were RMB1,353.4 billion, representing an increase of
RMB22.2 billion compared with the 2021 year-end balance, mainly because
construction in progress increased by RMB13.1 billion and interest in
associates increased by RMB9.6 billion.
As of 30 June 2022, the Company's total liabilities were RMB1,129.1 billion,
representing an increase of RMB154.9 billion compared with the end of last
year, of which:
Current liabilities were RMB793.6 billion, representing an increase of
RMB152.3 billion compared with the 2021 year-end balance, mainly because
short-term debts increased by RMB124.3 billion and accounts payable and bills
payable increased by RMB32.6 billion.
Non-current liabilities were RMB335.5 billion, representing an increase of
RMB2.5 billion compared with the 2021 year-end balance.
As of 30 June 2022, total equity attributable to shareholders of the Company
was RMB786.2 billion, representing an increase of RMB12.1 billion compared
with the 2021 year-end balance.
(2) Cash Flows
The following table sets forth the major items in the consolidated cash flow
statements for the first half of 2022 and of 2021:
Unit: RMB million
Major items of cash flows Six-month period ended 30 June Change
2022 2021
Net cash generated from operating activities 4,947 48,347 (43,400)
Net cash used in investing activities (51,138) (65,990) 14,852
Net cash generated from financing activities 75,212 8,650 66,562
Net increase/(decrease) in cash and cash equivalents 29,021 (8,993) 38,014
In the first half of 2022, net cash generated from operating activities was
RMB4.9 billion, representing a decrease of RMB43.4 billion year-on-year,
mainly due to net change of inventories increasing the outflow of cash by
RMB31.0 billion, net change of accounts payable and other current liabilities
decreasing inflow of cash by RMB22.5 billion, net change of income tax paid
decreasing outflow of cash by RMB6.2 billion and share of profits from
associates and joint ventures decreasing outflow of cash by RMB3.8 billion.
In the first half of 2022, the Company's net cash used in investing activities
was RMB51.1 billion, representing a decrease of cash outflow of RMB14.9
billion year-on-year, mainly due to a year-on-year decrease of cash outflow of
RMB34.2 billion in time deposits with maturities over three months, an
increased cash outflow of RMB7.6 billion used to pay for acquisition of
subsidiaries, an increase of cash outflow RMB5.3 billion in capital
expenditures and a decrease of cash inflow of RMB4.5 billion in the proceeds
from sale of investments.
In the first half of 2022, the Company's net cash generated from financing
activities was RMB75.2 billion, representing an increase of cash inflow of
RMB66.6 billion year-on-year, mainly due to proceeds from bank and other loans
increased by RMB178.8 billion, repayments of bank and other loans increased by
RMB93.3 billion and dividends distribution increased by RMB21.8 billion.
As of 30 June 2022, the Company's cash and cash equivalents were RMB139.2
billion.
(3) Contingent Liabilities
Please refer to "Material Guarantee Contracts and Performance Thereof" in the
"Significant Events" section of this report.
(4) Capital Expenditure
Please refer to "Capital Expenditures" in the "Business Review and Prospects"
section of this report.
(5) Research & Development and Environmental Expenditure
Research and Development expenditures referred to fees incurred in the period
and recognised as expenses. In the first half of 2022, the Company's research
and development expenditure amounted to RMB9.48 billion, of which expenditure
was RMB6.31 billion and capitalised expenditure was RMB3.17 billion.
Environmental expenditures refer to the routine pollutant cleaning fees paid
by the Company, excluding capitalised cost of pollutant treatment facilities.
In the first half of 2022, the environmental expenditures amounted to RMB4.355
billion.
(6) Measurement of Fair Values of Derivatives and Relevant System
The Company has established sound decision-making mechanism, business process
and internal control systems relevant to financial instrument accounting and
information disclosure. The following table sets forth items relevant to
measurement of fair values.
Items relevant to measurement of fair values Unit: RMB million
Items Beginning of End of the Profits and Accumulated Impairment Funding
the reporting reporting losses from variation loss provision source
period period variation of fair of fair values of the current
values in the recorded as reporting
current reporting equity period
period
Financial assets held for trading − 1,012 9 − − Self-owned fund
Structured deposit − 1,009 9 − − Self-owned fund
Fund − 3 − − − Self-owned fund
Derivative financial instruments 1,350 1,038 (19,312) − −
Cash flow hedges 15,148 25,023 (16) 2,330 −
Receivables financing 5,939 5,889 − − −
Other equity instrument investments 767 771 − (14) −
Total 23,204 33,733 (19,319) 2,316 −
4 ANALYSIS OF FINANCIAL STATEMENTS PREPARED UNDER CASs
The major differences between the Company's financial statements prepared
under CASs and IFRS are set out in Section C of the financial statements of
the Company on page 143 of this report.
(1) Under CASs, the operating income and operating profit or loss by
reportable segments were as follows:
Six-month period ended 30 June
2022 2021
RMB million RMB million
Operating income
Exploration and Production Segment 158,168 109,526
Refining Segment 775,636 625,865
Marketing and Distribution Segment 791,993 635,170
Chemicals Segment 278,210 232,643
Corporate and Others 912,272 614,339
Elimination of inter-segment sales (1,304,153) (956,770)
Consolidated operating income 1,612,126 1,260,773
Operating profit/(loss)
Exploration and Production Segment 25,358 5,218
Refining Segment 28,751 39,177
Marketing and Distribution Segment 17,964 16,583
Chemicals Segment 120 12,845
Corporate and Others 18,164 1,646
Elimination (11,210) (12,860)
Financial expenses, losses/gains from changes in fair value, (17,067) 385
investment income and disposal income
Other income 2,121 1,244
Consolidated operating profit 64,201 64,238
Net profit attributable to equity shareholders of the Company 43,530 39,426
Operating profit: In the first half of 2022, the operating profit of the
Company was RMB64.2 billion, representing a decrease of 0.1% year-on-year.
Net profit: In the first half of 2022, net profit attributable to the equity
shareholders of the Company was RMB43.5 billion, representing an increase of
10.4% year-on-year.
(2) Financial data prepared under CASs:
At 30 June At 31 December
2022 2021 Changes
RMB million RMB million RMB million
Total assets 2,059,814 1,889,255 170,559
Non-current liabilities 334,519 331,934 2,585
Shareholders' equity 931,672 916,041 15,631
Changes analysis:
Total assets: As of 30 June 2022, the Company's total assets were RMB2,059.8
billion, representing an increase of RMB170.6 billion compared with the 2021
year-end balance. This was mainly due to inventories increased by RMB77.6
billion, accounts receivable increased by RMB28.9 billion, cash at bank and on
hand increased by RMB11.9 billion, derivative financial assets increased by
RMB22.0 billion, other receivables increased by RMB9.0 billion, long-term
equity investments increased by RMB10.2 billion and construction in progress
increased by RMB13.1 billion.
Non-current liabilities: As of 30 June 2022, the Company's non-current
liabilities were RMB334.5 billion, representing an increase of RMB2.6 billion
compared with the 2021 year-end balance.
Shareholders' equity: As of 30 June 2022, total shareholders' equity of the
Company was RMB931.7 billion, representing an increase of RMB15.6 billion
compared with the 2021 year-end balance.
(3) The results of the principal operations by segments
Segments Operating Operating cost Gross profit Increase of Increase of Increase of
income (RMB million) margin* operating operating gross profit
(RMB million) (%) income on cost on margin on
a year-on-year a year-on-year a year-on-year
basis (%) basis (%) basis
(percentage
points)
Exploration and Production 158,168 105,879 23.9 44.4 20.6 8.4
Refining 775,636 622,979 4.6 23.9 35.1 (3.7)
Marketing and Distribution 791,993 742,258 6.1 24.7 26.8 (1.5)
Chemicals 278,210 268,075 3.0 19.6 31.5 (8.7)
Corporate and Others 912,272 884,577 3.0 48.5 46.4 1.4
Elimination of inter-segment sales (1,304,153) (1,292,943) N/A N/A N/A N/A
Total 1,612,126 1,330,825 9.1 27.9 33.3 (2.1)
* Gross profit margin = (Operating income - Operating cost - taxes
and surcharges)/Operating income
5. THE CAUSE AND IMPACT OF THE CHANGE IN THE COMPANY'S ACCOUNTING POLICY,
ACCOUNTING ESTIMATES AND ACCOUNTING METHODS
For details, please refer to Note 3(26) to the financial statements prepared
in accordance with CASs and Note 2 to the financial statement prepared in
accordance with IFRS.
CORPORATE GOVERNANCE
1. IMPROVEMENTS IN CORPORATE GOVERNANCE
During the reporting period, Sinopec Corp. adhered to the standard operation,
complied with the Articles of Association as well as domestic and applicable
overseas laws and regulations on securities, and strengthened the edifice of
the fundamental system of corporate governance by revising several internal
rules according to the updated securities regulations. The Board fulfilled its
duties, strengthened its strategic planning roles, and formulated medium-term
and long-term development plans. The Company continuously promoted the
execution effectiveness of internal control policy and strengthened compliance
management and risk control, so as to improve enterprise management. The Party
participated in the corporate governance of the Company, which promoted the
effective implementation of the decisions of the Board. The Company
continuously conducted the information disclosure and investor relations work
with high quality, strengthened communication with stakeholders, and fulfilled
the social responsibilities to contribute to economic growth and social
progress by ensuring a stable supply of oil and gas and supporting the actions
fighting against the pandemic, etc.
2. GENERAL MEETINGS
During the reporting period, Sinopec Corp. convened the annual general meeting
for 2021, the first A shareholders class meeting for 2022, and the first H
shareholders class meeting for 2022 on 18 May 2022 in Beijing, China, strictly
in compliance with the relevant laws, regulations, and the notice requirement,
convening and holding procedures under the Articles of Association. The annual
general meeting for 2021 approved the proposals in relation to the following
matters: (i) Report of the Board of Directors for 2021; (ii) Report of the
Board of Supervisors for 2021; (iii) The audited financial reports of Sinopec
Corp. for the year ended 31 December 2021 prepared by KPMG Huazhen (Special
General Partnership) and KPMG; (iv) The profit distribution plan of Sinopec
Corp. for 2021; (v) To authorise the Board to determine the interim profit
distribution plan for 2022; (vi) To re-appoint KPMG Huazhen (Special General
Partnership) and KPMG as the external auditors of Sinopec Corp. for the year
2022, and to authorise the Board to determine their remunerations; (vii) To
authorise the Board to determine the proposed plan for issuance of debt
financing instrument(s); (viii) To grant to the Board a general mandate to
issue new domestic shares and/or overseas-listed foreign shares of Sinopec
Corp.; (ix) To grant to the Board a mandate to buy back domestic shares and/or
overseas-listed foreign shares of Sinopec Corp.; (x) Resolutions on the
election of supervisors (excluding employee representative supervisors). The
first A shareholders class meeting for 2022 and the first H shareholders class
meeting for 2022 approved respectively the proposal on granting to the Board a
mandate to buy back domestic shares and/or overseas-listed foreign shares of
Sinopec Corp. For details of the meetings, please refer to the poll results
announcement published on China Securities Journal, Shanghai Securities News,
and Securities Times and on the websites of Shanghai Stock Exchange and Hong
Kong Stock Exchange after the meetings.
3. DIRECTORS, SUPERVISORS AND OTHER SENIOR MANAGEMENT
(1) Information on Appointment or Termination
On 18 May 2022, Mr. Jiang Zhenying resigned as Supervisor of Sinopec Corp. due
to a change of working arrangement. Mr. Li Defang and Mr. Lv Dapeng resigned
as Employee Representative Supervisors due to age. Mr. Guo Hongjin and Mr. Yin
Zhaolin were re-designated from Non-employee Representative Supervisors to
Employee Representative Supervisors. On the same day, Mr. Qiu Fasen, Mr. Lv
Lianggong, Mr. Wu Bo and Mr. Zhai Yalin were elected as Supervisors of Sinopec
Corp.
On 2 June 2022, Mr. Zhao Dong was appointed as the President of China
Petrochemical Corporation.
On 18 July 2022, Mr. Ng, Kar Ling Johnny resigned as Independent Non-executive
Director of Fangdd Network Group Ltd.
On 20 July 2022, Mr. Chen Ge resigned as Senior Vice President due to age.
(2) Equity Interests of Directors, Supervisors, and Other Senior Management
As of 30 June 2022, Mr. Ling Yiqun, Director and Senior Vice President, held
13,000 A shares of Sinopec Corp., and Mr. Li Defang, the former Supervisor,
held 40,000 A shares of Sinopec Corp. (held by his spouse).
Save as disclosed above, as of 30 June 2022, none of the Directors,
Supervisors and Senior Management of Sinopec Corp. and their respective
associates had any interests or short positions (including any interests or
short positions that are regarded or treated as being held in accordance with
the SFO) in any shares, underlying shares or debentures of Sinopec Corp. or
any associated corporations (as defined in Part XV of 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 the Hong Kong Listing Rules.
As required under the related Hong Kong regulations, 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 regulate
securities transactions by relevant personnel. 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 in the Model Code as well as
those set out in the Rules and the Code during the reporting period.
4 DIVIDEND
(1) Dividend distribution for the year ended 31 December 2021
Upon the approval at its annual general meeting for 2021, Sinopec Corp.
distributed the final cash dividend of RMB0.31 per share (tax inclusive) for
2021. The final dividend for 2021 has been distributed on or before 23 June
2022 to shareholders whose names appeared on the register of members of
Sinopec Corp. on 9 June 2022. Combined with the 2021 interim cash dividend of
RMB0.16 per share (tax inclusive), the total cash dividend for the whole year
of 2021 amounted to RMB0.47 per share (tax inclusive).
(2) Interim dividend distribution plan for the six months ended 30 June 2022
As approved at the 12th meeting of the eighth session of the Board, the
interim dividend of RMB0.16 per share (tax inclusive) for the six months ended
30 June 2022 will be distributed based on the total number of shares as of 16
September 2022 (record date) in cash.
The 2022 interim dividend distribution plan of Sinopec Corp., having
considered the 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 such
plan. The interim dividend will be distributed on or before 29 September 2022
to all shareholders whose names appear on the register of members of Sinopec
Corp. on the record date of 16 September 2022. In order to be qualified for
the interim dividend, holders of H shares shall lodge their share certificates
and transfer documents with Hong Kong Registrars Limited at 1712-1716, 17th
floor, Hopewell Centre, No. 183 Queen's Road East, Wanchai, Hong Kong, for
registration, no later than 4:30 p.m. on 9 September 2022. The register of
members of H shares of Sinopec Corp. will be closed from 10 September 2022 to
16 September 2022 (both days inclusive). The dividend will be denominated and
declared in RMB and distributed to domestic shareholders and shareholders
under Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect Program in RMB
and to the overseas 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 Hong Kong Dollar against RMB as published by the People's
Bank of China one week ahead of the date of declaration of the interim
dividend (1 Hong Kong dollar=RMB0.864426).
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 or issuing bonus shares by way of
capitalisation from retained earnings. Any H Shares of the Sinopec Corp. which
are not registered under the name of an individual shareholder, including
those registered under HKSCC Nominees Limited, other nominees, agents or
trustees, or other organisations or groups, shall be deemed as shares held by
non-resident enterprise shareholders. On such basis, enterprise income tax
shall be withheld from dividends payable to such shareholders. If holders of H
Shares intend to change their shareholder status, please enquire about the
relevant procedures with your agents or trustees. Sinopec Corp. will strictly
comply with the law or the requirements of the relevant government authority
to withhold and pay enterprise income tax on behalf of the relevant
shareholders based on the registration of members for H shares of Sinopec
Corp. as at the record date. If the individual holders of H shares are
residents of Hong Kong, Macau or countries which had an agreed tax rate of 10%
for cash dividends or bonus shares by way of capitalisation from retained
earnings with China under the relevant tax agreement, Sinopec Corp. should
withhold and pay individual income tax on behalf of the relevant shareholders
at a rate of 10%. If the individual holders of H Shares are residents of
countries 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 H Shares wish to reclaim the extra amount
withheld due to the application of 10% tax rate, Sinopec Corp. would apply for
the relevant agreed preferential tax treatment pursuant to the relevant tax
agreement provided that the relevant shareholders submit the evidence required
by the notice of the tax agreement to the share register of H shares of
Sinopec Corp. in a timely manner. Sinopec Corp. will assist with the tax
refund after the approval of the competent tax authority. If the individual
holders of H Shares are residents of countries which had 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 the relevant tax agreements. If the individual holders of H
Shares are residents of countries which had an agreed tax rate of 20% with
China, or which had not entered into any tax agreement with China, or
otherwise, 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) and the Notice on the Tax Policies Related to the
Pilot Program of the Shenzhen-Hong Kong Stock Connect
(《關於深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 2016 No.127): For dividend of domestic investors investing in the H
Shares of Sinopec Corp. through Shanghai-Hong Kong and Shenzhen-Hong Kong
Stock Connect Program, the Company shall withhold and pay income tax at the
rate of 20% on behalf of individual investors and securities investment funds.
The Company 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 by themselves. For dividends of investors of the Hong
Kong Stock Exchange (including enterprises and individuals) investing in the 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 competent tax authorities for the
withholding. For investors who are tax residents of other countries which have
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 according to such tax treaty will be refunded.
5 DETAILED IMPLEMENTATION OF THE SHARE INCENTIVE SCHEME
Sinopec Corp. and its subsidiaries did not implement any share incentive
scheme during the reporting period.
6 COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
During the reporting period, Sinopec Corp. complied with all the code
provisions of the Corporate Governance Code set out in Appendix 14 of the Hong
Kong Listing Rules.
7 REVIEW OF THE INTERIM REPORT
The Audit Committee of the Board of Sinopec Corp. has reviewed and confirmed
the Interim Report.
ENVIRONMENT AND SOCIAL RESPONSIBILITIES
1 Work conducted in ecological protection, pollution prevention and
environmental responsibilities performance in the reporting period
In the reporting period, the Company actively practiced the green and clean
development strategy, comprehensively promoted the construction and operation
of HSE system, persistently carried out Green Enterprise Action, deepened the
campaign of pollution prevention, enhanced ecological environment protection
of enterprises in key river basins such as the Yangtze River and Yellow River,
kept environment risk from occurring, thus no substantial or sudden
environmental incident happened. The COD and sulphur dioxide emissions
decreased by 2.1% and 4.1% respectively, and the solid waste was 100% properly
treated.
2 Measures taken to mitigate carbon emission and its effect in the
reporting period
In the reporting period, the Company, guided by the carbon peak and carbon
neutrality target, advanced the Energy Efficiency Improvement Plan in depth,
actively implemented emissions reduction measures of GHG, such as CO(2) and
methane, and continuously promoted the clean utilisation of fossil energy,
scaling up of clean energy, and low-carbon of production process. In the first
half of 2022, the Company continuously promoted energy conservation and
consumption reduction and GHG emissions decreased by 1.59 million tonnes of
CO(2) equivalent, 745 thousand tonnes of CO(2) were recycled, 390 million
cubic meters of methane were recovered which was equivalent to reducing 5.85
million tonnes of CO(2) emissions.
3 ENVIRONMENTAL PROTECTION SOLUTIONS OF COMPANIES AND THEIR SUBSIDIARIES
AS MAJOR POLLUTANT DISCHARGING COMPANIES IDENTIFIED BY ENVIRONMENTAL
PROTECTION DEPARTMENTS
(1) Pollutant discharge information
In the reporting period, certain subsidiaries of Sinopec Corp. listed as major
pollutant discharge units announced by national or local ecological and
environmental authorities have acquired their pollutant discharge license in
accordance with the requirements of the national list of fixed pollution
source emission permit classification management and disclosed environmental
information as required by the relevant authorities and local government. The
details of such information was published on national pollutant discharge
license management information platform
(http://permit.mee.gov.cn/permitExt/defaults/default-index!getInformation.action)
and the local government website.
(2) Construction and operation of pollution prevention facilities
In the reporting period, the Company built prevention and control facilities
for sewage, flue gas, solid waste and noise in accordance with the
requirements of the national and local pollution prevention and environmental
protection standards, kept effective and stable operation of pollution
prevention and control facilities.
(3) Environmental influence evaluation for construction projects and other
administrative permit for environmental protection
In the reporting period, the Company standardized environmental protection
management for construction projects, enforced whole process construction and
operation management, with measures of the "simultaneous three" implemented,
all new projects have acquired approval for environmental evaluation from
government.
(4) Contingent scheme for sudden environmental incident
In the reporting period, the Company complied with the requirements for
environmental incident contingent scheme by the State and persistently
improved its contingent scheme against sudden environmental incidents of
enterprises and severe pollution weather.
(5) Scheme for environment self-monitoring
In the reporting period, the Company improved its self-monitoring scheme in
accordance with the industry guideline, enforced the new requirements for
sewage, flue gas and noise monitoring, and disclosed the monitor information
as required.
(6) Administrative penalties due to environmental problems in the reporting
period
In the reporting period, no penalty for significant environmental protection
incident was imposed on the Company. The Company and its subsidiaries'
administrative penalties have been disclosed on the website of environment
departments and other related departments of local government.
(7) Other environmental information to be disclosed
In the reporting period, for subsidiaries not listed as major pollution units,
the Company has acquired related permissions from national and local
government, and enforces environmental protection measures. The above
mentioned subsidiaries are not obliged to disclose in accordance with the
requirements of national and local ecological environment authorities.
4 EXPAND THE ACHIEVEMENTS IN POVERTY-ALLEVIATION AND RURAL
REVITALIZATION
During the reporting period, the Company earnestly implemented the decisions
and plans of rural revitalization of the State and coordinated to promote the
support of industry, education and consumption and employment. According to
the actual needs of rural revitalization, the Company persistently supported
the revitalization of talents and conducted 5,037 person-times of training for
village cadres, revitalization leaders and professionals. The Company
constantly promoted the industry & consumption mode of support with
production leading sales and sales promoting production and supported local
consumption by RMB359 million in the first half of the year.
5 SUPPORT THE WINTER OLYMPIC AND PARALYMPIC GAMES BEIJING 2022
In the first half of 2022, as an official sponsor for Winter Olympic and
Paralympic Games Beijing 2022, Sinopec Corp. proactively implemented its
concept of clean energy, serve the Winter Olympic Games, dedicated itself to
service, supply and promotion for the Olympic Games. Sinopec Corp. developed
and manufactured the carbon fibre synthetic material used in the Flying Upward
torch, supplied clean energy for the Games and actively promoted the
construction of service stations integrated with oil, gas and hydrogen. During
the period of Winter Olympic and Paralympic Games Beijing 2022, Sinopec Corp.
built 4 hydrogen service stations for the Games and cumulatively served 12.6
thousand vehicles for the Winter Olympics.
SIGNIFICANT EVENTS
1. MAJOR PROJECTS
(1) Zhenhai Refining & Chemical expansion project (phase 2)
Zhenhai Refining & Chemical expansion project (phase 2) consists of
building a 11 million tpa refinery project and a 600,000 tpa propane
dehydrogenatin and downstream projects. The refinery project began
construction in June 2022 and is expected to achieve mechanical completion by
December of 2024. The Company's self-owned fund accounts for 30% of the
project investment, and bank loan is the main source of the remaining 70%. As
of 30 June 2022, the aggregate investment was RMB3.3 billion.
(2) Tianjin Nangang ethylene and downstream high-end new material industry
cluster project
Tianjin Nangang Ethylene and downstream High-End New Material Industry Cluster
Project consists of 1.2 million tpa ethylene project and downstream processing
units. The project began in May 2021 and is expected to achieve mechanical
completion by the end of 2023. The Company's self-owned fund accounts for
approximately 30% of the project investment and bank loan is the main source
of the remaining funds. As of 30 June 2022, the aggregate investment was
RMB6.4 billion.
(3) Hainan Refining & Chemical 1 million tpa ethylene and refinery
revamping and expansion project
Hainan Ethylene and Refining Expansion project mainly consists of 1 million
tpa ethylene and auxiliary units. The project started in December 2018 and
achieved the mechanical completion in June 2022. The Company's self-owned fund
accounts for approximately 30% of the project investment and bank loan is the
main source of the remaining funds. As of 30 June 2022, the aggregate
investment was RMB23.8 billion.
(4) Jiujiang Refining & Chemical PX project
Jiujiang Refining & Chemical PX project mainly consists of aromatics
extraction, xylene fractionation, disproportionation and transalkylation,
adsorption separation and isomerization units. Aromatics production capacity
will increase 0.89 million tons per year after the project is completed. The
project started construction in May 2020 and was put into operation in June
2022. The main source of the investment funds is bank loans. As of 30 June
2022, the aggregate investment was RMB3.5 billion.
(5) Yizheng Chemical Fiber PTA project
Yizheng Chemical Fiber 3 million tpa PTA project mainly consists of oxidation,
purification units and auxiliary units. The project started in July 2021 and
is expected to achieve mechanical completion in August 2023. The Company's
self-owned fund accounts for 30% of the project investment and bank loan is
the main source of the remaining funds. As of 30 June 2022, the aggregate
investment was RMB1.3 billion.
(6) Weirong shale gas project (phase 1 and phase 2)
Under the guidance of the principle of "overall deployment, stage-wise
implementation and fully consideration", the capacity construction was
promoted comprehensively from August 2018. The construction of phase 1 project
with a production capacity of 1 billion cubic meters per year was completed
and put into operation in December 2020. The phase 2 project with a production
capacity of 2 billion cubic meters per year is expected to be completed and
put into operation in December 2022. The Company's self-owned fund accounts
for 30% of the project investment and bank loan is the main source of the
remaining 70%. As of 30 June 2022, the aggregate investment was RMB7.0
billion.
(7) Tianjin LNG project (phase 2)
Tianjin LNG project (phase 2) mainly consists of a new wharf, five new
220,000-cubic-meter storage tanks etc. LNG processing capacity will reach 11
million tpa after phase 2 expansion project is completed. The project started
in January 2019 and is expected to be put into operation in August 2023. The
Company's self-owned fund accounts for approximately 30% of the project
investment and bank loan is the main source of the remaining 70%. As of 30
June 2022, the aggregate investment was RMB3.5 billion.
(8) Longkou LNG project
Longkou LNG project mainly consists of a wharf, terminal and power plant warm
drainage and water Intake. The first phase designed LNG capacity is 6 million
tons per year. One LNG berth with 0.266 million cubic meter capacity will be
modified and four 0.22 million cubic meter capacity storage tanks will be
newly built up. The project started in November 2021 and is expected to put
into operation in November 2024. The Company's self-owned fund accounts for
approximately 30% of the project investment and bank loan is the main source
of the remaining funds. As of 30 June 2022, the aggregate investment was
RMB2.4 billion.
2. CORE COMPETITIVENESS ANALYSIS
The Company is a large-scale integrated energy and petrochemical company with
upstream, mid-stream and downstream operations. The Company is a large oil and
gas producer in China with the largest refining capacity in China. The Company
is equipped with a well-developed refined oil products sales network, being
the largest supplier of refined oil products in China. The Company ranks first
in terms of ethylene production and marketing capacity and has a
well-established marketing network for chemical products.
The integrated business structure of the Company carries strong advantages in
synergy among its various business segments, enabling the Company to
continuously tap onto potentials in attaining an efficient and comprehensive
utilisation of its resources, and endowed the Company with strong resistance
against risks, as well as remarkable capabilities in sustaining profitability.
The Company enjoys a favourable positioning with its operations located close
to the consumer markets. The steady growth in the Chinese economy is helpful
to the development of both refined oil business and chemical business of the
Company; through continuous and specialised marketing efforts, the Company's
capability in international operations and market expansion has been further
enhanced.
The Company owns a team of professionals with expertise in the production of
oil and gas, operation of refineries and chemical plants, as well as marketing
activities. The Company applies outstanding fine management measures with its
remarkable capabilities in management of operations, and enjoys a favourable
operational cost advantage in its downstream businesses.
The Company has formulated a well-established technology system and mechanism,
and owns competent teams specialised in R&D covering a wide range of
subjects; the four platforms for technology advancement are taking shape,
which includes exploration and development of oil and gas, refining,
petrochemicals and strategic emerging technology. With its overall
technologies reaching state of the art level in the global arena, and some of
the technologies taking the lead globally, the Company enjoys a strong
technical strength.
The Company always attaches great importance to the fulfilment of social
responsibilities and carries out the green and low carbon development strategy
to pursue a sustainable development. Moreover, the Company enjoys an
outstanding "Sinopec" brand name, plays an important role in the national
economy and is a renowned and reputable company in China.
3. INTENTION TO DELIST AMERICAN DEPOSITARY SHARES FROM THE NEW YORK STOCK
EXCHANGE
Based on several comprehensive considerations, including the small volume of
the underlying H Shares of its outstanding American depositary shares ("ADSs")
compared to the total volume of its H Shares, the limited trading volume of
its ADSs relative to the worldwide trading volume of its H Shares and the
considerable administrative burden of maintaining the listing of the ADSs on
the New York Stock Exchange ("NYSE"), the registration of the ADSs and the
underlying H Shares with the United States Securities and Exchange Commission
and complying with the periodic reporting and related obligations of the U.S.
Securities Exchange Act of 1934 (as amended) in the long term, Sinopec Corp.
determined to apply for the voluntary delisting of its ADSs from the NYSE and
notified the NYSE on 12 August 2022 (Eastern Time in the U.S.). For details,
please refer to the announcements published by Sinopec Corp. on China
Securities Journal, Shanghai Securities News, Securities Times, and on the
website of Shanghai Stock Exchange on 13 August 2022, and on the website of
Hong Kong Stock Exchange on 12 August 2022.
4. ASSET TRANSACTIONS WITH INEOS
On 28 July 2022, the Company entered into transaction documents with certain
of subsidiaries of INEOS Limited ("INEOS") with respect to the cooperation on
Shanghai SECCO Petrochemical Co., Ltd. ("Shanghai SECCO") and other projects.
Pursuant to the relevant transaction documents, the Company conditionally
agreed to sell, and INEOS Investment (Shanghai) Company Limited conditionally
agreed to purchase, 50% equity interest in Shanghai SECCO; Sinopec Corp.
agreed to purchase, and INEOS Styrolution APAC Pte Limited agreed to sell, 50%
equity interest in INEOS Styrolution Advanced Materials (Ningbo) Pte Ltd
("Ningbo Styrolution") and Sinopec Corp. agreed to provide corresponding
shareholders' loans to Ningbo Styrolution; Sinopec Corp. and INEOS Tianjin
Holdings Limited also agreed to form the INEOS Sinopec HDPE (Tianjin) Limited
(tentative name) as a joint venture on a 50:50 basis, for the construction of
a 500,000 tonnes/year High Density Polyethylene (HDPE) project in Tianjin.
For details and definitions, please refer to the announcements published by
Sinopec Corp. on China Securities Journal, Shanghai Securities News,
Securities Times, and on the website of Shanghai Stock Exchange on 29 July
2022, and on the website of Hong Kong Stock Exchange on 28 July 2022.
5. ACTUAL CONTINUING CONNECTED TRANSACTIONS ENTERED INTO BY THE COMPANY
DURING THE REPORTING PERIOD
Sinopec Corp. and China Petrochemical Corporation entered into a number of
continuing connected transactions agreements, including the mutual supply
agreement, the land use rights leasing agreement, the properties leasing
agreement, the intellectual property license agreement and safety production
insurance fund document.
In the reporting period, purchases expenses of the actual continuing connected
transactions of the Company were RMB112.784 billion, representing 7.05% of the
total amount of this type of transactions for the reporting period, including
purchases of products and services (procurement, storage, transportation,
exploration and production services, and production-related services) of
RMB106.529 billion, payment of property rent of RMB470 million (the annual
value of right-of-use assets relating to property lease of RMB2,570 million),
payment of land rent of RMB5.568 billion (annual value of right-of-use assets
relating to land lease of RMB30.468 billion), and interest expenses of RMB217
million. The sales income from continuing connected transactions amounted to
RMB69.714 billion, representing 4.16% of the total amount of this type of
transactions for the reporting period, including sales of products of
RMB69.290 billion, agency commission income of RMB40 million, and interest
income of RMB384 million. In addition, entrusted loan provided by the Company
to the connected subsidiaries was RMB850 million. For definitions, please
refer to the announcements published by Sinopec Corp. on China Securities
Journal, Shanghai Securities News, Securities Times and on the website of
Shanghai Stock Exchange on 30 August 2021 and on the website of Hong Kong
Stock Exchange on 29 August 2021 and 3 September 2021.
The amounts of continuing connected transactions between the Company and
Sinopec Group did not exceed the relevant caps for the continuing connected
transactions as approved by the general meeting of shareholders and the Board.
6. FUNDS PROVIDED BETWEEN RELATED PARTIES
Unit: RMB million
Funds to related parties Funds from related parties
Related parties Relations Balance Amount incurred Balance Balance Amount incurred Balance at
at the at the end at the the end
beginning of the reporting beginning of the reporting
of the reporting period of the reporting period
period period
Sinopec Group Parent company and 9,797 2,007 11,804 30,682 1,823 32,505
affiliated companies
Other related parties Associates and joint ventures 7,143 289 7,432 3,593 1,086 4,679
Total 16,940 2,296 19,236 34,275 2,909 37,184
Reason for provision of funds between related parties Loans and other accounts receivable and payable
Impacts of the provision of funds on the Company No material negative impact
Note: Affiliated companies include subsidiaries, associates and joint
ventures.
7. ACTUAL DAILY RELATED TRANSACTIONS ENTERED INTO BY THE COMPANY AND CHINA
OIL & GAS PIPELINE NETWORK CORPORATION (PIPECHINA) DURING THE REPORTING
PERIOD
On 27 January 2022, the Board of Sinopec Corp. approved the daily related
transaction cap in relation to refined oil pipeline transportation services
between Sinopec Marketing Company Limited and China Oil & Gas Pipeline
Network Corporation for the period from 1 January 2022 to 31 December 2022.
The actual executed amount of the daily related transaction of the Company and
PipeChina regarding refined oil pipeline transportation services from 1
January 2022 to 30 June 2022 was RMB2.48 billion.
8. SIGNIFICANT LITIGATION, ARBITRATION RELATING TO THE COMPANY
No significant litigation or arbitration relating to the Company occurred
during the reporting period.
9. CREDIBILITY OF THE COMPANY, CONTROLLING SHAREHOLDERS AND DE FACTO
CONTROLLER
During the reporting period, the Company and its controlling shareholder did
not have any unperformed court's effective judgments which should be performed
or any large amount of debt which should be repaid.
10. MATERIAL CONTRACTS AND PERFORMANCE THEREOF
During the reporting period, the Company did not enter into any undisclosed
material contracts which should have been disclosed.
11. SIGNIFICANT EQUITY INVESTMENT
In the reporting period, no significant equity investment occurred by the
Company.
12. SIGNIFICANT SALE OF ASSETS OR EQUITY
In the reporting period, no significant sale of assets or equity occurred by
the Company.
13. BUSINESS WITH SINOPEC FINANCE CO. AND CENTURY BRIGHT
(1) DEPOSIT BUSINESS
Unit: RMB Million
Related party Related party relationship Daily cap Interest rate range Amount incurred
Balance at the Total deposit Total withdrawn Balance at the
beginning of the end of the
reporting period reporting period
Sinopec Finance Co. Sinopec Group 51%; Sinopec Corp.49% RMB80 billion by Sinopec current：0.35% - 1.725%; 15,708 5,649 5,260 22,455
time deposit: 1.62% - 7.4%
Century Bright Sinopec Group 100% Finance Co. and Century Bright current：0% - 0.25%; 45,974 85,145 54,746 56,637
time deposit: 0.10% - 3.23%
Note 1: In general, the deposit interest rate offered by Sinopec
Finance Co. and Century Bright to Sinopec Corp. is no lower than those of
similar nature available from major commercial banks for the same period.
Note 2: The amount incurred in the reporting period is in the calibre
of time deposits.
(2) LOAN BUSINESS
Unit: RMB Million
Related party Related party relationship Daily cap Interest rate range Amount incurred
Balance at the Total loan Total withdrawn Balance at the
beginning of the end of the
reporting period reporting period
Century Bright Sinopec Group 100% 112,674 1% - 4.05% 3,199 93,646 93,996 2,849
Sinopec Finance Co. Sinopec Group 51%; Sinopec Corp. 49% 15,558 1.08% - 5.23% 13,364 27,527 25,391 15,500
Note: In general, the loan interest rate offered by Sinopec
Finance Co. and Century Bright to Sinopec Corp. is no higher than those of
similar nature available from major commercial banks for the same period.
(3) CREDIT BUSINESS AND OTHER FINANCE BUSINESS
Unit: RMB Million
Related party Related party relationship Business nature Total amount Amount incurred
Sinopec Finance Sinopec Group 51%; Acceptance bill 5,685 13,429
Sinopec Corp. 49% Discounted bill ╱ 14,480
Note: The amount incurred is that of the newly-issued bill in
the reporting period.
14. MATERIAL GUARANTEE CONTRACTS AND PERFORMANCE THEREOF
Unit: RMB million
Major external guarantees (excluding guarantees for controlled subsidiaries)
Guarantor Relationship with Name of Amount*(1) Transaction date Period of guarantee Type Principal guaranty Whether Whether Amount of Counter- Whether
the Company guaranteed company (date of signing) debt condition completed overdue overdue guaranteed guaranteed
or not or not guarantee for connected
parties*(2)
Sinopec Corp. The listed company Zhongtian Hechuang 4,394 May-2016 May 2016-December Joint and several liability guarantee Due performance − No No − No No
itself
Energy Co., Ltd.
2023 (the maturity date
is estimated)
Sinopec Corp. The listed company Zhong An United Coal Chemical Co., Ltd. 5,467 April-2018 April 2018-December 2031 Joint and several liability guarantee Due performance − No No − No No
itself
Sinopec Corp. The listed company Amur Gas Chemical Complex Limited Liability Company 3,538*(3) December-2021 December 2021-December 2035 (the maturity date Joint and several liability guarantee*(5 Due performance − No No − No No
itself
is estimated)
( )
)
( )
Sinopec Corp. The listed company Amur Gas Chemical Complex Limited Liability Company 20 January-2021 January 2021-June Joint and several liability guarantee Due performance − No No − No No
itself
2026 (the maturity date
is estimated)
Total amount of guarantees provided during the reporting period*(4) 0
Total amount of guarantees outstanding at the end of reporting period*(4) (A) 13,419
Guarantees by the Company to the controlled subsidiaries
Total amount of guarantee provided to controlled subsidiaries during the 0
reporting period
Total amount of guarantee for controlled subsidiaries outstanding at the end 11,745
of the reporting period (B)
Total amount of guarantees provided by the Company (including those provided
for controlled subsidiaries)
Total amount of guarantees (A+B) 25,164
The proportion of the total amount of guarantees to the Sinopec Corp.'s net 2.7
assets (%)
Among which:
Guarantees provided for shareholder, de facto controller and its related 0
parties (C)
Amount of debt guarantees provided directly or indirectly to the companies 9,026
with liabilities to assets ratio over 70% (D)
The amount of guarantees in excess of 50% of the net assets (E) 0
Total amount of the above three guarantee items (C+D+E) 9,026
Statement of guarantee undue that might be involved in any joint and several None
liabilities
Statement of guarantee status None
*1: Guarantee amount refers to the actual amount of guarantee liability that
the Company may undertake during the reporting period within the approved
guarantee limit.
*2: As defined in the Rules Governing the Listing of Stocks on Shanghai
Stock Exchange.
*3: Excluding the interest corresponding to the loan principal agreed in the
guarantee contract, export credit premium and other expenses.
*4: The amount of guarantees provided during the reporting period and the
outstanding balance of guarantees amount at the end of the reporting period
include the guarantees provided by the controlled subsidiaries to external
parties. The amount of the guarantees provided by these subsidiaries is
derived from multiplying the guarantees provided by Sinopec Corp.'s
subsidiaries by the percentage of shareholding of Sinopec Corp. in such
subsidiaries.
*5: In addition to the credit guarantee, Sinopec Corp. subsidiary SOIHL HONG
KONG HOLDING LIMITED pledged its 40% equity interest in Amur Gas Chemical
Complex Limited Liability Company as a supplementary guarantee.
For specific details of the guarantees provided by Sinopec Corp. for Zhongtian
Hechuang Energy Co., Ltd., Zhong An United Coal Chemical Co., Ltd. and Amur
Gas Chemical Complex Limited Liability Company in the above table, please
refer to the Company's announcements dated 29 December 2015, 26 March 2018, 16
April 2020, 26 January 2021, 16 December 2021 disclosed on the website of the
Shanghai Stock Exchange and the circulars dated 7 January 2016, 23 March 2018
and an announcement dated 15 December 2021 disclosed on the website of the
Stock Exchange of Hong Kong.
15. PERFORMANCE OF THE UNDERTAKINGS BY CHINA PETROCHEMICAL CORPORATION
Background Type of Party Contents Term for performance Whether bears deadline or not Whether strictly performed or not
Undertaking
Undertakings related to IPOs China Petrochemical Corporation 1 Compliance with the connected transaction agreements; From 22 June 2001 No Yes
Initial Public
Offerings (IPOs) 2 Solving the issues regarding the legality of land-use rights
certificates and property ownership rights certificates within a specified
period of time;
3 Implementation of the Reorganisation Agreement (please refer to the
definition of Reorganisation Agreement in the H share prospectus of Sinopec
Corp.);
4 Granting licenses for intellectual property rights;
5 Avoiding competition within the same industry;
6 Abandonment of business competition and conflicts of interest with
Sinopec Corp.
Other undertakings Other China Petrochemical Given that China Petrochemical Corporation engages in the same or similar Within 10 years after 29 April 2014 or the date when China Petrochemical Yes Yes
businesses as Sinopec Corp. with regard to the exploration and production of Corporation acquires the assets
Corporation overseas petroleum and natural gas, China Petrochemical Corporation hereby
grants a 10-year option to Sinopec Corp. with the following provisions: (i)
within ten years from the issuance date of this undertaking, after a thorough
analysis from political, economic and other perspectives, Sinopec Corp. is
entitled to require China Petrochemical Corporation to sell its overseas oil
and gas assets owned as of the date of the undertaking and still in its
possession upon Sinopec Corp.'s exercise of the option to Sinopec Corp.; (ii)
in relation to the overseas oil and gas assets acquired by China Petrochemical
Corporation after the issuance of the undertaking, within 10 years of the
completion of such acquisition, after a thorough analysis from political,
economic and other perspectives, Sinopec Corp. is entitled to require China
Petrochemical Corporation to sell these assets to Sinopec Corp. China
Petrochemical Corporation undertakes to transfer the assets as required by
Sinopec Corp. under aforesaid items (i) and (ii) to Sinopec Corp., provided
that the exercise of such option complies with applicable laws and
regulations, contractual obligations and other procedural requirements.
As of the date of this report, Sinopec Corp. had no undertakings in respect of
financial performance, asset injections or asset restructuring that had not
been fulfilled, nor did Sinopec Corp. make any profit forecast in relation to
any asset or project.
16. STRUCTURED ENTITY CONTROLLED BY THE COMPANY
None
17. REPURCHASE, SALES AND REDEMPTION OF SHARES
During this reporting period, neither Sinopec Corp. nor any of its
subsidiaries repurchased, sold or redeemed any listed securities of Sinopec
Corp.
18. INFORMATION ON MAJOR SUBSIDIARIES OR THE ASSOCIATES OR JOINT VENTURES
During the reporting period, the net profit from the subsidiary or investment
income from the associate or joint venture accounts for more than 10% of the
Company's net profit:
Unit: RMB million
Company name Registered Percentage of Total assets Net Assets Net Profit Operating Operating Primary Activities
capital shares held by Income Profit
Sinopec Corp.
(%)
Sinopec Marketing 28,403 70.42 508,873 246,544 12,771 790,246 17,245 Sales of refined
Co., Ltd.
oil products
19. RISK FACTORS
In the course of its production and operations, Sinopec Corp. will actively
take various measures to circumvent operational risks. However, in practice,
it may not be possible to prevent the occurrence of all risks and
uncertainties described below.
Risks with regard to the variations from macroeconomic situation: The business
results of the Company are closely related to China's and global economic
situation. China achieved remarkable results in pandemic prevention and
control, and its economy continued to grow. The inflationary pressure and
uncertainty of the world economy have increased. The development of economy is
increasingly constrained by climate change and environmental issues. The
Company's business could also be adversely affected by other factors such as
the impact on export due to carbon tariff and trade protectionism from certain
countries, and negative impact on the investment return on domestic and
overseas upstream projects and investment in refining and chemical storage
projects which results from the uncertainty of geopolitics, international
crude oil price and etc.
Risks with regard to the cyclical effects from the industry: The majority of
the Company's operating income comes from the sales of refined oil products
and petrochemical products, and part of those businesses and their related
products are cyclic and are sensitive to macro-economy, cyclic changes of
regional and global economy, industrial policies, the changes of the
production capacity and output, demand of consumers, prices and supply of the
raw materials, as well as prices and supply of the alternative products etc.
Although the Company is an integrated company with upstream, midstream and
downstream operations, it can only counteract the adverse influences of
industry cycle to a certain extent.
Risks from the macroeconomic policies and government regulation: Although the
Chinese government is gradually liberalizing the market entry regulations on
petroleum and petrochemicals sector, the petroleum and petrochemical
industries in China are still subject to entry regulations to a certain
degree, which include: issuing exploration and mining permits in relation to
crude oil and natural gas, issuing licenses in relation to exploration and
development of crude oil and natural gas, issuing business licenses for
trading crude oil and refined oil, setting caps for retail prices of gasoline,
diesel and other oil products, the imposition of the special oil income levy;
the formulation of refined oil import and export quotas and procedures; the
formulation of safety, quality and environmental protection standards and the
formulation of energy conservation policies; and the imposition of constraints
on projects of high energy consumption and high contamination; in addition,
the changes which have occurred or might occur in macroeconomic and industry
policies such as the opening up of crude oil import licenses and the right of
tenure and the possible strengthened control of export quota of refined oil;
deepening the reform and improvement in pricing mechanism of natural gas, cost
supervision of gas pipeline and access to third party and accelerating the
establishment of a uniform gas energy metering and pricing system;
cancellation of qualification approval of the wholesale and storage of refined
oil business, decentralisation of retail business authorisation of refined oil
products to regional and city level government, further improvement in pricing
mechanism of refined oil products, gas stations investment being fully opened
to foreign investment; reforming in resource tax and environmental tax; and
the introduction of measures for energy conservation and carbon reduction in
key areas to strictly restrict energy efficiency; and the introduction of
transforming policy from "double control" of energy consumption to "double
control" of carbon emissions and intensity, etc. Such changes might have
certain effects on the industry development and market environment and the
operations and profitability of the Company.
Risks with regard to the changes from environmental legislation requirements:
Our production activities generate waste liquids, gases, solids and noise. The
Company has built up the pollution prevention and risk control facilities to
prevent and reduce the pollution to the environment. However, the relevant
government authorities may issue and implement much stricter environmental
protection laws and regulations, adopt much stricter environment protection
standards. Under such situations, the Company may increase expenses in
relation to the environment protection accordingly.
Risks from the uncertainties of obtaining additional oil and gas resources:
The future sustainable development of the Company is partly dependent to a
certain extent on our abilities in continuously discovering or acquiring
additional oil and natural gas resources. To obtain additional oil and natural
gas resources, the Company faces some inherent risks associated with
exploration and development and/or with acquisition activities, and the
Company has to invest a large amount of money with no guarantee of certainty.
If the Company fails to acquire additional resources through further
exploration, development and acquisition to increase the reserves of crude oil
and natural gas, the oil and natural gas reserves and production of the
Company may decline over time which may adversely affect the Company's
financial situation and operation performance.
Risks with regard to the external purchase of crude oil: A significant amount
of crude oil as needed by the Company is satisfied through external purchases.
In recent years, especially influenced by the continues spread of COVID-19
pandemic, mismatch between supply and demand of crude oil, geopolitics, global
economic growth and other factors, the prices of crude oil fluctuate sharply.
Additionally, the supply of crude oil may even be interrupted due to some
extreme major incidents in certain regions. Although the Company has taken
flexible countermeasures, it may not fully avoid risks associated with any
significant fluctuation of international crude oil prices and sudden
disruption of supply of crude oil from certain regions.
Risks with regard to the operation and natural disasters: The process of
petroleum chemical production is exposed to the high risks of inflammation,
explosion, toxicity, harm and environmental pollution and is vulnerable to
extreme natural disasters. Such contingencies may cause serious impacts to the
society, major financial losses to the Company and grievous injuries to
people. The Company has always been laying great emphasis on the safety
production, and has implemented a strict HSSE management system as an effort
to avoid such risks as far as possible. Meanwhile, the main assets and
inventories of the Company as well as the possibility of damage to a third
party have been insured. However, such measures may not shield the Company
from financial losses or adverse impact resulting from such contingencies.
Investment risks: Petroleum and chemical sector is a capital intensive
industry. Although the Company has adopted a prudent investment strategy,
refined the investment management rules, developed negative investment lists,
and conducted rigorous feasibility study and risk evaluation on investment
projects, which consists of special verifications in raw material market,
technical scheme, profitability, safety and environmental protection, legal
compliance, etc., certain investment risks will still exist and expected
returns may not be achieved due to major changes in factors such as market
environment, prices of equipment and raw materials, and construction period
during the implementation of the projects.
Risks with regard to overseas business development and management: The Company
engages in oil and gas exploration, refining and chemical, warehouse logistics
and international trading businesses in some regions outside China. The
Company's overseas businesses and assets are subject to the jurisdiction of
the host country's laws and regulations. In light of the complicated factors
such as changes in international geopolitics, persistence of COVID-19,
uncertainty of economic recovery, imbalance of global economy, competitiveness
of industry and trade structure, exclusiveness of regional trading blocs,
polarisation of benefits distribution in trade, and politicisation of economic
and trade issues, including sanctions, barriers to entry, instability in the
financial and taxation policies, contract defaults, tax dispute, the Company's
risks with regard to overseas business development and management could be
increased.
Currency risks: At present, China implements an administered floating exchange
rate regime based on market supply and demand which is regulated with
reference to a basket of currencies in terms of the exchange rate of Renminbi.
As the Company purchases a significant portion of crude oil in foreign
currency which is based on US dollar-denominated prices, the realized price of
crude oil is based on international crude oil price. Despite the fact that,
the price of the domestic refined oil products will change as the exchange
rate of the Renminbi changes according to the pricing mechanism for the
domestic refined oil products, and the price of other domestic petrochemical
products will also be influenced by the price of the imported products, which
to a large extent, smooths the impact of the Renminbi exchange rate on the
processing and sales of the Company's crude oil refined products. However, the
fluctuation of the Renminbi exchange rate will still have an effect on the
income of the upstream sector.
Cyber-security risks: The Company has a well-established network safety
system. We establish an emergency response mechanism in relation to network
security operation and information system, build an information platform of
network security risk management and control, continuously operated by a
professional network security team, and devote significant resources to
protecting our digital infrastructure and data against cyber-attacks. However,
the coverage and effectiveness of these cyber security tools should be
constantly monitored, and in the event of insufficient coverage and reduced
effectiveness, we could be adversely affected by, among other things,
disruptions to our business operations, and loss of proprietary information,
thus causing harm to our personnel, property, environment and reputation. As
cyber-security attacks continue to evolve, we may be required to expend
additional resources, in particular, to increase investment in security for
new technologies and issues such as data security, business security, cloud
computing and the internet of things devices, to enhance our protective
measures against cyber-security breaches.
CHANGES IN SHARE CAPITAL AND SHAREHOLDINGS OF SHAREHOLDERS
1 CHANGES IN THE SHARE CAPITAL
During the reporting period, there was no change in the number and nature of
issued shares of Sinopec Corp.
2 NUMBER OF SHAREHOLDERS AND THEIR SHAREHOLDINGS
As at 30 June 2022, there were a total of 524,909 shareholders of Sinopec
Corp., of which 519,348 were holders of A shares and 5,561 were holders of H
shares. Sinopec Corp. has complied with requirement for minimum public float
under the Hong Kong Listing Rules.
(1) Top ten shareholders as of 30 June 2022
Unit: share
Name of Shareholders Nature of Percentage Total number of Changes of Number
shareholders of shareholdings shares held shareholding(1) of shares subject
% to pledges or lock up
China Petrochemical Corporation State-owned share 68.31 82,709,227,393 0 0
HKSCC (Nominees) Limited(2) H share 20.96 25,375,624,441 (10,582,718) unknown
中國證券金融股份有限公司 A share 1.92 2,325,374,407 0 0
香港中央結算有限公司 A share 0.99 1,201,021,890 146,068,069 0
中央匯金資產管理有限責任公司 A share 0.26 315,223,600 0 0
中國人壽保險股份有限公司－傳統 A share 0.22 268,492,268 (565,668,163) 0
－普通保險產品－005L－CT001滬
國信證券股份有限公司 A share 0.19 235,021,624 32,658,039 0
招商銀行股份有限公司－上證紅利交易型 A share 0.08 95,509,106 10,106,840 0
開放式指數證券投資基金
中國工商銀行－上證50交易型 A share 0.08 91,348,276 (22,088,000) 0
開放式指數證券投資基金
全國社保基金一一八組合 A share 0.07 83,162,900 62,984,800 0
Note 1: As compared with the number of shares as at 31 December 2021.
Note 2: Century Bright, a wholly-owned overseas subsidiary of China
Petrochemical Corporation, holds 767,916,000 H shares, accounting for 0.6343%
of the total share capital of Sinopec Corp. Such shareholdings are included in
the total number of shares held by HKSCC Nominees Limited.
Statement on the connected relationship or acting in concert among the
aforementioned shareholders:
Sinopec Corp. is not aware of any connected relationship or acting in concert
among or between the above-mentioned shareholders.
(2) Information disclosed by the holders of H shares in accordance with the
Securities and Futures Ordinance (SFO) as of 30 June 2022
Name of shareholders Status of shareholders Number of Approximate
shares percentage of
interests held Sinopec Corp.'s
or regarded issued share capital
as held (H share) (%)
BlackRock, Inc. Interests of corporation controlled by 1,546,222,314(L) 6.06(L)
the substantial shareholder
Citigroup Inc. Interests of corporation controlled by 96,213,825(L) 0.37(L)
the substantial shareholder 96,761,047(S) 0.37(S)
Approved lending agent 1,404,385,633(L) 5.50(L)
Note: (L) Long position, (S) Short position
3 CHANGES IN THE CONTROLLING SHAREHOLDERS AND THE DE FACTO CONTROLLER
There was no change in the controlling shareholder or the de facto controller
of Sinopec Corp. during the reporting period.
BOND GENERAL INFORMATION
1. NON-FINANCIAL ENTERPRISE DEBT FINANCING INSTRUMENTS IN INTER-BANK BOND
MARKET
Bond name The first The second The third The first The second The third The first green The fourth to the twentieth super
medium-term medium-term medium-term medium-term medium-term medium-term medium-term short-term commercial
notes in 2020 notes in 2020 notes in 2020 notes in 2021 notes in 2021 notes in 2021 notes in 2021 papers in 2022
Abbreviation 20中石化MTN001 20中石化MTN002 20中石化MTN003 21中石化MTN001 21中石化MTN002 21中石化MTN003 21中石化GN001 22中石化SCP004-020
Code 102000568 102000569 102001109 102101386 102101480 102101489 132100172 12280357
12280585
12280586
12281441
12281436
12281433
12281834
12281836
12281829
12281835
12281837
12282026
12282033
12282031
12282038
12282024
12282034
Issuance date 2020/3/31 2020/3/31 2020/5/27 2021/7/23 2021/8/5 2021/8/5 2021/12/27 2022/1/20
2022/2/17
2022/5/17
2022/6/7
For details, please refer to the issuance
announcement
Interest commencement date 2020/4/1 2020/4/1 2020/5/28 2021/7/27 2021/8/6 2021/8/9 2021/12/28 2022/2/18
2022/5/18
2022/6/8
For details, please refer to the issuance
announcement
Maturity date 2023/4/1 2023/4/1 2023/5/28 2026/7/27 2024/8/6 2023/8/9 2024/12/28 2022/10/18
2022/11/15
2022/12/14
2022/12/22
2022/9/6
2022/11/16
For details, please refer to the issuance
announcement
Amount issued (RMB billion) 5 5 10 5 2 2 2.55 Total 70.5
For details of offering size of each issue, please refer to the issuance
announcement
Outstanding balance (RMB billion) 5 5 10 5 2 2 2.55 Total 70.5
For details, please refer to the issuance
announcement
Interest rate (%) 2.7 2.7 2.2 3.2 2.95 2.8 2.5 1.7 - 2.23
For details, please refer to the issuance
announcement
Bond name The first The second The third The first The second The third The first green The fourth to the twentieth super
medium-term medium-term medium-term medium-term medium-term medium-term medium-term short-term commercial
notes in 2020 notes in 2020 notes in 2020 notes in 2021 notes in 2021 notes in 2021 notes in 2021 papers in 2022
Principal and interest repayment Interest shall be paid once a year. The principal shall be paid at maturity The principal shall be paid at maturity with interest.
with last instalment of interest.
Investor qualification arrangement Nationwide inter-bank bond market institutional investors
Applicable trading mechanism Circulated and transferred in nationwide inter-bank bond market
Risk of suspension for listed trading Not applicable
(if any), and countermeasures
Trading market Nationwide inter-bank bond market
Use of proceeds Proceeds from the above-mentioned corporate bonds have been used for their
designated purpose as disclosed in the corporate bond prospectus. All the
proceeds have been completely used.
Credit rating During the reporting period, United Credit Ratings Co., Ltd. issued the
continuing credit rating report on 23 May. The long-term credit rating of
Sinopec Corp. remained AAA with stable outlook.
Special terms for Issuer or investor Not applicable
option or investor protection,
whether triggered or executed
Guarantee, repayment scheme and No guarantee. Interest was paid as usual during the reporting period without
other related events during the triggering any guarantee.
reporting period
Convening of corporate bond Not applicable
holders' meeting
Performance of corporate Corporate bonds trustee has performed its duties in accordance with regulatory
bonds trustee requirements
Note: As of the date of the report, the Company issued seventeen
super short-term commercial papers which will reach maturity date within 2022,
Please refer to the relevant prospectus, issuance announcements and other
documents published on the website of China Money Network
(www.chinamoney.com.cn) for details such as issuance date, maturity date,
amount issued and interest rate.
Principal accounting data and financial indicators at the end of reporting
period
Principal data At the end of the At the end of Change Reason for change
reporting period last year
Current ratio 0.89 0.87 0.02 Because the increase of current assets is higher than that of current
liabilities
Quick ratio 0.53 0.55 (0.02) Because the increase of current assets (excluding inventory) is lower than
that of current liabilities
Liability-to-asset ratio 54.77% 51.51% 3.26 percentage points Because the increase of liabilities is higher than that of assets
Loan repayment rate 100% 100% −
The reporting The reporting Change Reason for change
period for 2022 period for 2021
(January-June) (January-June)
Net profit attributable to equity 42,960 38,420 4,540 Due to increase of net profit
shareholders of the Company
excluding extraordinary gains and
losses (RMB Million)
Net profit excluding extraordinary 48,780 47,618 1,162 Due to increase of net profit
gains and losses (RMB Million)
EBITDA-to-total debt ratio 0.56 0.78 (0.22) Because the increase of EBITDA is lower than that of total debt
EBITDA-to-interest coverage ratio 14.47 16.24 (1.77) Due to increase of interest expense
Interest coverage ratio 8.80 9.73 (0.93) Due to increase of interest expense
Cash interest coverage ratio 5.84 29.61 (23.77) Due to significant decrease of net cash generated from operating activities
Interest payment rate 100% 100% −
Note: Liability-to-asset ratio = total liability/total assets
During the reporting period, the Company paid in full the interest accrued for
all bonds and debt financing instruments. As at 30 June 2022, the standby
credit line provided by several domestic financial institutions to the Company
was RMB453.6 billion in total, facilitating the Company to get such amount of
unsecured loans. The Company has fulfilled all the relevant undertakings in
the offering circular of corporate bonds and had no significant matters which
could affect the Company's operation and solvency.
On 18 April 2013, Sinopec Capital (2013) Limited, a wholly-owned overseas
subsidiary of Sinopec Corp., issued senior notes guaranteed by the Company
with four different maturities, namely 3 years, 5 years, 10 years and 30
years. The 3-year notes principal totalled USD750 million, with an annual
interest rate of 1.250% and had been repaid and delisted; the 5-year notes
principal totalled USD1.0 billion, with an annual interest rate of 1.875% and
had been repaid and delisted; the 10-year notes principal totalled USD1.25
billion, with an annual interest rate of 3.125%; and the 30-year notes
principal totalled USD500 million, with an annual interest rate of 4.250%.
These notes were listed on the Hong Kong Stock Exchange on 25 April 2013, with
interest payable semi-annually. The first payment of interest was made on 24
October 2013. During the reporting period, the Company has paid in full the
current-period interests of all notes with maturity of 10 years and 30 years.
AUDITOR'S REPORT
To the Shareholders of China Petroleum & Chemical Corporation,
We have reviewed the accompanying interim financial statements of China
Petroleum & Chemical Corporation ("Sinopec Corp."), which comprise the
consolidated and company balance sheets as of 30 June 2022, and the
consolidated and company income statements, the consolidated and company cash
flow statements and the consolidated and company statements of changes in
shareholders' equity for the period from 1 January 2022 to 30 June 2022, and
the notes to the financial statements. Management of Sinopec Corp. is
responsible for the preparation of these financial statements. Our
responsibility is to issue a report on these financial statements based on our
review.
We conducted our review in accordance with China Standard on Review No.
2101-Engagements to Review Financial Statements. This standard requires that
we plan and perform the review to obtain limited assurance as to whether the
financial statements are free of material misstatement. A review is limited
primarily to inquiries of company personnel and analytical procedures applied
to financial data and thus provides less assurance than an audit. We have not
performed an audit and, accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements of Sinopec Corp. are not
prepared in accordance with the requirements of Accounting Standards for
Business Enterprises ("CASs"), and do not present fairly, in all material
respects, the consolidated and the company's financial position of Sinopec
Corp. as at 30 June 2022, and the consolidated and the company's financial
performance and cash flows for the period from 1 January 2022 to 30 June 2022.
KPMG Huazhen
LLP
Certified Public Accountants
Registered in the People's Republic of China
Yang Jie (Engagement Partner)
Beijing,
China
He Shu
26 August 2022
(a) financial statements prepared under china accounting STANDARDS for
business enterprises
UNAUDITED CONSOLIDATED BALANCE SHEET
As at 30 June 2022
Note At 30 June At 31 December
2022 2021
RMB million RMB million
Assets
Current assets
Cash at bank and on hand 5 233,937 221,989
Financial assets held for trading 6 1,012 -
Derivative financial assets 7 40,389 18,371
Accounts receivable 8 63,717 34,861
Receivables financing 9 5,889 5,939
Prepayments 10 13,011 9,267
Other receivables 11 44,646 35,664
Inventories 12 285,032 207,433
Other current assets 18,800 24,500
Total current assets 706,433 558,024
Non-current assets
Long-term equity investments 13 219,347 209,179
Other equity instrument investments 771 767
Fixed assets 14 599,316 598,932
Construction in progress 15 169,056 155,939
Right-of-use assets 16 182,933 184,974
Intangible assets 17 119,378 119,210
Goodwill 18 8,727 8,594
Long-term deferred expenses 19 10,658 10,007
Deferred tax assets 20 20,179 19,389
Other non-current assets 21 23,016 24,240
Total non-current assets 1,353,381 1,331,231
Total assets 2,059,814 1,889,255
Liabilities and shareholders' equity
Current liabilities
Short-term loans 23 43,169 27,366
Derivative financial liabilities 7 15,367 3,223
Bills payable 24 11,347 11,721
Accounts payable 25 236,871 203,919
Contract liabilities 26 124,411 124,622
Employee benefits payable 27 23,000 14,048
Taxes payable 28 36,566 81,267
Other payables 29 122,481 114,701
Non-current liabilities due within one year 30 66,409 28,651
Other current liabilities 31 114,002 31,762
Total current liabilities 793,623 641,280
Non-current liabilities
Long-term loans 32 77,556 49,341
Debentures payable 33 14,868 42,649
Lease liabilities 34 168,646 170,233
Provisions 35 44,443 43,525
Deferred tax liabilities 20 8,860 7,910
Other non-current liabilities 36 20,146 18,276
Total non-current liabilities 334,519 331,934
Total liabilities 1,128,142 973,214
Shareholders' equity
Share capital 37 121,071 121,071
Capital reserve 38 118,089 120,188
Other comprehensive income 39 6,557 (690)
Specific reserve 3,566 2,664
Surplus reserves 40 213,224 213,224
Undistributed profits 324,627 318,645
Total equity attributable to shareholders of the Company 787,134 775,102
Minority interests 144,538 140,939
Total shareholders' equity 931,672 916,041
Total liabilities and shareholders' equity 2,059,814 1,889,255
These financial statements have been approved for issue by the board of
directors on 26 August 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
UNAUDITED BALANCE SHEET
As at 30 June 2022
Note At 30 June At 31 December
2022 2021
RMB million RMB million
Assets
Current assets
Cash at bank and on hand 129,589 110,691
Financial assets held for trading 3 -
Derivative financial assets 13,377 4,503
Accounts receivable 8 36,279 21,146
Receivables financing 1,528 227
Prepayments 10 4,491 4,540
Other receivables 11 43,176 46,929
Inventories 81,515 63,661
Other current assets 16,961 23,408
Total current assets 326,919 275,105
Non-current assets
Long-term equity investments 13 365,927 360,847
Other equity instrument investments 201 201
Fixed assets 14 278,961 284,622
Construction in progress 15 75,398 66,146
Right-of-use assets 16 99,096
Intangible assets 9,011 9,334
Long-term deferred expenses 2,559 2,875
Deferred tax assets 9,164 8,715
Other non-current assets 38,709 34,227
Total non-current assets 879,026 872,679
Total assets 1,205,945 1,147,784
Liabilities and shareholders' equity
Current liabilities
Short-term loans 21,230 16,550
Derivative financial liabilities 6,601 1,121
Bills payable 4,371 6,058
Accounts payable 97,340 85,307
Contract liabilities 7,663 7,505
Employee benefits payable 15,376 8,398
Taxes payable 22,086 46,333
Other payables 188,266 211,179
Non-current liabilities due within one year 39,710 16,737
Other current liabilities 87,461 13,702
Total current liabilities 490,104 412,890
Non-current liabilities
Long-term loans 51,859 34,258
Debentures payable 11,536 31,522
Lease liabilities 98,292 104,426
Provisions 35,851 35,271
Other non-current liabilities 2,850 3,103
Total non-current liabilities 200,388 208,580
Total liabilities 690,492 621,470
Shareholders' equity
Share capital 121,071 121,071
Capital reserve 66,455 67,897
Other comprehensive income 6,269 6,024
Specific reserve 2,034 1,658
Surplus reserves 213,224 213,224
Undistributed profits 106,400 116,440
Total shareholders' equity 515,453 526,314
Total liabilities and shareholders' equity 1,205,945 1,147,784
These financial statements have been approved for issue by the board of
directors on 26 August 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
UNAUDITED CONSOLIDATED INCOME STATEMENT
For the six-month period ended 30 June 2022
Note Six-month period ended 30 June
2022 2021
RMB million RMB million
Operating income 41 1,612,126 1,260,773
Less: Operating costs 41 1,330,825 998,286
Taxes and surcharges 42 134,409 120,900
Selling and distribution expenses 45 28,130 31,731
General and administrative expenses 46 26,183 36,170
Research and development expenses 47 6,310 5,360
Financial expenses 43 5,337 4,902
Including: Interest expenses 8,124 7,660
Interest income 3,012 2,663
Exploration expenses, including dry holes 48 5,738 4,846
Add: Other income 49 2,121 1,244
Investment (loss)/income 50 (10,307) 4,890
Including: Income from investment in associates and joint ventures 7,327 11,133
(losses)/gains from changes in fair value 51 (1,558) 116
Credit impairment reversals 72 55
Impairment losses 52 (1,456) (926)
Asset disposal gains 135 281
Operating profit 64,201 64,238
Add: Non-operating income 53 855 696
Less: Non-operating expenses 54 1,079 1,081
Profit before taxation 63,977 63,853
Less: Income tax expense 55 14,461 15,052
Net profit 49,516 48,801
Including: net profit of acquiree before business combination under common - 273
control
Classification by going concern:
Continuous operating net profit 49,516 48,801
Termination of net profit - -
Classification by ownership:
Equity shareholders of the Company 43,530 39,426
Minority interests 5,986 9,375
Basic earnings per share 66 0.360 0.326
Diluted earnings per share 66 0.360 0.326
Other comprehensive income 39
Items that may not be reclassified subsequently to profit or loss
Changes in fair value of other equity instrument investments (17) 8
Items that may be reclassified subsequently to profit or loss
Other comprehensive income that can be converted into profit or loss 3,397 121
under the equity method
Cost of hedging reserve (844) (40)
Cash flow hedges 10,258 8,640
Foreign currency translation differences 3,913 (621)
Total other comprehensive income 16,707 8,108
Total comprehensive income 66,223 56,909
Attributable to:
Equity shareholders of the Company 59,563 47,410
Minority interests 6,660 9,499
These financial statements have been approved for issue by the board of
directors on 26 August 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
UNAUDITED INCOME STATEMENT
For the six-month period ended 30 June 2022
Note Six-month period ended 30 June
2022 2021
RMB million RMB million
Operating income 41 650,430 469,122
Less: Operating costs 41 521,323 363,427
Taxes and surcharges 86,457 72,725
Selling and distribution expenses 1,215 1,866
General and administrative expenses 11,665 16,386
Research and development expenses 5,843 4,962
Financial expenses 4,995 5,382
Including: Interest expenses 6,793 4,193
Interest income 1,736 1,160
Exploration expenses, including dry holes 4,794 4,182
Add: Other income 1,445 743
Investment income 50 17,300 10,602
Including: Income from investment in associates and joint ventures 3,014 4,366
Gains from changes in fair value 241 232
Credit impairment (losses)/reversals (1) 2
Impairment losses (736) (753)
Asset disposal gains/(losses) 121 (3)
Operating profit 32,508 11,015
Add: Non-operating income 181 203
Less: Non-operating expenses 671 519
Profit before taxation 32,018 10,699
Less: Income tax expense 4,515 2,813
Net profit 27,503 7,886
Classification by going concern:
Continuous operating net profit 27,503 7,886
Termination of net profit - -
Other comprehensive income
Items that may not be reclassified subsequently to profit or loss
Changes in fair value of other equity instrument investments (5) -
Items that may be reclassified subsequently to profit or loss
Other comprehensive income that can be converted into profit or 139 18
loss under the equity method
Cash flow hedges 4,622 5,936
Total other comprehensive income 4,756 5,954
Total comprehensive income 32,259 13,840
These financial statements have been approved for issue by the board of
directors on 26 August 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
For the six-month period ended 30 June 2022
Note Six-month period ended 30 June
2022 2021
RMB million RMB million
Cash flows from operating activities:
Cash received from sale of goods and rendering of services 1,704,813 1,310,197
Refund of taxes and levies 3,442 788
Other cash received relating to operating activities 128,034 65,782
Sub-total of cash inflows 1,836,289 1,376,767
Cash paid for goods and services (1,420,335) (1,030,400)
Cash paid to and for employees (40,058) (37,297)
Payments of taxes and levies (211,115) (196,023)
Other cash paid relating to operating activities (159,834) (64,700)
Sub-total of cash outflows (1,831,342) (1,328,420)
Net cash flow from operating activities 57(a) 4,947 48,347
Cash flows from investing activities:
Cash received from disposal of investments 442 3,341
Cash received from returns on investments 4,345 3,316
Net cash received from disposal of fixed assets, intangible assets and 107 502
other long-term assets
Net cash received from disposal of subsidiaries and other business entities 57(d) 1 4,296
Other cash received relating to investing activities 37,189 21,019
Sub-total of cash inflows 42,084 32,474
Cash paid for acquisition of fixed assets, intangible assets and other (63,023) (56,222)
long-term assets
Cash paid for acquisition of investments (6,027) (9,226)
Net cash paid for the acquisition of subsidiaries and other business entities (7,628) -
Other cash paid relating to investing activities (16,544) (33,016)
Sub-total of cash outflows (93,222) (98,464)
Net cash flow from investing activities (51,138) (65,990)
Cash flows from financing activities:
Cash received from capital contributions 987 302
Including: Cash received from minority shareholders' capital 987 302
contributions to subsidiaries
Cash received from borrowings 348,900 170,144
Other cash received relating to financing activities 32 78
Sub-total of cash inflows 349,919 170,524
Cash repayments of borrowings (224,161) (130,857)
Cash paid for dividends, profits distribution or interest (41,606) (19,559)
Including: Subsidiaries' cash payments for distribution of (1,088) (1,581)
dividends or profits to minority shareholders
Other cash paid relating to financing activities 57(e) (8,940) (11,458)
Sub-total of cash outflows (274,707) (161,874)
Net cash flow from financing activities 75,212 8,650
Effects of changes in foreign exchange rate 1,567 (452)
Net increase/(decrease) in cash and cash equivalents 57(b) 30,588 (9,445)
Add: Cash and cash equivalents at the beginning of the year 108,590 87,559
Cash and cash equivalents at the end of the period 57(c) 139,178 78,114
These financial statements have been approved for issue by the board of
directors on 26 August 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
UNAUDITED CASH FLOW STATEMENT
For the six-month period ended 30 June 2022
Note Six-month period ended 30 June
2022 2021
RMB million RMB million
Cash flows from operating activities:
Cash received from sale of goods and rendering of services 719,791 512,907
Refund of taxes and levies 2,374 492
Other cash received relating to operating activities 9,561 6,052
Sub-total of cash inflows 731,726 519,451
Cash paid for goods and services (541,234) (369,090)
Cash paid to and for employees (20,623) (19,181)
Payments of taxes and levies (122,524) (110,031)
Other cash paid relating to operating activities (34,763) (9,587)
Sub-total of cash outflows (719,144) (507,889)
Net cash flow from operating activities 12,582 11,562
Cash flows from investing activities:
Cash received from disposal of investments 3,334 12,101
Cash received from returns on investments 15,739 4,676
Net cash received from disposal of fixed assets, intangible assets and other 25 39
long-term assets
Other cash received relating to investing activities 85,079 58,662
Sub-total of cash inflows 104,177 75,478
Cash paid for acquisition of fixed assets, intangible assets and other (27,989) (25,419)
long-term assets
Cash paid for acquisition of investments (10,920) (19,726)
Net cash paid for the acquisition of subsidiaries and other business entities (4,221) -
Other cash paid relating to investing activities (98,036) (61,762)
Sub-total of cash outflows (141,166) (106,907)
Net cash flow from investing activities (36,989) (31,429)
Cash flows from financing activities:
Cash received from borrowings 184,910 88,635
Other cash received relating to financing activities 186,614 136,030
Sub-total of cash inflows 371,524 224,665
Cash repayments of borrowings (87,141) (63,205)
Cash paid for dividends or interest (41,593) (19,812)
Other cash paid relating to financing activities (196,723) (127,904)
Sub-total of cash outflows (325,457) (210,921)
Net cash flow from financing activities 46,067 13,744
Effects of changes in foreign exchange rate 4 (1)
Net increase/(decrease) in cash and cash equivalents 21,664 (6,124)
Add:Cash and cash equivalents at the beginning of the year 34,575 28,081
Cash and cash equivalents at the end of the period 56,239 21,957
These financial statements have been approved for issue by the board of
directors on 26 August 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six-month period ended 30 June 2022
Share Capital Other Specific Surplus Retained Total Minority Total
capital reserve comprehensive reserve reserves earnings shareholders' interests shareholders'
income equity equity
attributable
to equity
shareholders of
the Company
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Balance at 31 December 2020 121,071 122,558 1,038 1,941 209,280 286,575 742,463 141,413 883,876
Adjustment for business combination of entities - 4,831 - - - - 4,831 13 4,844
under common control (Note 61)
Balance at 1 January 2021 121,071 127,389 1,038 1,941 209,280 286,575 747,294 141,426 888,720
Change for the period
1. Net profit - - - - - 39,426 39,426 9,375 48,801
2. Other comprehensive income (Note 39) - - 7,984 - - - 7,984 124 8,108
Total comprehensive income - - 7,984 - - 39,426 47,410 9,499 56,909
Amounts transferred to initial carrying amount - - (8,121) - - - (8,121) (549) (8,670)
of hedged items
Transactions with owners, recorded directly
in shareholders' equity:
3. Appropriations of profits:
- Distributions to shareholders (Note 56) - - - - - (15,739) (15,739) - (15,739)
4. Contributions to subsidiaries from - - - - - - - 559 559
minority interests
5. Transaction with minority interests - (1,384) - - - - (1,384) (6,818) (8,202)
6. Distributions to minority interests - - - - - - - (1,885) (1,885)
Total transactions with owners, recorded directly - (1,384) - - - (15,739) (17,123) (8,144) (25,267)
in shareholders' equity
7. Net increase in specific reserve for the period - - - 778 - - 778 175 953
8. Others - 121 - - - (273) (152) (247) (399)
Balance at 30 June 2021 121,071 126,126 901 2,719 209,280 309,989 770,086 142,160 912,246
Balance at 1 January 2022 121,071 120,188 (690) 2,664 213,224 318,645 775,102 140,939 916,041
Change for the period
1. Net profit - - - - - 43,530 43,530 5,986 49,516
2. Other comprehensive income (Note 39) - - 16,033 - - - 16,033 674 16,707
Total comprehensive income - - 16,033 - - 43,530 59,563 6,660 66,223
Amounts transferred to initial carrying amount - - (8,786) - - - (8,786) (430) (9,216)
of hedged items
Transactions with owners, recorded directly
in shareholders' equity:
3. Appropriations of profits:
- Distributions to shareholders (Note 56) - - - - - (37,532) (37,532) - (37,532)
4. Contributions from minority interests - - - - - - - 1,420 1,420
5. Transactions with minority interests - - - - - - - (1,713) (1,713)
6. Distributions to minority interests - - - - - - - (2,337) (2,337)
Total transactions with owners, recorded directly - - - - - (37,532) (37,532) (2,630) (40,162)
in shareholders' equity
7. Net increase in specific reserve for the period - - - 902 - - 902 141 1,043
8. Other equity movements under the equity method - (2,102) - - - - (2,102) - (2,102)
9. Others - 3 - - - (16) (13) (142) (155)
Balance at 30 June 2022 121,071 118,089 6,557 3,566 213,224 324,627 787,134 144,538 931,672
These financial statements have been approved for issue by the board of
directors on 26 August 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
UNAUDITED STATEMENT OF CHANGES IN EQUITY
For the six-month period ended 30 June 2022
Share capital Capital Other Specific Surplus Retained Total
reserve comprehensive reserve reserves earnings shareholders'
income equity
RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Balance at 1 January 2021 121,071 68,976 5,910 1,189 209,280 115,849 522,275
Change for the period
1. Net profit - - - - - 7,886 7,886
2. Other comprehensive income - - 5,954 - - - 5,954
Total comprehensive income - - 5,954 - - 7,886 13,840
Amounts transferred to initial carrying amount - - (6,045) - - - (6,045)
of hedged items
Transactions with owners, recorded directly
in shareholders' equity:
3. Appropriations of profits:
- Distributions to shareholders (Note 56) - - - - - (15,739) (15,739)
Total transactions with owners, recorded directly - - - - - (15,739) (15,739)
in shareholders' equity
4. Net increase in specific reserve for the period - - - 278 - - 278
5. Others - 36 - - - 198 234
Balance at 30 June 2021 121,071 69,012 5,819 1,467 209,280 108,194 514,843
Balance at 1 January 2022 121,071 67,897 6,024 1,658 213,224 116,440 526,314
Change for the period
1. Net profit - - - - - 27,503 27,503
2. Other comprehensive income - - 4,756 - - - 4,756
Total comprehensive income - - 4,756 - - 27,503 32,259
Amounts transferred to initial carrying amount - - (4,511) - - - (4,511)
of hedged items
Transactions with owners, recorded directly
in shareholders' equity:
3. Appropriations of profits:
- Distributions to shareholders (Note 56) - - - - - (37,532) (37,532)
Total transactions with owners, recorded directly - - - - - (37,532) (37,532)
in shareholders' equity
4. Net increase in specific reserve for the period - - - 376 - - 376
5. Other equity movements under the equity method - (1,437) - - - - (1,437)
6. Others - (5) - - - (11) (16)
Balance at 30 June 2022 121,071 66,455 6,269 2,034 213,224 106,400 515,453
These financial statements have been approved for issue by the board of
directors on 26 August 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
The accompanying notes form part of these financial statements.
1 STATUS OF THE COMPANY
China Petroleum & Chemical Corporation (the "Company") was established on
25 February 2000 as a joint stock limited company. The company is registered
in Beijing, the People's Republic of China, and the headquarter is located in
Beijing, the People's Republic of China. The approval date of the financial
report is 26 August 2022.
According to the State Council's approval to the "Preliminary Plan for the
Reorganisation of China Petrochemical Corporation" (the "Reorganisation"), the
Company was established by China Petrochemical Corporation, which transferred
its core businesses together with the related assets and liabilities at 30
September 1999 to the Company. Such assets and liabilities had been valued
jointly by China United Assets Appraisal Corporation, Beijing Zhong Zheng
Appraisal Company, CIECC Assets Appraisal Corporation and Zhong Fa
International Properties Valuation Corporation. The net asset value was
determined at RMB98,249,084,000. The valuation was reviewed and approved by
the Ministry of Finance (the "MOF") (Cai Ping Zi 2000 No. 20 "Comments on the
Review of the Valuation Regarding the Formation of a Joint Stock Limited
Company by China Petrochemical Corporation").
In addition, pursuant to the notice Cai Guan Zi 2000 No. 34 "Reply to the
Issue Regarding Management of State-Owned Equity by China Petroleum and
Chemical Corporation" issued by the MOF, 68.8 billion domestic state-owned
shares with a par value of RMB1.00 each were issued to Sinopec Group Company,
the amount of which is equivalent to 70% of the above net asset value
transferred from Sinopec Group Company to the Company in connection with the
Reorganisation.
Pursuant to the notice Guo Jing Mao Qi Gai 2000 No. 154 "Reply on the
Formation of China Petroleum and Chemical Corporation", the Company obtained
the approval from the State Economic and Trade Commission on 21 February 2000
for the formation of a joint stock limited company.
The Company took over the exploration, development and production of crude oil
and natural gas, refining, chemicals and related sales and marketing business
of Sinopec Group Company after the establishment of the Company.
The Company and its subsidiaries (the "Group") engage in the oil and gas and
chemical operations and businesses, including:
(1) the exploration, development and production of crude oil and natural
gas;
(2) the refining, transportation, storage and marketing of crude oil and
petroleum product; and
(3) the production and sale of chemical.
Details of the Company's principal subsidiaries are set out in Note 60.
2 BASIS OF PREPARATION
(1) Statement of compliance of China Accounting Standards for Business
Enterprises ("CASs")
The financial statements have been prepared in accordance with the
requirements of Accounting Standards for Business Enterprises - Basic
Standards, specific standards and relevant regulations (hereafter referred as
CASs collectively) issued by the MOF on or after 15 February 2006. These
financial statements also comply with the disclosure requirements of
"Regulation on the Preparation of Information Disclosures of Companies Issuing
Public Shares, No.15: General Requirements for Financial Reports" issued by
the China Securities Regulatory Commission ("CSRC"). These financial
statements present truly and completely the consolidated and company financial
position as at 30 June 2022, and the consolidated and company financial
performance and the consolidated and company cash flows for the six-month
period ended 30 June 2022.
These financial statements are prepared on a basis of going concern.
(2) Accounting period
The accounting year of the Group is from 1 January to 31 December.
(3) Measurement basis
The financial statements of the Group have been prepared under the historical
cost convention, except for the assets and liabilities set out below:
- Financial assets held for trading (see Note 3(11))
- Other equity instrument investments (see Note 3(11))
- Derivative financial instruments (see Note 3(11))
- Receivables financing (see Note 3(11))
(4) Functional currency and presentation currency
The functional currency of the Company's and most of its subsidiaries are
Renminbi. The Company and its subsidiaries determine their functional currency
according to the main economic environment in where they operate. The Group's
consolidated financial statements are presented in Renminbi. Some of
subsidiaries use other currency as the functional currency. The Company
translates the financial statements of subsidiaries from their respective
functional currencies into Renminbi (see Note 3(2)) if the subsidiaries'
functional currencies are not Renminbi.
3 SIGNIFICANT ACCOUNTING POLICIES
The Group determines specific accounting policies and accounting estimates
based on the characteristics of production and operational activities, mainly
reflected in the accounting for allowance for financial assets (Note 3(11)),
valuation of inventories (Note 3(4)), depreciation of fixed assets and
depletion of oil and gas properties (Note 3(7), (8)), measurement of
provisions (Note 3(16)), etc.
Principal accounting estimates and judgements of the Group are set out in Note
59.
(1) Accounting treatment of business combination involving entities under
common control and not under common control
(a) Business combination involving entities under common control
A business combination involving entities or businesses under common control
is a business combination in which all of the combining entities or businesses
are ultimately controlled by the same party or parties both before and after
the business combination, and that control is not transitory. The assets and
liabilities that the acquirer receives in the acquisition are accounted for at
the acquiree's carrying amount on the acquisition date. The difference between
the carrying amount of the acquired net assets and the carrying amount of the
consideration paid for the acquisition (or the total nominal value of shares
issued) is recognised in the share premium of capital reserve, or the retained
earnings in case of any shortfall in the share premium of capital reserve. Any
costs directly attributable to the combination shall be recognised in profit
or loss for the current period when occurred. The expense incurred for equity
securities and debt securities issued as the consideration of the combination
is recognised in the initial cost of the securities. The combination date is
the date on which the acquirer effectively obtains control of the acquiree.
(b) Business combination involving entities not under common control
A business combination involving entities or businesses not under common
control is a business combination in which all of the combining entities or
businesses are not ultimately controlled by the same party or parties both
before and after the business combination. Difference between the
consideration paid by the Group as the acquirer, comprises of the aggregate of
the fair value at the acquisition date of assets given, liabilities incurred
or assumed, and equity securities issued by the acquirer in exchange for
control of the acquiree, and the Group's interest in the fair value of the
identifiable net assets of the acquiree, is recognised as goodwill (Note
3(10)) if it is an excess, otherwise in the profit or loss. The expense
incurred for equity securities and debt securities issued as the consideration
of the combination is recognised in the initial cost of the securities. Any
other expense directly attributable to the business combination is recognised
in the profit or loss for the year. The difference between the fair value and
the book value of the assets given is recognised in profit or loss. The
acquiree's identifiable assets, liabilities and contingent liabilities, if
satisfying the recognition criteria, are recognised by the Group at their fair
value at the acquisition date. The acquisition date is the date on which the
acquirer effectively obtains control of the acquiree.
(c) Method for preparation of consolidated financial statements
The scope of consolidated financial statements is based on control and the
consolidated financial statements comprise the Company and its subsidiaries.
Control means an entity is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns
through its power over the entity. The financial statements of subsidiaries
are included in the consolidated financial statements from the date that
control commences until the date that control ceases.
Where the Company combines a subsidiary during the reporting period through a
business combination involving entities under common control, the financial
statements of the subsidiary are included in the consolidated financial
statements as if the combination had occurred at the beginning of the earliest
comparative year presented or, if later, at the date that common control was
established. Therefore the opening balances and the comparative figures of the
consolidated financial statements are restated. In the preparation of the
consolidated financial statements, the subsidiary's assets, liabilities and
results of operations are included in the consolidated balance sheet and the
consolidated income statement, respectively, based on their carrying amounts
in the subsidiary's financial statements, from the date that common control
was established.
Where the Company acquires a subsidiary during the reporting year through a
business combination involving entities not under common control, the
identifiable assets, liabilities and results of operations of the subsidiaries
are consolidated into consolidated financial statements from the date that
control commences, based on the fair value of those identifiable assets and
liabilities at the acquisition date.
Where the Company acquired a minority interest from a subsidiary's minority
shareholders, the difference between the investment cost and the newly
acquired interest into the subsidiary's identifiable net assets at the
acquisition date is adjusted to the capital reserve (capital surplus) in the
consolidated balance sheet. Where the Company partially disposed an investment
of a subsidiary that do not result in a loss of control, the difference
between the proceeds and the corresponding share of the interest into the
subsidiary is adjusted to the capital reserve (capital surplus) in the
consolidated balance sheet. If the credit balance of capital reserve (capital
surplus) is insufficient, any excess is adjusted to retained profits.
In a business combination involving entities not under common control achieved
in stages, the Group remeasures its previously held equity interest in the
acquiree on the acquisition date. The difference between the fair value and
the net book value is recognised as investment income for the year. If other
comprehensive income was recognised regarding the equity interest previously
held in the acquiree before the acquisition date, the relevant other
comprehensive income is transferred to investment income in the period in
which the acquisition occurs.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(1) Accounting treatment of business combination involving entities under
common control and not under common control (Continued)
(c) Method for preparation of consolidated financial statements (Continued)
Where control of a subsidiary is lost due to partial disposal of the equity
investment held in a subsidiary, or any other reasons, the Group derecognises
assets, liabilities, minority interests and other equity items related to the
subsidiary. The remaining equity investment is remeasured to fair value at the
date in which control is lost. The sum of consideration received from disposal
of equity investment and the fair value of the remaining equity investment,
net of the fair value of the Group's previous share of the subsidiary's
identifiable net assets recorded from the acquisition date, is recognised in
investment income in the period in which control is lost. Other comprehensive
income related to the previous equity investment in the subsidiary, is
transferred to investment income when control is lost. Other comprehensive
income related to the equity investment of the original subsidiary shall be
converted into the current investment income in the event of loss of control.
Minority interest is presented separately in the consolidated balance sheet
within shareholders' equity. Net profit or loss attributable to minority
shareholders is presented separately in the consolidated income statement
below the net profit line item.
The excess of the loss attributable to the minority interests during the
period over the minority interests' share of the equity at the beginning of
the reporting period is deducted from minority interests.
Where the accounting policies and accounting period adopted by the
subsidiaries are different from those adopted by the Company, adjustments are
made to the subsidiaries' financial statements according to the Company's
accounting policies and accounting period. Intra-group balances and
transactions, and any unrealised profit or loss arising from intra-group
transactions, are eliminated in preparing the consolidated financial
statements. Unrealised losses resulting from intra-group transactions are
eliminated in the same way as unrealised gains but only to the extent that
there is no evidence of impairment.
The unrealised profit or loss arising from the sale of assets by the Company
to its subsidiaries is eliminated in full against the net profit attributed to
shareholders; the unrealised profit or loss from the sale of assets by
subsidiaries to the Company is eliminated according to the distribution ratio
between shareholders of the parent company and minority interests. For sale of
assets that occurred between subsidiaries, the unrealised gains and losses is
eliminated according to the distribution ratio for its subsidiaries seller
between net profit attributable to shareholders of the parent company and
minority interests.
(2) Transactions in foreign currencies and translation of financial
statements in foreign currencies
Foreign currency transactions are, on initial recognition, translated into
Renminbi at the spot exchange rates quoted by the People's Bank of China
("PBOC rates") at the transaction dates.
Foreign currency monetary items are translated at the PBOC rates at the
balance sheet date. Exchange differences, except for those directly related to
the acquisition, construction or production of qualified assets, are
recognised as income or expenses in the income statement. Non-monetary items
denominated in foreign currency measured at historical cost are not
translated. Non-monetary items denominated in foreign currency that are
measured at fair value are translated using the exchange rates at the date
when the fair value was determined. The difference between the translated
amount and the original currency amount is recognised as other comprehensive
income, if it is classified as other equity instrument investments; or charged
to the income statement if it is measured at fair value through profit or
loss.
The assets and liabilities of foreign operation are translated into Renminbi
at the spot exchange rates at the balance sheet date. The equity items,
excluding "Retained earnings", are translated into Renminbi at the spot
exchange rates at the transaction dates. The income and expenses of foreign
operation are translated into Renminbi at the spot exchange rates or an
exchange rate that approximates the spot exchange rates on the transaction
dates. The resulting exchange differences are separately presented as other
comprehensive income in the balance sheet within equity. Upon disposal of a
foreign operation, the cumulative amount of the exchange differences
recognised in which relate to that foreign operation is transferred to profit
or loss in the year in which the disposal occurs.
(3) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand deposits, short-term
and highly liquid investments which are readily convertible into known amounts
of cash and are subject to an insignificant risk of change in value.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(4) Inventories
Inventories are initially measured at cost. Cost includes the cost of purchase
and processing, and other expenditures incurred in bringing the inventories to
their present location and condition. The cost of inventories is mainly
calculated using the weighted average method. In addition to the cost of
purchase of raw material, work in progress and finished goods include direct
labour and an appropriate allocation of manufacturing overhead costs.
At the balance sheet date, inventories are stated at the lower of cost and net
realisable value.
Any excess of the cost over the net realisable value of each item of
inventories is recognised as a provision for diminution in the value of
inventories. Net realisable value is the estimated selling price in the normal
course of business less the estimated costs of completion and the estimated
costs necessary to make the sale and relevant taxes. The net realisable value
of materials held for use in the production is measured based on the net
realisable value of the finished goods in which they will be incorporated. The
net realisable value of the quantity of inventory held to satisfy sales or
service contracts is measured based on the contract price. If the quantities
held by the Group are more than the quantities of inventories specified in
sales contracts, the net realisable value of the excess portion of inventories
is measured based on general selling prices.
Inventories include raw materials, work in progress, semi-finished goods,
finished goods and reusable materials. Reusable materials include low-value
consumables, packaging materials and other materials, which can be used
repeatedly but do not meet the definition of fixed assets. Reusable materials
are amortised in full when received for use. The amounts of the amortisation
are included in the cost of the related assets or profit or loss.
Inventories are recorded by perpetual method.
(5) Long-term equity investments
(a) Investment in subsidiaries
In the Company's separate financial statements, long-term equity investments
in subsidiaries are accounted for using the cost method. Except for cash
dividends or profits distributions declared but not yet distributed that have
been included in the price or consideration paid in obtaining the investments,
the Company recognises its share of the cash dividends or profit distributions
declared by the investee as investment income irrespective of whether these
represent the net profit realised by the investee before or after the
investment. Investments in subsidiaries are stated at cost less impairment
losses (see Note 3(12)) in the balance sheet. At initial recognition, such
investments are measured as follows:
The initial investment cost of a long-term equity investment obtained through
a business combination involving entities under common control is the
Company's share of the carrying amount of the subsidiary's equity at the
combination date. The difference between the initial investment cost and the
carrying amounts of the consideration given is adjusted to share premium in
capital reserve. If the balance of the share premium is insufficient, any
excess is adjusted to retained earnings.
For a long-term equity investment obtained through a business combination not
involving enterprises under common control, the initial investment cost
comprises the aggregate of the fair values of assets transferred, liabilities
incurred or assumed, and equity securities issued by the Company, in exchange
for control of the acquiree. For a long-term equity investment obtained
through a business combination not involving enterprises under common control,
if it is achieved in stages, the initial cost comprises the carrying value of
previously-held equity investment in the acquiree immediately before the
acquisition date, and the additional investment cost at the acquisition date.
An investment in a subsidiary acquired otherwise than through a business
combination is initially recognised at actual purchase cost if the Group
acquires the investment by cash, or at the fair value of the equity securities
issued if an investment is acquired by issuing equity securities, or at the
value stipulated in the investment contract or agreement if an investment is
contributed by investors.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(5) Long-term equity investments (Continued)
(b) Investment in joint ventures and associates
A joint venture is an incorporated entity over which the Group, based on legal
form, contractual terms and other facts and circumstances, has joint control
with the other parties to the joint venture and rights to the net assets of
the joint venture. Joint control is the contractually agreed sharing of
control of an arrangement, which exists only when decisions about the relevant
activities require the unanimous consent of the Group and the parties sharing
control.
An associate is the investee that the Group has significant influence on their
financial and operating policies. Significant influence represents the right
to participate in the financial and operating policy decisions of the investee
but is not control or joint control over the establishment of these policies.
The Group generally considers the following circumstances in determining
whether it can exercise significant influence over the investee: whether there
is representative appointed to the board of directors or equivalent governing
body of the investee; whether to participate in the investee's policy-making
process; whether there are significant transactions with the investees;
whether there is management personnel sent to the investee; whether to provide
critical technical information to the investee.
An investment in a joint ventures or an associate is accounted for using the
equity method, unless the investment is classified as held for sale.
The initial cost of investment in joint ventures and associates is stated at
the consideration paid except for cash dividends or profits distributions
declared but unpaid at the time of acquisition and therefore included in the
consideration paid should be deducted if the investment is made in cash. Under
the circumstances that the long-term investment is obtained through
non-monetary asset exchange, the initial cost of the investment is stated at
the fair value of the assets exchanged if the transaction has commercial
substance, the difference between the fair value of the assets exchanged and
its carrying amount is charged to profit or loss; or stated at the carrying
amount of the assets exchanged if the transaction lacks commercial substance.
The Group's accounting treatments when adopting the equity method include:
Where the initial investment cost of a long-term equity investment exceeds the
Group's interest in the fair value of the investee's identifiable net assets
at the date of acquisition, the investment is initially recognised at the
initial investment cost. Where the initial investment cost is less than the
Group's interest in the fair value of the investee's identifiable net assets
at the time of acquisition, the investment is initially recognised at the
investor's share of the fair value of the investee's identifiable net assets,
and the difference is charged to profit or loss.
After the acquisition of the investment, the Group recognises its share of the
investee's net profits or losses and other comprehensive income as investment
income or losses and other comprehensive income, and adjusts the carrying
amount of the investment accordingly. Once the investee declares any cash
dividends or profits distributions, the carrying amount of the investment is
reduced by that attributable to the Group.
The Group recognises its share of the investee's net profits or losses after
making appropriate adjustments to align the accounting policies or accounting
periods with those of the Group based on the fair values of the investee's net
identifiable assets at the time of acquisition. Under the equity accounting
method, unrealised profits and losses resulting from transactions between the
Group and its associates or joint ventures are eliminated to the extent of the
Group's interest in the associates or joint ventures. Unrealised losses
resulting from transactions between the Group and its associates or joint
ventures are fully recognised in the event that there is an evidence of
impairment.
The Group discontinues recognising its share of net losses of the investee
after the carrying amount of the long-term equity investment and any long-term
interest that is in substance forms part of the Group's net investment in the
associate or the joint venture is reduced to zero, except to the extent that
the Group has an obligation to assume additional losses. However, if the Group
has incurred obligations for additional losses and the conditions on
recognition of provision are satisfied in accordance with the accounting
standard on contingencies, the Group continues recognising the investment
losses and the provision. Where net profits are subsequently made by the
associate or joint venture, the Group resumes recognising its share of those
profits only after its share of the profits equals the share of losses not
recognised.
The Group adjusts the carrying amount of the long-term equity investment for
changes in owners' equity of the investee other than those arising from net
profits or losses and other comprehensive income, and recognises the
corresponding adjustment in capital reserve.
(c) The impairment assessment method and provision accrual on investment
The impairment assessment and provision accrual on investments in
subsidiaries, associates and joint ventures are stated in Note 3(12).
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(6) Leases
A lease is a contract that a lessor transfers the right to use an identified
asset for a period of time to a lessee in exchange for consideration.
(a) As Lessee
The Group recognises a right-of-use asset at the commencement date, and
recognises the lease liability at the present value of the lease payments that
are not paid at that date. The lease payments include fixed payments, the
exercise price of a purchase option if the Group is reasonably certain to
exercise that option, and payments of penalties for terminating the lease if
the lease term reflects the Group exercising that option, etc. Variable
payments that are based on a percentage of sales are not included in the lease
payments, and should be recognised in profit or loss when incurred. Lease
liabilities to be paid within one year (including one year) from balance sheet
date is presented in non-current liabilities due within one year.
Right-of-use assets of the Group mainly comprise land. Right-of-use assets are
measured at cost which comprises the amount of the initial measurement of the
lease liability, any lease payments made at or before the commencement date,
any initial direct costs incurred by the lessee, less any lease incentives
received. The Group depreciates the right-of-use assets over the shorter of
the asset's useful life and the lease term on a straight-line basis. When the
recoverable amount of a right-of-use asset is less than its carrying amount,
the carrying amount is reduced to the recoverable amount.
Payments associated with short-term leases with lease terms within 12 months
and leases for which the underlying assets are individually of low value when
it is new are recognised on a straight-line basis over the lease term as an
expense in profit or loss or as cost of relevant assets, instead of
recognising right-of-use assets and lease liabilities.
(b) As Lessor
A lease that transfers substantially all the risks and rewards incidental to
ownership of an asset is a finance lease. An operating lease is a lease other
than a finance lease.
When the Group leases self-owned plants and buildings, equipment and
machinery, lease income from an operating lease is recognised on a
straight-line basis over the period of the lease. The Group recognises
variable lease income which is based on a certain percentage of sales as
rental income when occurred.
(7) Fixed assets and construction in progress
Fixed assets represent the tangible assets held by the Group using in the
production of goods, rendering of services and for operation and
administrative purposes with useful life over one year.
Fixed assets are stated in the balance sheet at cost less accumulated
depreciation and impairment losses (see Note 3(12)). Construction in progress
is stated in the balance sheet at cost less impairment losses (see Note
3(12)).
The cost of a purchased fixed asset comprises the purchase price, related
taxes, and any directly attributable expenditure for bringing the asset to
working condition for its intended use. The cost of self-constructed assets
includes the cost of materials, direct labour, capitalised borrowing costs
(see Note 3(19)), and any other costs directly attributable to bringing the
asset to working condition for its intended use. According to legal or
contractual obligations, costs of dismantling and removing the items and
restoring the site on which the related assets located are included in the
initial cost.
Construction in progress is transferred to fixed assets when the asset is
ready for its intended use. No depreciation is provided against construction
in progress.
The external sales of products or by-products which are produced before the
fixed assets reach its intended use, the Group accounts for the related
revenues and costs separately in accordance with the provisions of "CASs 14 -
Revenue", "CASs 1 - Inventory", and are recognised in profit or loss for the
current period.
Where the individual component parts of an item of fixed asset have different
useful lives or provide benefits to the Group in different patterns thus
necessitating use of different depreciation rates or methods, each part is
recognised as a separate fixed asset.
The subsequent costs including the cost of replacing part of an item of fixed
assets are recognised in the carrying amount of the item if the recognition
criteria are satisfied, and the carrying amount of the replaced part is
derecognised. The costs of the day-to-day servicing of fixed assets are
recognised in profit or loss as incurred.
The Group terminates the recognition of an item of fixed asset when it is in a
state of disposal or it is estimated that it is unable to generate any
economic benefits through use or disposal. Gains or losses arising from the
retirement or disposal of an item of fixed asset are determined as the
difference between the net disposal proceeds and the carrying amount of the
item and are recognised in profit or loss on the date of retirement or
disposal.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(7) Fixed assets and construction in progress (Continued)
Other than oil and gas properties, the cost of fixed assets less residual
value and accumulated impairment losses is depreciated using the straight-line
method over their estimated useful lives, unless the fixed asset is classified
as held for sale. The estimated useful lives and the estimated rate of
residual values adopted for respective classes of fixed assets are as follows:
Estimated Estimated rate
useful life of residual value
Plants and buildings 12-50 years 3%
Equipment, machinery and others 4-30 years 3%
Useful lives, residual values and depreciation methods are reviewed at least
each year end.
(8) Oil and gas properties
Oil and gas properties include the mineral interests in properties, wells and
related support equipment arising from oil and gas exploration and production
activities.
The acquisition cost of mineral interest is capitalised as oil and gas
properties. Costs of development wells and related support equipment are
capitalised. The cost of exploratory wells is initially capitalised as
construction in progress pending determination of whether the well has found
proved reserves. Exploratory well costs are charged to expenses upon the
determination that the well has not found proved reserves. However, in the
absence of a determination of the discovery of proved reserves, exploratory
well costs are not carried as an asset for more than one year following
completion of drilling. If, after one year has passed, a determination of the
discovery of proved reserves cannot be made, the exploratory well costs are
impaired and charged to expense. All other exploration costs, including
geological and geophysical costs, are charged to profit or loss in the year as
incurred.
The Group estimates future dismantlement costs for oil and gas properties with
reference to engineering estimates after taking into consideration the
anticipated method of dismantlement required in accordance with the industry
practices. These estimated future dismantlement costs are discounted at
credit-adjusted risk-free rate and are capitalised as oil and gas properties,
which are subsequently amortised as part of the costs of the oil and gas
properties.
Capitalised costs of proved oil and gas properties are amortised on a
unit-of-production method based on volumes produced and reserves.
(9) Intangible assets
Intangible assets, where the estimated useful life is finite, are stated in
the balance sheet at cost less accumulated amortisation and provision for
impairment losses (see Note 3(12)). For an intangible asset with finite useful
life, its cost less estimated residual value and accumulated impairment losses
is amortised on a straight-line basis over the expected useful lives, unless
the intangible assets are classified as held for sale.
An intangible asset is regarded as having an indefinite useful life and is not
amortised when there is no foreseeable limit to the year over which the asset
is expected to generate economic benefits for the Group.
Useful lives and amortisation methods are reviewed at least each year end.
The external sales of products or by-products which are produced in the
research and development process, the Group accounts for the related revenues
and costs separately in accordance with the provisions of "CASs 14 - Revenue",
"CASs 1 - Inventory", and are recognised in profit or loss for the current
period.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(10) Goodwill
The initial cost of goodwill represents the excess of cost of acquisition over
the acquirer's interest in the fair value of the identifiable net assets of
the acquiree under the business combination involving entities not under
common control.
Goodwill is not amortised and is stated at cost less accumulated impairment
losses (see Note 3(12)). On disposal of an asset group or a set of asset
groups, any attributable amount of purchased goodwill is written off and
included in the calculation of the profit or loss on disposal.
(11) Financial Instruments
Financial instruments, refer to the contracts that form one party's financial
assets and form the financial liabilities or equity instruments of the other
party. The Group recognises a financial asset or a financial liability when
the Group enters into and becomes a party to the underlining contract of the
financial instrument.
(a) Financial assets
(i) Classification and measurement
The Group classifies financial assets into different categories depending on
the business model for managing the financial assets and the contractual terms
of cash flows of the financial assets: (1) financial assets measured at
amortised cost, (2) financial assets measured at fair value through other
comprehensive income, (3) financial assets measured at fair value through
profit or loss. A contractual cash flow characteristic which could have only a
de minimis effect, or could have an effect that is more than de minimis but is
not genuine, does not affect the classification of the financial asset.
Financial assets are initially recognised at fair value. For financial assets
measured at fair value through profit or loss, the relevant transaction costs
are recognised in profit or loss. The transaction costs for other financial
assets are included in the initially recognised amount. However, accounts
receivable arising from sales of goods or rendering services, without
significant financing component, are initially recognised based on the
transaction price expected to be entitled by the Group.
Debt instruments
The debt instruments held by the Group refer to the instruments that meet the
definition of financial liabilities from the perspective of the issuer, and
are measured in the following ways:
- Measured at amortised cost:
The business model for managing such financial assets by the Group are held
for collection of contractual cash flows. The contractual cash flow
characteristics are to give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
Interest income from these financial assets is recognised using the effective
interest rate method. The financial assets include cash at bank and on hand
and receivables.
- Measured at fair value through other comprehensive income:
The business model for managing such financial assets by the Group are held
for collection of contractual cash flows and for selling the financial assets,
the contractual cash flow characteristics of such financial assets are
consistent with the basic lending arrangements. Movements in the carrying
amount are taken through other comprehensive income, except for the
recognition of impairment gains or losses, foreign exchange gains and losses
and interest income calculated using the effective interest rate method, which
are recognised in profit or loss. The financial assets include receivables
financing.
Equity instruments
Equity instruments that the Group has no power to control, jointly control or
exercise significant influence over, are measured at fair value through profit
or loss and presented as financial assets held for trading.
In addition, the Group designates some equity instruments that are not held
for trading as financial assets at fair value through other comprehensive
income, and presented in other equity instrument investments. The relevant
dividends of these financial assets are recognised in profit or loss. When
derecognised, the cumulative gain or loss previously recognised in other
comprehensive income is transferred to retained earnings.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(11) Financial Instruments (Continued)
(a) Financial assets (Continued)
(ii) Impairment
The Group recognises a loss allowance for expected credit losses on financial
assets measured at amortised cost and receivables financing measured at fair
value through other comprehensive income.
The Group measures and recognises expected credit losses, considering
reasonable and supportable information about the relevant past events, current
conditions and forecasts of future economic conditions.
The Group measures the expected credit losses of financial instruments on
different stages at each balance sheet date. For financial instruments that
have no significant increase in credit risk since the initial recognition, on
first stage, the Group measures the loss allowance at an amount equal to
12-month expected credit losses. If there has been a significant increase in
credit risk since the initial recognition of a financial instrument but credit
impairment has not occurred, on second stage, the Group recognises a loss
allowance at an amount equal to lifetime expected credit losses. If credit
impairment has occurred since the initial recognition of a financial
instrument, on third stage, the Group recognises a loss allowance at an amount
equal to lifetime expected credit losses.
For financial instruments that have low credit risk at the balance sheet date,
the Group assumes that there is no significant increase in credit risk since
the initial recognition, and measures the loss allowance at an amount equal to
12-month expected credit losses.
For financial instruments on the first stage and the second stage, and that
have low credit risk, the Group calculates interest income according to
carrying amount without deducting the impairment allowance and effective
interest rate. For financial instruments on the third stage, interest income
is calculated according to the carrying amount minus amortised cost after the
provision of impairment allowance and effective interest rate.
For accounts receivable and receivables financing related to revenue, the
Group measures the loss allowance at an amount equal to lifetime expected
credit
The Group recognises the loss allowance accrued or written back in profit or
loss.
(iii) Derecognition
The Group derecognises a financial asset when (1) the contractual right to
receive cash flows from the financial asset expires; (2) the Group transfers
the financial asset and substantially all the risks and rewards of ownership
of the financial asset; (3) the financial assets have been transferred and the
Group neither transfers nor retains substantially all the risks and rewards of
ownership of the financial asset, but the Group has not retained control.
On derecognition of other equity instrument investments, the difference
between the carrying amounts and the sum of the consideration received and any
cumulative gain or loss previously recognised in other comprehensive income,
is recognised in retained earnings. While on derecognition of other financial
assets, this difference is recognised in profit or loss.
(b) Financial liabilities
The Group, at initial recognition, classifies financial liabilities as either
financial liabilities subsequently measured at amortised cost or financial
liabilities at fair value through profit or loss.
The Group's financial liabilities are mainly financial liabilities measured at
amortised cost, including bills payable, accounts payable, other payables,
loans and debentures payable, etc. These financial liabilities are initially
measured at the amount of their fair value after deducting transaction costs
and use the effective interest rate method for subsequent measurement.
Where the present obligations of financial liabilities are completely or
partially discharged, the Group derecognises these financial liabilities or
discharged parts of obligations. The differences between the carrying amounts
and the consideration received are recognised in profit or loss.
Financial guarantee liabilities
Financial guarantees are contracts that requires the Group to make specified
payments to reimburse the holder for a loss it incurs because a specified
debtor fails to make payment when due in accordance with the original or
modified terms of a debt instrument.
Financial guarantees issued are initially recognised at fair value, which is
determined by reference to fees charged in an arm's length transaction for
similar services, when such information is obtainable, or to interest rate
differentials, by comparing the actual rates charged by lenders when the
guarantee is made available with the estimated rates that lenders would have
charged, had the guarantees not been available, where reliable estimates of
such information can be made. Where consideration is received or receivable
for the issuance of the guarantee, the consideration is recognised in
accordance with the Group's policies applicable to that category of asset.
Where no such consideration is received or receivable, an immediate expense is
recognised in profit or loss.
Subsequent to initial recognition, the amount initially recognised as deferred
income is amortised in profit or loss over the term of the guarantee as income
from financial guarantees issued.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(11) Financial Instruments (Continued)
(c) Determination of fair value
If there is an active market for financial instruments, the quoted price in
the active market is used to measure fair values of the financial instruments.
If no active market exists for financial instruments, valuation techniques are
used to measure fair values. In valuation, the Group adopts valuation
techniques that are applicable in the current situation and have sufficient
available data and other information to support it, and selects input values
that are consistent with the asset or liability characteristics considered by
market participants in the transaction of relevant assets or liabilities, and
gives priority to relevant observable input values. Use of unobservable input
values where relevant observable input values cannot be obtained or are not
practicable.
(d) Derivative financial instruments and hedge accounting
Derivative financial instruments are recognised initially at fair value. At
each balance sheet date, the fair value is remeasured. The gain or loss on
remeasurement to fair value is recognised immediately in profit or loss,
except where the derivatives qualify for hedge accounting.
Hedge accounting is a method which recognises the offsetting effects on profit
or loss of changes in the fair values of the hedging instrument and the hedged
item in the same accounting period, to represent the effect of risk management
activities.
Hedged items are the items that expose the Group to risks of changes in future
cash flows and that are designated as being hedged and that must be reliably
measurable. The Group's hedged items include a forecast transaction that is
settled with an undetermined future market price and exposes the Group to risk
of variability in cash flows, etc.
A hedging instrument is a designated derivative whose changes in fair value or
cash flows are expected to offset changes in the fair value or cash flows of
the hedged item.
The hedging relationship meets all of the following hedge effectiveness
requirements:
(1) There is an economic relationship between the hedged item and the
hedging instrument, which share a risk and that gives rise to opposite changes
in fair value that tend to offset each other.
(2) The effect of credit risk does not dominate the value changes that
result from that economic relationship.
(3) The hedge ratio of the hedging relationship is the same as that
resulting from the quantity of the hedged item that the entity actually hedges
and the quantity of the hedging instrument that the entity actually uses to
hedge that quantity of hedged item. However, that designation shall not
reflect an imbalance between the weightings of the hedged item and the hedging
instrument.
- Cash flow hedges
Cash flow hedge is a hedge of the exposure to variability in cash flows that
is attributable to a particular risk associated with all, or a component of, a
recognised asset or liability (such as all or some future interest payments on
variable-rate debt) or a highly probable forecast transaction, and could
affect profit or loss. As long as a cash flow hedge meets the qualifying
criteria for hedge accounting, the hedging relationship shall be accounted for
as follows. The amount of the cash flow hedge reserve is adjusted to the lower
of the following (in absolute amounts):
- The cumulative gain or loss on the hedging instrument from inception
of the hedge;
- The cumulative change in present value of the expected future cash
flows on the hedged item from inception of the hedge.
The gain or loss on the hedging instrument that is determined to be an
effective hedge is recognised in other comprehensive income.
The portion of the gain or loss on the hedging instrument that is determined
to be an ineffective hedge is recognised in profit or loss.
If a hedged forecast transaction subsequently results in the recognition of a
non-financial asset or non-financial liability, or a hedged forecast
transaction for a non-financial asset or a non-financial liability becomes a
firm commitment for which fair value hedge accounting is applied, the entity
shall remove that amount from the cash flow hedge reserve and include it
directly in the initial cost or other carrying amount of the asset or the
liability. This is not a reclassification adjustment and hence it does not
affect other comprehensive income.
For cash flow hedges, other than those covered by the preceding two policy
statements, that amount shall be reclassified from the cash flow hedge reserve
to profit or loss as a reclassification adjustment in the same period or
periods during which the hedged expected future cash flows affect profit or
loss.
If the amount that has been accumulated in the cash flow hedge reserve is a
loss and the Group expects that all or a portion of that loss will not be
recovered in one or more future periods, the Group immediately reclassify the
amount that is not expected to be recovered into profit or loss.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(11) Financial Instruments (Continued)
(d) Derivative financial instruments and hedge accounting (Continued)
- Cash flow hedges (Continued)
When the hedging relationship no longer meets the risk management objective on
the basis of which it qualified for hedge accounting (ie the entity no longer
pursues that risk management objective), or when a hedging instrument expires
or is sold, terminated, exercised, or there is no longer an economic
relationship between the hedged item and the hedging instrument or the effect
of credit risk starts to dominate the value changes that result from that
economic relationship or no longer meets the criteria for hedge accounting,
the Group discontinues prospectively the hedge accounting treatments. If the
hedged future cash flows are still expected to occur, that amount shall remain
in the cash flow hedge reserve and shall be accounted for as cash flow hedges.
If the hedged future cash flows are no longer expected to occur, that amount
shall be immediately reclassified from the cash flow hedge reserve to profit
or loss as a reclassification adjustment. A hedged future cash flow that is no
longer highly probable to occur may still be expected to occur, if the hedged
future cash flows are still expected to occur, that amount shall remain in the
cash flow hedge reserve and shall be accounted for as cash flow hedges.
- Fair value hedges
A fair value hedge is a hedge of the exposure to changes in the fair value of
a recognised asset or liability or an unrecognised firm commitment, or a
portion of such an asset, liability or firm commitment.
The gain or loss from remeasuring the hedging instrument is recognised in
profit or loss. The gain or loss on the hedged item attributable to the hedged
risk adjusts the carrying amount of the recognised hedged item not measured at
fair value and is recognised in profit or loss.
Any adjustment to the carrying amount of a hedged item is amortised to profit
or loss if the hedged item is a financial instrument (or a component thereof)
measured at amortised cost. The amortisation is based on a recalculated
effective interest rate at the date that amortisation begins.
(12) Impairment of other non-financial long-term assets
Internal and external sources of information are reviewed at each balance
sheet date for indications that the following assets, including fixed assets,
construction in progress, right-of-use assets, goodwill, intangible assets,
long-term deferred expenses and investments in subsidiaries, associates and
joint ventures may be impaired.
Assets are tested for impairment whenever events or changes in circumstances
indicate that their carrying amounts may not be recoverable. The recoverable
amounts of goodwill and intangible assets with uncertain useful lives are
estimated annually no matter there are any indications of impairment. Goodwill
is tested for impairment together with related asset units or groups of asset
units.
An asset unit is the smallest identifiable group of assets that generates cash
inflows largely independent of the cash inflows from other assets or groups of
assets. An asset unit comprises related assets that generate associated cash
inflows. In identifying an asset unit, the Group primarily considers whether
the asset unit is able to generate cash inflows independently as well as the
management style of production and operational activities, and the decision
for the use or disposal of asset.
The recoverable amount is the greater of the fair value less costs to sell and
the present value of expected future cash flows generated by the asset (or
asset unit, set of asset units).
Fair value less costs to sell of an asset is based on its selling price in an
arm's length transaction less any direct costs attributable to the disposal.
Present value of expected future cash flows is the estimation of future cash
flows to be generated from the use of and upon disposal of the asset,
discounted at an appropriate pre-tax discount rate over the asset's remaining
useful life.
If the recoverable amount of an asset is less than its carrying amount, the
carrying amount is reduced to the recoverable amount. The amount by which the
carrying amount is reduced is recognised as an impairment loss in profit or
loss. A provision for impairment loss of the asset is recognised accordingly.
Impairment losses related to an asset unit or a set of asset units first
reduce the carrying amount of any goodwill allocated to the asset unit or set
of asset units, and then reduce the carrying amount of the other assets in the
asset unit or set of asset units on a pro rata basis. However, the carrying
amount of an impaired asset will not be reduced below the highest of its
individual fair value less costs to sell (if determinable), the present value
of expected future cash flows (if determinable) and zero.
Impairment losses for assets are not reversed.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(13) Long-term deferred expenses
Long-term deferred expenses are amortised on a straight-line basis over their
beneficial periods.
(14) Employee benefits
Employee benefits are all forms of considerations and compensation given in
exchange for services rendered by employees, including short- term
compensation, post-employment benefits, termination benefits and other
long-term employee benefits.
(a) Short-term compensation
Short-term compensation includes salaries, bonuses, allowances and subsidies,
employee benefits, medical insurance premiums, work-related injury insurance
premium, maternity insurance premium, contributions to housing fund, unions
and education fund and short-term absence with payment etc. When an employee
has rendered service to the Group during an accounting period, the Group shall
recognise the short-term compensation actually incurred as a liability and
charge to the cost of an asset or to profit or loss in the same period, and
non-monetary benefits are valued with the fair value.
(b) Post-employment benefits
The Group classifies post-employment benefits into either Defined Contribution
Plan (DC plan) or Defined Benefit Plan (DB plan). DC plan means the Group only
contributes a fixed amount to an independent fund and no longer bears other
payment obligation; DB plan is post-employment benefits other than DC plan. In
this reporting period, the post-employment benefits of the Group primarily
comprise basic pension insurance and unemployment insurance and both of them
are DC plans.
Basic pension insurance
Employees of the Group participate in the social insurance system established
and managed by local labor and social security department. The Group makes
basic pension insurance to the local social insurance agencies every month, at
the applicable benchmarks and rates stipulated by the government for the
benefits of its employees. After the employees retire, the local labor and
social security department has obligations to pay them the basic pension. When
an employee has rendered service to the Group during an accounting period, the
Group shall recognise the accrued amount according to the above social
security provisions as a liability and charge to the cost of an asset or to
profit or loss in the same period.
(c) Termination benefits
When the Group terminates the employment relationship with employees before
the employment contracts expire, or provides compensation as an offer to
encourage employees to accept voluntary redundancy, a provision for the
termination benefits provided is recognised in profit or loss under the
conditions of both the Group has a formal plan for the termination of
employment or has made an offer to employees for voluntary redundancy, which
will be implemented shortly; and the Group is not allowed to withdraw from
termination plan or redundancy offer unilaterally.
(15) Income tax
Current tax and deferred tax are recognised in profit or loss except to the
extent that they relate to business combinations and items recognised directly
in equity (including other comprehensive income).
Current tax is the expected tax payable calculated at the applicable tax rate
on taxable income for the year, plus any adjustment to tax payable in respect
of previous years.
At the balance sheet date, current tax assets and liabilities are offset if
the Group has a legally enforceable right to set them off and also intends
either to settle on a net basis or to realise the asset and settle the
liability simultaneously.
Deferred tax assets and liabilities are recognised based on deductible
temporary differences and taxable temporary differences respectively.
Temporary difference is the difference between the carrying amounts of assets
and liabilities and their tax bases. Unused tax losses and unused tax credits
able to be utilised in subsequent years are treated as temporary differences.
Deferred tax assets are recognised to the extent that it is probable that
future taxable income will be available to offset the deductible temporary
differences.
Temporary differences arise in a transaction, which is not a business
combination, and at the time of transaction, does not affect accounting profit
or taxable profit (or unused tax losses), will not result in deferred tax.
Temporary differences arising from the initial recognition of goodwill will
not result in deferred tax.
At the balance sheet date, the amounts of deferred tax recognised is measured
based on the expected manner of recovery or settlement of the carrying amount
of the assets and liabilities, using tax rates that are expected to be applied
in the period when the asset is recovered or the liability is settled in
accordance with tax laws.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date. If it is unlikely to obtain sufficient taxable income to offset against
the benefit of deferred tax asset, the carrying amount of the deferred tax
assets is written down. Any such write-down should be subsequently reversed
where it becomes probable that sufficient taxable income will be available.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(15) Income tax (Continued)
At the balance sheet date, deferred tax assets and liabilities are offset if
all the following conditions are met:
- the taxable entity has a legally enforceable right to offset current
tax assets and current tax liabilities; and
- they relate to income taxes levied by the same tax authority on
either:
- the same taxable entity; or
- different taxable entities which either to intend to settle the current
tax liabilities and assets on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which significant
amounts of deferred tax liabilities or assets are expected to be settled or
recovered.
(16) Provisions
Provisions are recognised when the Group has a present obligation as a result
of a contingent event, it is probable that an outflow of economic benefits
will be required to settle the obligations and a reliable estimate can be
made. Where the effect of time value of money is material, provisions are
determined by discounting the expected future cash flows.
Provisions for future dismantlement costs are initially recognised based on
the present value of the future costs expected to be incurred in respect of
the Group's expected dismantlement and abandonment costs at the end of related
oil and gas exploration and development activities. Any subsequent change in
the present value of the estimated costs, other than the change due to passage
of time which is regarded as interest costs, is reflected as an adjustment to
the provision of oil and gas properties.
(17) Revenue recognition
Revenue arises in the course of the Group's ordinary activities, and increases
in economic benefits in the form of inflows that result in an increase in
equity, other than those relating to contributions from equity participants.
The Group sells crude oil, natural gas, petroleum and chemical products, etc.
Revenue is recognised according to the expected consideration amount, when a
customer obtains control over the relevant goods or services. To determine
whether a customer obtains control of a promised asset, the Group shall
consider indicators of the transfer of control, which include, but are not
limited to, the Group has a present right to payment for the asset; the Group
has transferred physical possession of the asset to the customer; the customer
has the significant risks and rewards of ownership of the asset; the customer
has accepted the asset.
Sales of goods
Sales are recognised when control of the goods have transferred, being when
the products are delivered to the customer. Advance from customers but goods
not yet delivered is recorded as contract liabilities and is recognised as
revenues when a customer obtains control over the relevant goods.
(18) Government grants
Government grants are the gratuitous monetary assets or non-monetary assets
that the Group receives from the government, excluding capital injection by
the government as an investor. Special funds such as investment grants
allocated by the government, if clearly defined in official documents as part
of "capital reserve" are dealt with as capital contributions, and not regarded
as government grants.
Government grants are recognised when there is reasonable assurance that the
grants will be received and the Group is able to comply with the conditions
attaching to them. Government grants in the form of monetary assets are
recorded based on the amount received or receivable, whereas non-monetary
assets are measured at fair value.
Government grants received in relation to assets are recorded as deferred
income, and recognised evenly in profit or loss over the assets' useful lives.
Government grants received in relation to revenue are recorded as deferred
income, and recognised as income in future periods as compensation when the
associated future expenses or losses arise; or directly recognised as income
in the current period as compensation for past expenses or losses.
(19) Borrowing costs
Borrowing costs incurred on borrowings for the acquisition, construction or
production of qualified assets are capitalised into the cost of the related
assets in the capitalisable period.
Except for the above, other borrowing costs are recognised as financial
expenses in the income statement when incurred.
(20) Repairs and maintenance expenses
Repairs and maintenance (including overhauling expenses) expenses are
recognised in profit or loss when incurred.
(21) Environmental expenditures
Environmental expenditures that relate to current ongoing operations or to
conditions caused by past operations is expensed as incurred. Liabilities
related to future remediation costs are recorded when environmental
assessments and/or cleanups are probable and the costs can be reliably
estimated. As facts concerning environmental contingencies become known to the
Group, the Group reassesses its position both with respect to accrued
liabilities and other potential exposures.
3 SIGNIFICANT ACCOUNTING POLICIES (Continued)
(22) Research and development costs
Research costs and development costs that cannot meet the capitalisation
criteria are recognised in profit or loss when incurred.
(23) Dividends
Dividends and distributions of profits proposed in the profit appropriation
plan which will be authorised and declared after the balance sheet date, are
not recognised as a liability at the balance sheet date and are separately
disclosed in the notes to the financial statements. Dividends are recognised
as a liability in the period in which they are declared.
(24) Related parties
If a party has the power to control, jointly control or exercise significant
influence over another party, or vice versa, or where two or more parties are
subject to common control, joint control from another party, they are
considered to be related parties, except for the two parties significantly
influenced by a party. Related parties may be individuals or enterprises.
Where enterprises are subject to state control but are otherwise unrelated,
they are not related parties.
In addition to the related parties stated above, the Company determines
related parties based on the disclosure requirements of Administrative
Procedures on the Information Disclosures of Listed Companies issued by the
CSRC.
(25) Segment reporting
Reportable segments are identified based on operating segments which are
determined based on the structure of the Group's internal organisation,
management requirements and internal reporting system. An operating segment is
a component of the Group that meets the following respective conditions:
‧ engage in business activities from which it may earn revenues and incur
expenses;
‧ whose operating results are regularly reviewed by the Group's management
to make decisions about resource to be allocated to the segment and assess its
performance; and
‧ for which financial information regarding financial position, results of
operations and cash flows are available.
Inter-segment revenues are measured on the basis of actual transaction price
for such transactions for segment reporting, and segment accounting policies
are consistent with those for the consolidated financial statements.
(26) Changes in significant accounting policies
In 2022, the Group has adopted the following newly accounting standards and
implementation guidance issued by the MOF, mainly include:
- The provisions of "Accounting for the external sale of products or
by-products produced before the fixed assets reach its intended use or in the
research and development ("trial sales") in CAS Bulletin No.15 (Caikuai 2021
No.35) ("Bulletin No. 15")
- The provisions of Bulletin No. 15 of judgment on onerous contracts
(a) The accounting treatment of Bulletin No. 15 of trial sales
In accordance with this provision, the Group accounts for revenues and costs
of the external sale of products or by-products produced before the fixed
assets reach its intended use and in the research and development ("trial
sales"), in accordance with the provisions of "CASs 14 - Revenue", "CASs 1 -
Inventory", which are recognised in profit or loss for the current period,
instead of offsetting revenues and costs of trial sales and against the cost
of fixed assets or research and development expenses.
The adoption of the above regulations does not have significant effect on the
financial position and financial performance of the Group.
(b) The provisions of Bulletin No. 15 of judgment on onerous contracts
In accordance with this provision, the Group estimates the cost of fulfilling
a contract comprises the incremental costs of the contract and the apportioned
amount of other costs that relate directly to the contract when determining a
onerous contract.
The adoption of the above regulations does not have significant effect on the
financial position and financial performance of the Group.
4 TAXATION
Major types of tax applicable to the Group are value-added tax, resources tax,
consumption tax, income tax, special oil income levy, city construction tax,
education surcharge and local education surcharge.
Tax rates of products are presented as below:
Type of taxes Tax rate Tax basis and method
Value Added Tax (the "VAT") 13%, 9%, 6% Based on taxable value added amount. Tax payable is calculated using the
taxable sales amount multiplied by the applicable tax rate less current
period's deductible VAT input.
Resource Tax 6% Based on the revenue from sales of crude oil and natural gas.
Consumption Tax RMB2,109.76 per tonnage for Gasoline, RMB1,411.20 per tonnage for Diesel, Based on quantities
RMB2,105.20 per tonnage for Naphtha, RMB1,948.64 per tonnage for Solvent oil,
RMB1,711.52 per tonnage for Lubricant oil, RMB1,218.00 per tonnage for Fuel
oil, and RMB1,495.20 per tonnage for Jet fuel oil.
Corporate Income Tax 5% to 50% Based on taxable income.
Special Oil Income Levy 20% to 40% Based on the sales of domestic crude oil at prices higher than a specific
level.
City Maintenance and 1%, 5% or 7% Based on the actual paid VAT and consumption tax.
Construction Tax
Education surcharges 3% Based on the actual paid VAT and consumption tax.
Local Education surcharges 2% Based on the actual paid VAT and consumption tax.
5 CASH AT BANK AND ON HAND
The Group
At 30 June 2022 At 31 December 2021
Original Original
currency Exchange RMB currency Exchange RMB
million rates million million rates million
Cash on hand
Renminbi 1 1
Cash at bank
Renminbi 144,431 144,294
US Dollar 961 6.7114 6,452 2,027 6.3757 12,924
Hong Kong Dollar 4,408 0.8552 3,770 3,533 0.8176 2,888
EUR 12 7.0084 87 3 7.2197 20
Others 104 180
154,845 160,307
Deposits at related parities
Renminbi 22,590 15,758
US Dollar 7,890 6.7114 52,943 6,943 6.3757 44,266
EUR 122 7.0084 854 67 7.2197 483
Others 2,705 1,175
79,092 61,682
Total 233,937 221,989
Deposits at related parties represent deposits placed at Sinopec Finance
Company Limited and Sinopec Century Bright Capital Investment Limited.
Deposits interest is calculated based on market rate.
At 30 June 2022, time deposits with financial institutions of the Group
amounted to RMB94,759 million (31 December 2021: RMB113,399 million).
6 FINANCIAL ASSETS HELD FOR TRADING
At 30 June At 31 December
2022 2021
RMB million RMB million
Structured deposits 1,009 -
Exchange traded fund 3 -
Total 1,012 -
The financial assets are primarily the structured deposits with financial
institutions, which are presented as current assets since they are expected to
be expired within 12 months from the end of the reporting period.
7 DERIVATIVE FINANCIAL ASSETS AND DERIVATIVE FINANCIAL LIABILITIES
Derivative financial assets and derivative financial liabilities of the Group
are primarily commodity futures and swaps contracts. See Note 65.
8 ACCOUNTS RECEIVABLE
The Group The Company
At 30 June At 31 December At 30 June At 31 December
2022 2021 2022 2021
RMB million RMB million RMB million RMB million
Accounts receivable 67,797 38,894 36,365 21,239
Less: Allowance for doubtful accounts 4,080 4,033 86 93
Total 63,717 34,861 36,279 21,146
Ageing analysis on accounts receivable is as follows:
The Group
At 30 June 2022 At 31 December 2021
Percentage Percentage
Percentage of allowance Percentage of allowance
to total to accounts to total to accounts
Amount accounts Allowance receivable Amount accounts Allowance receivable
RMB receivable RMB balance RMB receivable RMB balance
million % million % million % million %
Within one year 63,297 93.4 43 0.1 34,263 88.1 83 0.2
Between one and two years 260 0.4 80 30.8 623 1.6 181 29.0
Between two and three years 3,623 5.3 3,369 93.0 3,411 8.8 3,190 93.5
Over three years 617 0.9 588 95.3 597 1.5 579 97.0
Total 67,797 100.0 4,080 38,894 100.0 4,033
The Company
At 30 June 2022 At 31 December 2021
Percentage Percentage
Percentage of allowance Percentage of allowance
to total to accounts to total to accounts
Amount accounts Allowance receivable Amount accounts Allowance receivable
RMB receivable RMB balance RMB receivable RMB balance
million % million % million % million %
Within one year 35,847 98.6 2 0.1 20,196 95.1 9 0.1
Between one and two years 433 1.1 14 3.2 946 4.5 6 0.6
Between two and three years 16 0.1 1 6.3 20 0.1 2 10.0
Over three years 69 0.2 69 100.0 77 0.3 76 98.7
Total 36,365 100.0 86 21,239 100.0 93
At 30 June 2022 and 31 December 2021, the total amounts of the top five
accounts receivable of the Group are set out below:
At 30 June At 31 December
2022 2021
Total amount (RMB million) 15,835 10,444
Percentage to the total balance of accounts receivable 23.4% 26.9%
Allowance for doubtful accounts 2,136 2,062
Sales are generally on cash term. Credit is generally only available for major
customers with well-established trading records. Amounts due from China
Petrochemical Corporation ("Sinopec Group Company") and fellow subsidiaries
are repayable under the same terms.
Accounts receivable (net of allowance for doubtful accounts) primarily
represent receivables that are neither past due nor impaired. These
receivables relate to a wide range of customers for whom there is no recent
history of default. Information about the impairment of accounts receivable
and the Group exposure to credit risk can be found in Note 65.
During for the six-month periods ended 30 June 2022 and 2021, the Group and
the Company had no individually significant accounts receivable been fully or
substantially provided allowance for doubtful accounts.
During for the six-month periods ended 30 June 2022 and 2021, the Group and
the Company had no individually significant write-off or recovery of doubtful
debts which had been fully or substantially provided for in prior years.
8 ACCOUNTS RECEIVABLE (Continued)
Ageing started from the overdue date of accounts receivable. The Group always
measured the provision for impairment of accounts receivable based on the
amount equivalent to the expected credit loss during the entire duration. The
ECLs were calculated based on historical actual credit loss experience. The
rates were considered the differences between economic conditions during the
period over which the historical data has been collected, current conditions
and the Group's view of economic conditions over the expected lives of the
receivables. The Group performed the calculation of ECL rates by the operating
segment and geographical location
30 June 2022 Impairment provision on Impairment provision on
individual basis provision matrix basis
Gross Carrying Impairment Weighted- Impairment Loss
carrying amount provision average provision allowance
amount on individual loss rate
basis
RMB RMB RMB RMB RMB
million million million million million
Current and within 1 year past due 63,297 9,390 - 0.1% 43 43
1 to 2 years past due 260 69 49 16.2% 31 80
2 to 3 years past due 3,623 3,559 3,338 48.4% 31 3,369
Over 3 years past due 617 257 228 100.0% 360 588
Total 67,797 13,275 3,615 465 4,080
30 June 2022 Impairment provision on Impairment provision on
individual basis provision matrix basis
Gross Carrying Impairment Weighted- Impairment Loss
carrying amount provision average provision allowance
amount on individual loss rate
basis
RMB RMB RMB RMB RMB
million million million million million
Current and within 1 year past due 34,263 4,280 26 0.2% 57 83
1 to 2 years past due 623 500 137 35.8% 44 181
2 to 3 years past due 3,411 3,324 3,146 50.6% 44 3,190
Over 3 years past due 597 208 190 100.0% 389 579
Total 38,894 8,312 3,499 534 4,033
9 RECEIVABLES FINANCING
Receivables financing represents mainly the bills of acceptance issued by
banks for sales of goods and products, The business model of receivables
financing is to collect contract cash flow and sell it.
At 30 June 2022, the Group's derecognised but outstanding bills due to
endorsement or discount amounted to RMB35,260 million (31 December 2021:
RMB36,400 million).
At 30 June 2022, the Group considers that its bills of acceptance issued by
banks do not pose a significant credit risk and will not cause any significant
loss due to the default of drawers.
10 PREPAYMENTS
The Group The Company
At 30 June At 31 December At 30 June At 31 December
2022 2021 2022 2021
RMB million RMB million RMB million RMB million
Prepayments 13,120 9,350 4,510 4,556
Less: Allowance for doubtful accounts 109 83 19 16
Total 13,011 9,267 4,491 4,540
Ageing analysis of prepayments is as follows:
The Group
At 30 June 2022 At 31 December 2021
Percentage of Percentage of
Percentage allowance to Percentage allowance to
Amount to total Allowance prepayments Amount to total Allowance prepayments
RMB prepayments RMB balance RMB prepayments RMB balance
million % million % million % million %
Within one year 12,533 95.5 - - 8,541 91.3 - -
Between one and two years 236 1.8 21 8.9 444 4.8 7 1.6
Between two and three years 126 1.0 14 11.1 166 1.8 25 15.1
Over three years 225 1.7 74 32.9 199 2.1 51 25.6
Total 13,120 100.0 109 9,350 100.0 83
The Company
At 30 June 2022 At 31 December 2021
Percentage of Percentage of
Percentage allowance to Percentage allowance to
Amount to total Allowance prepayments Amount to total Allowance prepayments
RMB prepayments RMB balance RMB prepayments RMB balance
million % million % million % million %
Within one year 4,233 93.8 - - 3,965 87.0 - -
Between one and two years 68 1.5 4 5.9 369 8.1 2 0.5
Between two and three years 88 2.0 8 9.1 99 2.2 10 10.1
Over three years 121 2.7 7 5.8 123 2.7 4 3.3
Total 4,510 100.0 19 4,556 100.0 16
At 30 June 2022 and 31 December 2021, the total amounts of the top five
prepayments of the Group are set out below:
At 30 June At 31 December
2022 2021
Total amount (RMB million) 4,186 2,939
Percentage to the total balance of prepayments 31.9% 31.4%
11 OTHER RECEIVABLES
The Group The Company
At 30 June At 31 December At 30 June At 31 December
2022 2021 2022 2021
RMB million RMB million RMB million RMB million
Other receivables 46,230 37,254 44,081 47,827
Less: Allowance for doubtful accounts 1,584 1,590 905 898
Total 44,646 35,664 43,176 46,929
Ageing analysis of other receivables is as follows:
The Group
At 30 June 2022 At 31 December 2021
Percentage Percentage
Percentage of allowance Percentage of allowance
to total to other to total to other
Amount other Allowance receivables Amount other Allowance receivables
RMB receivables RMB balance RMB receivables RMB balance
million % million % million % million %
Within one year 35,542 76.8 35 0.1 26,579 71.3 35 0.1
Between one and two years 598 1.3 107 17.9 597 1.6 112 18.8
Between two and three years 7,652 16.6 180 2.4 7,661 20.6 165 2.2
Over three years 2,438 5.3 1,262 51.8 2,417 6.5 1,278 52.9
Total 46,230 100.0 1,584 37,254 100.0 1,590
The Company
At 30 June 2022 At 31 December 2021
Percentage Percentage
Percentage of allowance Percentage of allowance
to total to other to total to other
Amount other Allowance receivables Amount other Allowance receivables
RMB receivables RMB balance RMB receivables RMB balance
million % million % million % million %
Within one year 26,671 60.5 - - 28,176 58.9 - -
Between one and two years 3,589 8.2 3 0.1 3,740 7.8 2 0.1
Between two and three years 1,016 2.3 1 0.1 1,414 3.0 2 0.1
Over three years 12,805 29.0 901 7.0 14,497 30.3 894 6.2
Total 44,081 100.0 905 47,827 100.0 898
At 30 June 2022 and at 31 December 2021, the total amounts of the top five
other receivables of the Group are set out below:
At 30 June At 31 December
2022 2021
Total amount (RMB million) 22,540 19,056
Ageing Within one year, between one Within one year, between one
and two years, and two years,
between two and between two and
three years and three years and
over three years over three years
Percentage to the total balance of other receivables 48.8% 51.2%
Allowance for doubtful accounts 73.0 74.0
During the six-month periods ended 30 June 2022 and 2021, the Group and the
Company had no individually significant other receivables been fully or
substantially provided allowance for doubtful accounts.
During the six-month periods ended 30 June 2022 and 2021, the Group and the
Company had no individually significant write-off or recovery of doubtful
debts which had been fully or substantially provided for in prior years.
12 INVENTORIES
The Group
At 30 June At 31 December
2022 2021
RMB million RMB million
Raw materials 175,141 109,940
Work in progress 14,965 15,701
Finished goods 96,218 84,174
Spare parts and consumables 3,056 2,515
289,380 212,330
Less: Provision for diminution in value of inventories 4,348 4,897
Total 285,032 207,433
During the six-month period ended 30 June 2022, the provision for diminution
in value of inventories of the Group was primarily due to the costs of raw
materials were higher than net realisable value.
13 LONG-TERM EQUITY INVESTMENTS
The Group
Provision for
Investments in Investments impairment
joint ventures in associates losses Total
RMB million RMB million RMB million RMB million
Balance at 1 January 2022 63,384 149,500 (3,705) 209,179
Additions for the period 2,939 2,706 - 5,645
Share of profits less losses under the equity method 1,372 5,955 - 7,327
Change of other comprehensive income (199) 3,596 - 3,397
under the equity method
Other equity movements under the equity method 16 (2,118) - (2,102)
Dividends declared (4,184) (1,259) - (5,443)
Disposals for the period (126) (134) - (260)
Foreign currency translation differences 832 893 (103) 1,622
Other movements - (18) - (18)
Balance at 30 June 2022 64,034 159,121 (3,808) 219,347
The Company
Investments Investments in Investments Provision for Total
in subsidiaries joint ventures in associates impairment
losses
RMB million RMB million RMB million RMB million RMB million
Balance at 1 January 2022 277,310 17,609 73,854 (7,926) 360,847
Additions for the period 5,754 380 - - 6,134
Share of profits less losses under the equity - 568 2,446 - 3,014
method
Change of other comprehensive income under the - - 139 - 139
equity method
Other equity movements under the equity method - 4 (1,441) - (1,437)
Dividends declared - (2,016) (407) - (2,423)
Disposals for the period (347) - - - (347)
Balance at 30 June 2022 282,717 16,545 74,591 (7,926) 365,927
For the six-month period ended 30 June 2022, the Group and the Company had no
individually significant long-term investment impairment.
Details of the Company's principal subsidiaries are set out in Note 60.
13 LONG-TERM EQUITY INVESTMENTS (Continued)
Principal joint ventures and associates of the Group are as follows:
(a) Principal joint ventures and associates
Name of investees Principal place Register location Legal Principal activities Registered Percentage of
of business representative Capital equity/voting
RMB million right directly or
indirectly held
by the Company
1. Joint ventures
Fujian Refining & Petrochemical PRC PRC Liu Xiangdong Manufacturing refining oil products 14,758 50.00%
Company Limited ("FREP")
BASF-YPC Company Limited ("BASF-YPC") PRC PRC Gu Yuefeng Manufacturing and distribution of 13,141 40.00%
petrochemical products
Taihu Limited ("Taihu") Russia Cyprus NA Crude oil and natural gas extraction 25,000 USD 49.00%
Yanbu Aramco Sinopec Refining Saudi Arabia Saudi Arabia NA Petroleum refining and processing 1,560 million 37.50%
Company Ltd. ("YASREF")
USD
Sinopec SABIC Tianjin Petrochemical PRC PRC SAMI ALOSAIMI Manufacturing and distribution of 10,520 50.00%
Company Limited ("Sinopec SABIC Tianjin")
petrochemical products
2. Associates
National Petroleum Pipe Network Group Co., PRC PRC Zhang Wei Operation of natural gas pipelines 500,000 14.00%
Ltd. ("National Pipe Network Group") (i)
and auxiliary facilities
Sinopec Finance Company Limited PRC PRC Jiang Yongfu Provision of non-banking financial 18,000 49.00%
("Sinopec Finance")
services
Sinopec Capital Co.,Ltd. ("Sinopec Capital") PRC PRC Sun Mingrong Project management, equity 10,000 49.00%
investment management,
investment consulting,
self-owned equity management
Zhongtian Synergetic Energy Company Limited PRC PRC Peng Yi Mining coal and manufacturing of 17,516 38.75%
("Zhongtian Synergetic Energy")
coal-chemical products
Caspian Investments Resources Ltd. ("CIR") The Republic British Virgin Islands NA Crude oil and natural gas extraction 10,002 USD 50.00%
of Kazakhstan
Except that SIBUR is a public joint stock company, other joint ventures and
associates above are limited companies.
(b) Major financial information of principal joint ventures
Summarised balance sheet and reconciliation to their carrying amounts in
respect of the Group's principal joint ventures:
FREP BASF-YPC Taihu YASREF Sinopec SABIC Tianjin
At 30 At 31 At 30 At 31 At 30 At 31 At 30 At 31 At 30 At 31
June December June December June December June December June December
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Current assets
Cash and cash equivalents 5,150 6,562 5,121 5,375 1,496 1,258 6,757 5,441 4,110 4,820
Other current assets 12,221 9,217 6,350 6,953 9,796 2,188 20,998 12,404 4,313 3,437
Total current assets 17,371 15,779 11,471 12,328 11,292 3,446 27,755 17,845 8,423 8,257
Non-current assets 12,909 13,744 9,006 9,336 8,051 14,032 42,435 41,947 18,650 18,835
Current liabilities
Current financial liabilities (593) (1,177) (39) (77) (35) (32) (5,659) (9,549) (1,826) (597)
Other current liabilities (7,691) (5,008) (2,387) (2,546) (1,518) (1,931) (24,271) (15,844) (4,265) (3,547)
Total current liabilities (8,284) (6,185) (2,426) (2,623) (1,553) (1,963) (29,930) (25,393) (6,091) (4,144)
Non-current liabilities
Non-current financial liabilities (6,857) (6,857) - - (89) (85) (30,034) (30,903) (6,848) (7,599)
Other non-current liabilities (225) (242) (103) (92) (1,502) (1,439) (1,802) (1,723) (643) (382)
Total non-current liabilities (7,082) (7,099) (103) (92) (1,591) (1,524) (31,836) (32,626) (7,491) (7,981)
Net assets 14,914 16,239 17,948 18,949 16,199 13,991 8,424 1,773 13,491 14,967
Net assets attributable to 14,914 16,239 17,948 18,949 15,694 13,523 8,424 1,773 13,491 14,967
shareholders of the Company
Net assets attributable to - - - - 505 468 - - - -
minority interests
Share of net assets 7,457 8,120 7,179 7,580 7,690 6,626 - - 6,746 7,484
from joint ventures
Carrying Amounts 7,457 8,120 7,179 7,580 7,690 6,626 - - 6,746 7,484
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS
For the six-month period ended 30 June 2022
13 LONG-TERM EQUITY INVESTMENTS (Continued)
(b) Major financial information of principal joint ventures (Continued)
Summarised income statement
Six-month period ended 30 June FREP BASF-YPC Taihu YASREF Sinopec SABIC Tianjin
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Turnover 29,042 22,263 13,430 12,776 9,675 6,847 63,610 28,009 12,670 11,645
Interest income 61 73 59 17 269 193 22 2 71 103
Interest expense (181) (210) (6) (3) (58) (42) (515) (484) (34) (46)
Profit/(Loss) before taxation 653 2,472 2,666 3,968 1,707 1,250 7,634 (1,829) (858) 1,295
Tax expense (158) (618) (666) (991) (341) (246) (1,589) 302 290 (377)
Profit/(Loss) for the period 495 1,854 2,000 2,977 1,366 1,004 6,045 (1,527) (568) 918
Other comprehensive income - - - - 842 (352) 606 392 - -
Total comprehensive income 495 1,854 2,000 2,977 2,208 652 6,651 (1,135) (568) 918
Dividends from joint ventures 910 - 1,374 336 - - - - 454 500
Share of net profit/(loss) from 248 927 800 1,191 651 492 - - (284) 459
joint ventures
Share of other comprehensive - - - - 413 (172) - - - -
income from joint ventures (ii)
The share of profit and other comprehensive income for the six-month period
ended 30 June 2022 in all individually immaterial joint ventures accounted for
using equity method in aggregate was RMB43 million (six-month period ended 30
June 2021: profit RMB2,082 million) and RMB612 million (six-month period ended
30 June 2021: profit RMB143 million) respectively. As at 30 June 2022, the
carrying amount of all individually immaterial joint ventures accounted for
using equity method in aggregate was RMB31,961 million (31 December 2021:
RMB30,640 million).
(c) Major financial information of principal associates
Summarised balance sheet and reconciliation to their carrying amounts in
respect of the Group's principal associates:
Pipe China Sinopec Finance SIBUR Zhongtian Synergetic Energy CIR
At 30 At 31 At 30 At 31 At 30 At 31 At 30 At 31 At 30 At 31
June December June December June December June December June December
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Current assets 135,065 86,335 210,337 194,458 13,568 13,140 4,429 3,532 1,049 576
Non-current assets 776,751 768,161 55,510 55,086 325 102 52,357 51,331 663 870
Current liabilities (182,211) (136,150) (233,463) (217,987) (26) (28) (4,802) (8,577) (704) (822)
Non-current liabilities (144,535) (103,243) (603) (602) (854) (676) (25,192) (22,216) (162) (144)
Net assets 585,070 615,103 31,781 30,955 13,013 12,538 26,792 24,070 846 480
Net assets attributable to 526,286 526,241 31,781 30,955 13,013 12,538 26,792 24,070 846 480
shareholders of the Company
Net assets attributable to 58,784 88,862 - - - - - - - -
minority interests
Share of net assets from associates 73,680 73,674 15,573 15,168 6,376 6,144 10,382 9,327 423 240
Carrying Amounts 73,680 73,674 15,573 15,168 6,376 6,144 10,382 9,327 423 240
Summarised income statement
Six-month period ended 30 June Pipe China Sinopec Finance Sinopec Capital Zhongtian Synergetic Energy CIR
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Turnover 55,516 48,917 2,775 2,514 2 2 9,238 8,619 1,122 878
Profit for the period 18,080 15,036 1,195 1,093 624 624 2,722 2,074 333 218
Other comprehensive income - - 282 34 - - - - 33 (22)
Total comprehensive income 18,080 15,036 1,477 1,127 624 624 2,722 2,074 366 196
Dividends declared by associates - - 319 - 73 - - - - 815
Share of net profit from associates 2,064 1,625 586 536 306 306 1,055 804 167 109
Share of other comprehensive (loss)/ - - 138 17 - - - - 17 (11)
income from associates (ii)
13 LONG-TERM EQUITY INVESTMENTS (Continued)
(c) Major financial information of principal associates (Continued)
Summarised income statement (Continued)
The share of profit and other comprehensive loss for the six-month period
ended 30 June 2022 in all individually immaterial associates accounted for
using equity method in aggregate was RMB1,777 million (six-month period ended
30 June 2021: RMB2,602 million) and RMB3,441 million (six-month period ended
30 June 2021: RMB144 million) respectively. As at 30 June 2022, the carrying
amount of all individually immaterial associates accounted for using equity
method in aggregate was RMB51,880 million (31 December 2021: RMB44,176
million).
Notes:
(i) Sinopec is able to exercise significant influence in National Pipe
Network Group and SIBUR since Sinopec has a member in National Pipe Network
Group and SIBUR's Board of Director.
(ii) Including foreign currency translation differences.
14 FIXED ASSETS
The Group
At 30 June At 31 December
2022 2021
RMB million RMB million
Fixed assets (a) 599,254 598,925
Fixed assets pending for disposal 62 7
Total 599,316 598,932
(a) Fixed assets
Oil Equipment,
Plants and and gas machinery
buildings properties and others Total
RMB million RMB million RMB million RMB million
Cost:
Balance at 1 January 2022 143,165 793,045 1,048,227 1,984,437
Additions for the period 265 867 2,756 3,888
Transferred from construction in progress 1,611 14,221 23,179 39,011
Reclassifications 395 (13) (382) -
Decreases for the period (168) (270) (2,385) (2,823)
Exchange adjustments 109 2,146 165 2,420
Balance at 30 June 2022 145,377 809,996 1,071,560 2,026,933
Less: Accumulated depreciation:
Balance at 1 January 2022 63,479 611,012 613,498 1,287,989
Additions for the period 2,153 14,865 25,002 42,020
Reclassifications 240 (12) (228) -
Decreases for the period (93) (251) (1,552) (1,896)
Exchange adjustments 52 1,921 100 2,073
Balance at 30 June 2022 65,831 627,535 636,820 1,330,186
Less: Provision for impairment losses:
Balance at 1 January 2022 4,687 49,826 43,010 97,523
Additions for the period - - 2 2
Decreases for the period (31) (1) (136) (168)
Exchange adjustments - 136 - 136
Balance at 30 June 2022 4,656 49,961 42,876 97,493
Net book value:
Balance at 30 June 2022 74,890 132,500 391,864 599,254
Balance at 31 December 2021 74,999 132,207 391,719 598,925
14 FIXED ASSETS (Continued)
The Company
At 30 June At 31 December
2022 2021
RMB million RMB million
Fixed assets (b) 278,930 284,618
Fixed assets pending for disposal 31 4
Total 278,961 284,622
(b) Fixed assets
Equipment,
Plants and Oil and gas machinery
buildings properties and others Total
RMB million RMB million RMB million RMB million
Cost:
Balance at 1 January 2022 51,696 646,020 514,422 1,212,138
Additions for the period 3 549 175 727
Transferred from construction in progress 283 9,886 7,417 17,586
Reclassifications 181 (10) (171) -
Decreases for the period (408) (245) (6,963) (7,616)
Balance at 30 June 2022 51,755 656,200 514,880 1,222,835
Less: Accumulated depreciation:
Balance at 1 January 2022 27,372 499,833 330,453 857,658
Additions for the period 773 11,331 10,744 22,848
Reclassifications 28 (9) (19) -
Decreases for the period (247) (161) (5,927) (6,335)
Balance at 30 June 2022 27,926 510,994 335,251 874,171
Less: Provision for impairment losses:
Balance at 1 January 2022 2,228 43,307 24,327 69,862
Decreases for the period (27) (1) (100) (128)
Balance at 30 June 2022 2,201 43,306 24,227 69,734
Net book value:
Balance at 30 June 2022 21,628 101,900 155,402 278,930
Balance at 31 December 2021 22,096 102,880 159,642 284,618
The additions to oil and gas properties of the Group and the Company for the
six-month period ended 30 June 2022 included RMB867 million (six-month period
ended 30 June 2021: RMB728 million) (Note 35) and RMB549 million (six-month
period ended 30 June 2021: RMB562 million), respectively of the estimated
dismantlement costs for site restoration.
At 30 June 2022 and 31 December 2021, the Group and the Company had no
individually significant fixed assets which were pledged.
At 30 June 2022 and 31 December 2021, the Group and the Company had no
individually significant fixed assets which were temporarily idle or pending
for disposal.
At 30 June 2022 and 31 December 2021, the Group and the Company had no
individually significant fully depreciated fixed assets which were still in
use.
15 CONSTRUCTION IN PROGRESS
The Group The Company
RMB million RMB million
Cost:
Balance at 1 January 2022 158,069 66,448
Additions for the period 59,688 30,961
Disposals for the period - (543)
Dry hole costs written off (3,725) (3,282)
Transferred to fixed assets (39,011) (17,586)
Reclassification to other assets (3,872) (298)
Exchange adjustments 81 -
Balance at 30 June 2022 171,230 75,700
Less: Provision for impairment losses:
Balance at 1 January 2022 2,130 302
Decreases for the period (5) -
Exchange adjustments 49 -
Balance at 30 June 2022 2,174 302
Net book value:
Balance at 30 June 2022 169,056 75,398
Balance at 31 December 2021 155,939 66,146
At 30 June 2022, major construction projects of the Group are as follows:
Project name Budgeted Balance at Net change Balance at Percentage Source of funding Accumulated
amount 1 January for the 30 June of project interest
2022 period 2022 investment capitalised
to budgeted at 30 June
amount 2022
RMB million RMB million RMB million RMB million RMB million
Hainan Refining and Chemical Ethylene 28,565 15,602 8,226 23,828 83% Bank loans & self-financing 223
and Refining Reconstruction and
Expansion Project
Tianjin Nangang Ethylene and Downstream 29,052 2,999 3,445 6,444 22% Bank loans & self-financing 73
High-end New Material Industry Cluster
Project
Caprolactam Industry Chain Relocation and 13,950 3,700 1,670 5,370 38% Bank loans & self-financing 71
Upgrading Transformation Development
Project
Zhenhai Refining and Chemical Refining and 41,639 2,128 1,206 3,334 8% Self-financing -
High-end Synthetic New Material Project
Western Sichuan Gas Field Leikoupo 16,092 1,956 640 2,596 16% Bank loans & self-financing 43
Formation Gas Reservoir Development
and Construction Project
16 RIGHT-OF-USE ASSETS
The Group
Land Others Total
RMB million RMB million RMB million
Cost:
Balance at 1 January 2022 172,104 46,921 219,025
Additions for the period 1,917 4,763 6,680
Decreases for the period (1,840) (1,210) (3,050)
Balance at 30 June 2022 172,181 50,474 222,655
Less: Accumulated depreciation:
Balance at 1 January 2022 18,904 15,147 34,051
Additions for the period 3,417 3,712 7,129
Decreases for the period (759) (699) (1,458)
Balance at 30 June 2022 21,562 18,160 39,722
Net book value:
Balance at 30 June 2022 150,619 32,314 182,933
Balance at 31 December 2021 153,200 31,774 184,974
The Company
Land Others Total
RMB million RMB million RMB million
Cost:
Balance at 1 January 2022 115,489 2,956 118,445
Additions for the period 649 1,809 2,458
Decreases for the period (7,384) (244) (7,628)
Balance at 30 June 2022 108,754 4,521 113,275
Less: Accumulated depreciation:
Balance at 1 January 2022 11,204 1,529 12,733
Additions for the period 1,801 495 2,296
Decreases for the period (704) (146) (850)
Balance at 30 June 2022 12,301 1,878 14,179
Net book value:
Balance at 30 June 2022 96,453 2,643 99,096
Balance at 31 December 2021 104,285 1,427 105,712
17 INTANGIBLE ASSETS
The Group
Land use Patents Non-patent Operation rights Others Total
rights technology
RMB million RMB million RMB million RMB million RMB million RMB million
Cost:
Balance at 1 January 2022 111,864 6,533 5,140 53,791 8,217 185,545
Additions for the period 3,920 24 248 377 199 4,768
Decreases for the period (1,145) (11) - (221) (2) (1,379)
Balance at 30 June 2022 114,639 6,546 5,388 53,947 8,414 188,934
Less: Accumulated amortisation:
Balance at 1 January 2022 28,194 4,907 3,800 23,670 4,492 65,063
Additions for the period 1,814 103 116 1,173 266 3,472
Decreases for the period (173) - - (77) (1) (251)
Balance at 30 June 2022 29,835 5,010 3,916 24,766 4,757 68,284
Less: Provision for impairment losses:
Balance at 1 January 2022 and 236 482 130 407 17 1,272
at 30 June 2022
Net book value:
Balance at 30 June 2022 84,568 1,054 1,342 28,774 3,640 119,378
Balance at 31 December 2021 83,434 1,144 1,210 29,714 3,708 119,210
Amortisation of the intangible assets of the Group charged for the six-month
period ended 30 June 2022 is RMB3,212 million (six-month period ended 30 June
2021: RMB3,047 million).
18 GOODWILL
Goodwill is allocated to the following Group's cash-generating units:
Name of investees Principal activities At 30 June At 31 December
2022 2021
RMB million RMB million
Sinopec Zhenhai Refining and Chemical Branch Manufacturing of intermediate 4,043 4,043
("Zhenhai R&C")
petrochemical products and
petroleum products
Shanghai SECCO Petrochemical Company Limited Production and sale of petrochemical products 2,541 2,541
("Shanghai SECCO")
Sinopec Beijing Yanshan Petrochemical Branch Manufacturing of intermediate petrochemical products and petroleum products 1,004 1,004
("Sinopec Yanshan")
Other units without individual significant goodwill 1,139 1,006
Total 8,727 8,594
Goodwill represents the excess of the cost of purchase over the fair value of
the underlying assets and liabilities.
19 LONG-TERM DEFERRED EXPENSES
Long-term deferred expenses primarily represent catalysts expenditures and
improvement expenditures of fixed assets.
20 DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities before the consolidated elimination
adjustments are as follows:
Deferred tax assets Deferred tax liabilities
At 30 June At 31 December At 30 June At 31 December
2022 2021 2022 2021
RMB million RMB million RMB million RMB million
Receivables and inventories 6,373 3,763 - -
Payables 4,394 2,858 - -
Cash flow hedges 145 258 (2,841) (2,709)
Fixed assets 16,055 16,777 (16,834) (15,037)
Tax value of losses carried forward 3,457 4,749 - -
Other equity instrument investments 122 127 (7) (9)
Intangible assets 1,005 1,008 (505) (492)
Others 956 1,056 (1,001) (870)
Deferred tax assets/(liabilities) 32,507 30,596 (21,188) (19,117)
The consolidated elimination amount between deferred tax assets and
liabilities are as follows:
At 30 June At 31 December
2022 2021
RMB million RMB million
Deferred tax assets 12,328 11,207
Deferred tax liabilities 12,328 11,207
Deferred tax assets and liabilities after the consolidated elimination
adjustments are as follows:
At 30 June At 31 December
2022 2021
RMB million RMB million
Deferred tax assets 20,179 19,389
Deferred tax liabilities 8,860 7,910
At 30 June 2022, certain subsidiaries of the Company did not recognise
deferred tax of deductible loss carried forward of RMB16,444 million (at 31
December 2021: RMB18,342 million), of which RMB588 million (during the
six-month period ended 30 June 2021: RMB120 million) was incurred for the
six-month period ended 30 June 2022, because it was not probable that the
related tax benefit will be realised. These deductible losses carried forward
of RMB1,649 million, RMB2,308 million, RMB1,986 million, RMB4,349 million,
RMB5,564 million and RMB588 million will expire in 2022, 2023, 2024,
2025,2026, 2027 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.
21 OTHER NON-CURRENT ASSETS
Other non-current assets mainly represent long-term receivables, prepayments
for construction projects and purchases of equipment.
22 DETAILS OF IMPAIRMENT LOSSES
At 30 June 2022, impairment losses of the Group are analysed as follows:
Note Balance at Provision for Written back Written off for Other Balance at
31 December the period for the period the period increase/ 30 June
2021 (decrease) 2022
RMB million RMB million RMB million RMB million RMB million RMB million
Allowance for doubtful accounts
Included: Accounts receivable 8 4,033 156 (217) (33) 141 4,080
Prepayments 10 83 22 - - 4 109
Other receivables 11 1,590 58 (69) - 5 1,584
Other receivables 11 1,590 58 (69) - 5 1,584
Other non-current assets 1,933 - - - 107 2,040
7,639 236 (286) (33) 257 7,813
Inventories 12 4,897 1,452 (16) (2,045) 60 4,348
Long-term equity investments 13 3,705 - - - 103 3,808
Fixed assets 14 97,523 2 - (137) 105 97,493
Construction in progress 15 2,130 - - (5) 49 2,174
Intangible assets 17 1,272 - - (1) 1 1,272
Goodwill 7,861 - - - - 7,861
Others 49 - (4) - - 45
Total 125,076 1,690 (306) (2,221) 575 124,814
The reasons for recognising impairment losses are set out in the respective
notes of respective assets.
23 SHORT-TERM LOANS
The Group's short-term loans represent:
At 30 June 2022 At 31 December 2021
Original Exchange RMB million Original Exchange RMB million
currency rates currency rates
million million
Short-term bank loans 40,057 24,959
- Renminbi loans 40,057 24,959
Short-term loans from Sinopec Group 3,112 2,407
Company and fellow subsidiaries
- Renminbi loans 1,402 1,320
- US Dollar loans 226 6.7114 1,516 146 6.3757 934
- Euro loans 28 7.0084 194 21 7.2197 153
Total 43,169 27,366
At 30 June 2022, the Group's interest rates on short-term loans were from
interest 1.00% to 4.20% (At 31 December 2021: from interest 0.53% to 4.20%)
per annum. The majority of the above loans are by credit.
At 30 June 2022 and 31 December 2021, the Group had no significant overdue
short-term loans.
24 BILLS PAYABLE
Bills payable primarily represented bank accepted bills for the purchase of
material, goods and products. Bills payable were due within one year.
At 30 June 2022 and 31 December 2021 the Group had no overdue unpaid bills.
25 ACCOUNTS PAYABLE
At 30 June 2022 and 31 December 2021, the Group had no individually
significant accounts payable aged over one year.
26 CONTRACT LIABILITIES
As at 30 June 2022 and 31 December 2021, the Group's contract liabilities
primarily represent advances from customers. Related performance obligations
are satisfied and revenue is recognised within one year.
27 EMPLOYEE BENEFITS PAYABLE
(1) Employee benefits payable:
At Accrued Decreased At
31 December during during 30 June
2021 the period the period 2022
Short-term employee benefits 13,967 44,923 (36,563) 22,327
Post-employment benefits- defined contribution plans 69 7,071 (6,479) 661
Termination benefits 12 77 (77) 12
14,048 52,071 (43,119) 23,000
(2) Short-term employee benefits
At Accrued Decreased At
31 December during during 30 June
2021 the period the period 2022
Salaries, bonuses, allowances 10,730 32,879 (24,310) 19,299
Staff welfare 2,586 3,366 (4,025) 1,927
Social insurance 277 3,366 (3,128) 515
Included: Medical insurance 265 3,085 (2,846) 504
Work-related injury insurance 6 213 (213) 6
Maternity insurance 6 68 (69) 5
Housing fund 48 3,544 (3,255) 337
Labour union fee, staff and workers' education fee 279 657 (740) 196
Other short-term employee benefits 47 1,111 (1,105) 53
13,967 44,923 (36,563) 22,327
(3) Post-employment benefits - defined contribution plans
At Accrued Decreased At
31 December during during 30 June
2021 the period the period 2022
Basic pension insurance 50 4,964 (4,375) 639
Unemployment insurance 8 161 (161) 8
Annuity 11 1,946 (1,943) 14
69 7,071 (6,479) 661
28 TAXES PAYABLE
The Group
At 30 June At 31 December
2022 2021
RMB million RMB million
Value-added tax payable 3,513 8,818
Consumption tax payable 15,364 56,084
Income tax payable 5,182 4,809
Mineral resources compensation fee payable 7 8
Other taxes 12,500 11,548
Total 36,566 81,267
29 OTHER PAYABLES
At 30 June 2022 and 31 December 2021, other payables of the Group over one
year primarily represented payables for constructions.
30 NON-CURRENT LIABILITIES DUE WITHIN ONE YEAR
The Group's non-current liabilities due within one year represent:
At 30 June 2022 At 31 December 2021
Original Original
currency Exchange currency Exchange
million rates RMB million million rates RMB million
Long-term bank loans
- Renminbi loans 17,113 3,281
- US Dollar loans - 2 6.3757 12
Long-term loans from Sinopec Group Company and fellow subsidiaries
- Renminbi loans 484 466
Long term loans due within one year 17,597 3,759
Debentures payable due within one year
- Renminbi debentures 28,377 7,000
Lease liabilities due within one year 16,239 15,173
Others 4,196 2,719
Non-current liabilities due within one year 66,409 28,651
At 30 June 2022 and 31 December 2021, the Group had no significant overdue
long-term loans.
31 OTHER CURRENT LIABILITIES
As at 30 June 2022, other current liabilities mainly represent 74,000 million
(31 December 2021: Nil) short-term corporate bonds and 12,400 million (31
December 2021: RMB12,800 million) output VAT to be transferred.
The total amount of the 180-day corporate bonds issued on 21 January 2022 is
RMB2 billion with a fixed rate at 2.20% per annum; the total amount of the
270-day corporate bonds issued on 21 January 2022 is RMB4.5 billion with a
fixed rate at 2.23% per annum; the total amount of the 270-day corporate bonds
issued on 18 February 2022 is RMB6 billion with a fixed rate at 2.00% per
annum; the total amount of the 120-day corporate bonds issued on 7 March 2022
is RMB1.5 billion with a fixed rate at 2.01% per annum; the total amount of
the 244-day corporate bonds issued on 14 April 2022 is RMB20 billion with a
fixed rate at 2.00% per annum; the total amount of the 218-day corporate bonds
issued on 18 May 2022 is RMB20 billion with a fixed rate at 2.00% per annum;
the total amount of the 161-day corporate bonds issued on 8 June 2022 is
RMB7.5 billion with a fixed rate at 1.83% per annum; the total amount of the
90-day corporate bonds issued on 8 June 2022 is RMB12.5 billion with a fixed
rate at 1.70% per annum.
32 LONG-TERM LOANS
The Group's long-term loans represent:
At 30 June 2022 At 31 December 2021
Interest rate and final maturity Original Exchange rates RMB million Original Exchange rates RMB million
currency currency
million million
Long-term bank loans
- Renminbi loans Interest rates ranging from 79,865 38,880
interest 1.08% to 4.00% per
annum at 30 June 2022
(2021:1.08% to 4.00%) with
maturities through 2039
- US Dollar loans Interest rates at 0.00% per 8 6.7114 51 10 6.3757 64
annum at 30 June 2022
(2021:1.55%) with maturities
through 2038
Less: Portion with one year (note 30) (17,113) (3,293)
Long-term bank loans 62,803 35,651
Long-term loans from Sinopec Group Company and fellow subsidiaries
- Renminbi loans Interest rates ranging from 14,966 12,988
interest 1.08% to 5.23% per
annum at 30 June 2022
(2021:1.08% to 5.23%) with
maturities through 2037
- US Dollar loans Interest rates at 3.86% per 40 6.7114 271 183 6.3757 1,168
annum at 30 June 2022
(2021:1.65%) with maturities
in 2027
Less: Portion with one year (note 30) (484) (466)
Long-term loans from Sinopec Group 14,753 13,690
Company and fellow subsidiaries
Total 77,556 49,341
The maturity analysis of the Group's long-term loans is as follows:
At 30 June At 31 December
2022 2021
RMB million RMB million
Between one and two years 9,309 18,373
Between two and five years 62,855 26,633
After five years 5,392 4,335
Total 77,556 49,341
Long-term loans are primarily unsecured, and carried at amortised costs.
33 DEBENTURES PAYABLE
The Group
At 30 June At 31 December
2022 2021
RMB million RMB million
Debentures payable:
- Corporate Bonds (i) 43,245 49,649
Less: Portion with one year (note 30) 28,377 7,000
Total 14,868 42,649
Note:
(i) These corporate bonds are carried at amortised cost, including USD
denominated corporate bonds of RMB11,717 million, and RMB denominated
corporate bonds of RMB31,528 million (31 December 2021: USD denominated
corporate bonds of RMB11,127 million, and RMB denominated corporate bonds of
RMB38,522 million).
34 LEASE LIABILITY
The Group
At 30 June At 31 December
2022 2021
RMB million RMB million
Lease liabilities 184,885 185,406
Deduct：Portion of lease liabilities with one year (Note 30) 16,239 15,173
Total 168,646 170,233
35 PROVISIONS
Provisions primarily represent provision for future dismantlement costs of oil
and gas properties. The Group has established certain standardised measures
for the dismantlement of its retired oil and gas properties by making
reference to the industry practices and is thereafter constructively obligated
to take dismantlement measures of its retired oil and gas properties. Movement
of provision of the Group's obligations for the dismantlement of its retired
oil and gas properties is as follows:
The Group
RMB million
Balance at 1 January 2022 40,495
Provision for the period 867
Accretion expenses 521
Decrease for the period (81)
Exchange adjustments (71)
Balance at 30 June 2022 41,731
36 OTHER NON-CURRENT LIABILITIES
Other non-current liabilities primarily represent long-term payables, special
payables and deferred income.
37 SHARE CAPITAL
The Group
At 30 June At 31 December
2022 2021
RMB million RMB million
Registered, issued and fully paid:
95,557,771,046 listed A shares (31 December 2021: 95,557,771,046) of RMB1.00 95,558 95,558
each
25,513,438,600 listed H shares (31 December 2021: 25,513,438,600) of RMB1.00 25,513 25,513
each
Total 121,071 121,071
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 RMB1.00 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 RMB1.00 each and offer not more than 19.5 billion
shares with a par value of RMB1.00 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 RMB1.00 each, representing 12,521,864,000 H shares and 25,805,750 American
Depositary Shares ("ADSs", each representing 100 H shares), at prices of
HKD1.59 per H share and USD20.645 per ADS, respectively, by way of a global
initial public offering to Hong Kong SAR and overseas investors. As part of
the global initial public offering, 1,678,049,000 state-owned ordinary shares
of RMB1.00 each owned by Sinopec Group Company were converted into H shares
and sold to Hong Kong SAR and overseas investors.
37 SHARE CAPITAL (Continued)
The Group (Continued)
In July 2001, the Company issued 2.8 billion listed A shares with a par value
of RMB1.00 each at RMB4.22 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 RMB1.00 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 RMB1.00 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 RMB1.00 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 RMB1.00 each at the Placing Price of HKD8.45 per
share. The aggregate gross proceeds from the Placing amounted to approximately
HKD24,042,227,300.00 and the aggregate net proceeds (after deduction of the
commissions and estimated expenses) amounted to approximately
HKD23,970,100,618.00.
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 capital
reserve 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 RMB1.00 each, as a result of exercise 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 RMB1.00 each, as a result of exercise 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 RMB1.00 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 and bonds. 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 and bonds. Management monitors
capital on the basis of the debt-to-capital ratio, which is calculated by
dividing long-term loans (excluding current portion) and debentures payable,
by the total of equity attributable to shareholders of the Company and
long-term loans (excluding current portion) and debentures payable, 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 2022, the debt-to-capital ratio and the liability-to-asset ratio of
the Group were 10.5 % (31 December 2021: 10.6%) and 54.8% (31 December 2021:
51.5%), respectively.
The schedule of the contractual maturities of loans, debentures payable and
commitments are disclosed in Notes 32, 33 and 62, 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.
38 CAPITAL RESERVE
The movements in capital reserve of the Group are as follows:
RMB million
Balance at 1 January 2022 120,188
Other equity movements under the equity method (2,102)
Others 3
Balance at 30 June 2022 118,089
Capital reserve represents mainly: (a) the difference between the total amount
of the par value of shares issued and the amount of the net assets transferred
from Sinopec Group Company in connection with the Reorganisation; (b) share
premiums derived from issuances of H shares and A shares by the Company and
excess of cash paid by investors over their proportionate shares in share
capital, the proportionate shares of unexercised portion of the Bond with
Warrants at the expiration date, and the amount transferred from the
proportionate liability component and the derivative component of the
converted portion of the 2011 Convertible Bonds; (c) difference between
consideration paid for the combination of entities under common control and
the transactions with minority interests over the carrying amount of the net
assets acquired.
39 OTHER COMPREHENSIVE INCOME
The Group
(a) The changes of other comprehensive income in consolidated income
statement
Six-month period ended 30 June 2022
Before-tax amount Tax effect Net-of-tax amount
RMB million RMB million RMB million
Cash flow hedges:
Effective portion of changes in fair value of hedging instruments 2,330 (888) 1,442
recognised during the period
Less: Reclassification adjustments for amounts transferred to the (10,637) 1,821 (8,816)
consolidated income statement
Subtotal 12,967 (2,709) 10,258
Fair value hedges (844) - (844)
Changes in fair value of other equity instrument investments (14) (3) (17)
Other comprehensive loss that can be converted into profit or loss 3,397 - 3,397
under the equity method
Foreign currency translation differences 3,913 - 3,913
Other comprehensive loss 19,419 (2,712) 16,707
Six-month period ended 30 June 2021
Before-tax amount Tax effect Net-of-tax amount
RMB million RMB million RMB million
Effective portion of changes in fair value of hedging instruments 5,214 (1,130) 4,084
recognised during the period
Less: Reclassification adjustments for amounts transferred to the (5,201) 645 (4,556)
consolidated income statement
Subtotal 10,415 (1,775) 8,640
Fair value hedges (40) - (40)
Changes in fair value of other equity instrument investments 7 1 8
Other comprehensive loss that can be converted into profit or loss 121 - 121
under the equity method
Foreign currency translation differences (621) - (621)
Other comprehensive income 9,882 (1,774) 8,108
39 OTHER COMPREHENSIVE INCOME (Continued)
The Group (Continued)
(b) The change of each item in other comprehensive income
Equity Attributable to shareholders of the company Minority Total other
Other interests comprehensive
comprehensive income
loss that Changes in fair
can be converted value of Foreign
into profit or other equity currency
loss under the instrument Fair value Cash flow translation
equity method investments hedges hedges differences Subtotal
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
1 January 2021 (6,089) (20) 81 7,805 (739) 1,038 (2,600) (1,562)
Change for the period 115 11 (20) 220 (463) (137) (425) (562)
30 June 2021 (5,974) (9) 61 8,025 (1,202) 901 (3,025) (2,124)
1 January 2022 (5,765) (18) (29) 7,214 (2,092) (690) (3,315) (4,005)
Change for the period 3,514 (13) (422) 885 3,283 7,247 244 7,491
30 June 2022 (2,251) (31) (451) 8,099 1,191 6,557 (3,071) 3,486
As at 30 June 2022, cash flow hedge reserve amounted to a gain of RMB8,286
million (31 December 2021: a gain of RMB7,244 million), of which a gain of
RMB8,099 million was attribute to shareholders of the Company (31 December
2021: a gain of RMB7,214 million).
40 SURPLUS RESERVES
Movements in surplus reserves are as follows:
The Group
Statutory Discretionary
surplus reserve surplus reserves Total
RMB million RMB million RMB million
Balance at 1 January 2022 96,224 117,000 213,224
Appropriation - - -
Balance at 30 June 2022 96,224 117,000 213,224
The PRC Company Law and Articles of Association of the Company have set out
the following profit appropriation plans:
(a) 10% of the net profit is transferred to the statutory surplus reserve.
In the event that the reserve balance reaches 50% of the registered capital,
no transfer is needed;
(b) After the transfer to the statutory surplus reserve, a transfer to
discretionary surplus reserve can be made upon the passing of a resolution at
the shareholders' meeting.
41 OPERATING INCOME AND OPERATING COSTS
Six-month period ended 30 June
The Group The Company
2022 2021 2022 2021
RMB million RMB million RMB million RMB million
Income from principal operations 1,582,236 1,231,523 636,090 456,623
Income from other operations 29,890 29,250 14,340 12,499
Total 1,612,126 1,260,773 650,430 469,122
Operating costs 1,330,825 998,286 521,323 363,427
The income from principal operations mainly represents revenue from the sales
of refined petroleum products, chemical products, crude oil and natural gas.
The income from other operations mainly represents revenue from sale of
materials, service, rental income and others. Operating costs primarily
represent the products cost related to the principal operations. The Group's
segmental information is set out in Note 64.
41 OPERATING INCOME AND OPERATING COSTS (Continued)
The detailed information about the Group's operating income is as follows:
Six-month period ended 30 June
2022 2021
RMB million RMB million
Income from principal operations 1,582,236 1,231,523
Included: Gasoline 389,830 345,353
Diesel 327,767 226,151
Crude oil 278,099 204,510
Basic chemical feedstock 140,022 112,346
Synthetic resin 74,451 70,793
Kerosene 71,419 51,165
Natural gas 38,017 30,007
Synthetic fiber monomers and polymers 25,186 21,885
Others (i) 237,445 169,313
Income from other operations 29,890 29,250
Included: Sale of materials and others 29,329 28,654
Rental income 561 596
Total 1,612,126 1,260,773
Notes:
(i) Others are primarily liquefied petroleum gas and other refinery and
chemical byproducts and joint products and so on.
(ii) Except for rental income, the above income are generated from the
contract.
42 TAXES AND SURCHARGES
The Group
Six-month period ended 30 June
2022 2021
RMB million RMB million
Consumption tax 103,510 100,539
City construction tax 9,011 8,292
Special Oil Income Levy 8,095 185
Education surcharge 6,486 6,132
Resources tax 4,404 3,004
Others 2,903 2,748
Total 134,409 120,900
The applicable tax rate of the taxes and surcharges are set out in Note 4.
43 FINANCIAL EXPENSES
The Group
Six-month period ended 30 June
2022 2021
RMB million RMB million
Interest expenses incurred 3,605 2,691
Less: Capitalised interest expenses 597 349
Add: Interest expense on lease liabilities 4,595 4,627
Net interest expenses 7,603 6,969
Accretion expenses (Note 35) 521 691
Interest income (3,012) (2,663)
Net foreign exchange loss/(gain) 225 (95)
Total 5,337 4,902
The interest rates per annum at which borrowing costs were capitalised during
the six-month period ended 30 June 2022 by the Group ranged from 2.70% to
4.50% (six-month period ended 30 June 2021: 1.60% to 4.90%).
44 CLASSIFICATION OF EXPENSES BY NATURE
The operating costs, selling and distribution expenses, general and
administrative expenses, research and development expenses and exploration
expenses (including dry holes) in consolidated income statement classified by
nature are as follows:
Six-month period ended 30 June
2022 2021
RMB million RMB million
Purchased crude oil, products and operating supplies and expenses 1,262,183 945,555
Personnel expenses 49,223 45,195
Depreciation, depletion and amortisation 53,638 54,466
Exploration expenses (including dry holes) 5,738 4,846
Other expenses 26,404 26,331
Total 1,397,186 1,076,393
45 SELLING AND DISTRIBUTION EXPENSES
Selling expenses mainly include wages and salaries of sales staff,
depreciation and amortization of sales equipment and related systems, etc.
46 GENERAL AND ADMINISTRATIVE EXPENSES
Administrative expenses mainly include salaries and salaries of administrative
personnel, depreciation and amortization of office facilities, office systems
and software, and repair costs.
47 RESEARCH AND DEVELOPMENT EXPENSES
The research and development expenditures are mainly used for the replacement
of resources in upstream, optimising structure and operation upgrades in
refining sector, structured adjustment of materials and products in chemical
segment.
48 EXPLORATION EXPENSES
Exploration expenses include geological and geophysical expenses and
written-off of unsuccessful dry hole costs.
49 OTHER INCOME
Other income are mainly the government grants related to the business
activities.
50 INVESTMENT (LOSS)/INCOME
Six-month period ended 30 June
The Group The Company
2022 2021 2022 2021
RMB million RMB million RMB million RMB million
Income from investment of subsidiaries accounted - - 13,431 5,366
for under cost method
Income from investment accounted for under equity method 7,327 11,133 3,014 4,366
Investment income from disposal of long-term equity investments 69 60 2 60
Dividend income from holding of other equity instrument investments 14 (21) - (39)
Investment loss from holding/disposal of financial (17,331) (5,390) - (95)
assets and liabilities and derivative financial instruments
at fair value through profit or loss
Gain/(loss) from ineffective portion of cash flow hedges (430) (942) 175 365
Others 44 50 678 579
Total (10,307) 4,890 17,300 10,602
51 (LOSSES)/GAINS FROM CHANGES IN FAIR VALUE
The Group
Six-month period ended 30 June
2022 2021
RMB million RMB million
Net fair value losses on financial assets and financial liabilities at fair (1,972) (523)
value through profit or loss
Unrealised gains from ineffective portion cash flow hedges, net 414 639
Total (1,558) 116
52 IMPAIRMENT LOSSES
The Group
Six-month period ended 30 June
2022 2021
RMB million RMB million
Prepayments 22 (33)
Inventories 1,436 430
Fixed assets 2 484
Others (4) 45
Total 1,456 926
53 NON-OPERATING INCOME
The Group
Six-month period ended 30 June
2022 2021
RMB million RMB million
Government grants 156 305
Others 699 391
Total 855 696
54 NON-OPERATING EXPENSES
The Group
Six-month period ended 30 June
2022 2021
RMB million RMB million
Fines, penalties and compensation 14 39
Donations 101 8
Asset scrap, damage loss 171 344
Others 793 690
Total 1,079 1,081
55 INCOME TAX EXPENSE
The Group
Six-month period ended 30 June
2022 2021
RMB million RMB million
Provision for income tax for the period 14,135 17,389
Deferred taxation (44) (2,373)
Under-provision for income tax in respect of preceding year 370 36
Total 14,461 15,052
Reconciliation between actual income tax expense and accounting profit at
applicable tax rates is as follows:
Six-month period ended 30 June
2022 2021
RMB million RMB million
Profit before taxation 63,977 63,853
Expected income tax expense at a tax rate of 25% 15,994 15,963
Tax effect of non-deductible expenses 1,980 3,748
Tax effect of non-taxable income (1,843) (3,119)
Tax effect of preferential tax rate (i) (1,539) (1,377)
Effect of income taxes at foreign operations 54 (433)
Tax effect of utilisation of previously unrecognised tax losses and temporary (732) (361)
differences
Tax effect of tax losses not recognised 147 30
Write-down of deferred tax assets 30 565
Adjustment for under provision for income tax in respect of preceding years 370 36
Actual income tax expense 14,461 15,052
Note:
(i) The provision for PRC current income tax is based on a statutory
income tax rate of 25% of the assessable income of the Group as determined in
accordance with the relevant income tax rules and regulations of the PRC,
except for certain entities of the Group in western regions in the PRC are
taxed at preferential income tax rate of 15%. According to Announcement 2020
No.23 of the MOF "Announcement of the MOF, the State Taxation Administration
and the National Development and Reform Commission on continuation of the
income tax policy of western development enterprises", the preferential income
tax rate extends from 1 January 2021 to 31 December 2030.
56 DIVIDENDS
(a) Dividends of ordinary shares declared after the balance sheet date
Pursuant to the Company's Articles of Association and a resolution passed at
the Directors' meeting on 26 August 2022, the directors authorised to declare
the interim dividends for the year ended 31 December 2022 of RMB0.16 (2021:
RMB0.16) per share totalling RMB19,371 million (2021: RMB19,371 million).
Dividends declared after the date of the statement of financial position are
not recognised as a liability at the date of the statement of financial
position.
(b) Dividends of ordinary shares declared during the period
Pursuant to the shareholders' approval at the Annual General Meeting on 18 May
2022, a final dividend of RMB0.31 per share totaling RMB37,532 million
according to total shares of 9 June 2022 was approved. All dividends have been
paid in June 2022.
Pursuant to the shareholders' approval at the Annual General Meeting on 25 May
2021, a final dividend of RMB0.13 per share totaling RMB15,739 million
according to total shares of 16 June 2021 was approved. All dividends have
been paid in June 2021.
57 SUPPLEMENTAL INFORMATION TO THE CASH FLOW STATEMENT
The Group
(a) Reconciliation of net profit to cash flows from operating activities:
Six-month period ended 30 June
2022 2021
RMB million RMB million
Net profit 49,516 48,801
Add: Impairment losses on assets 1,456 926
Credit impairment reversals (72) (55)
Depreciation of right-of-use assets 6,544 6,437
Depreciation of fixed assets 42,020 43,357
Amortisation of intangible assets and long-term deferred expenses 5,074 4,672
Dry hole costs written off 3,725 2,640
Net loss on disposal of non-current assets 36 63
Fair value gain/(loss) 1,558 (116)
Financial expenses 5,112 4,997
Investment loss/(income) 10,307 (4,890)
Increase in deferred tax assets (1,885) (4,460)
Increase in deferred tax liabilities 1,841 2,087
Increase in inventories (79,034) (48,011)
Safety fund reserve 1,043 953
Increase in operating receivables (49,228) (46,447)
Increase in operating payables 6,934 37,393
Net cash flow from operating activities 4,947 48,347
(b) Net change in cash:
2021 2020
RMB million RMB million
Cash balance at the end of the period 139,178 78,114
Less: Cash at the beginning of the period 108,590 87,559
Net increase/(decrease) of cash 30,588 (9,445)
(c) The analysis of cash held by the Group is as follows:
Six-month period ended 30 June
2022 2021
RMB million RMB million
Cash at bank and on hand
- Cash on hand - 1
- Demand deposits 139,178 78,113
Cash at the end of the period 139,178 78,114
(d) Cash or cash equivalents received by disposal of subsidiaries and other
business units：
Six-month period ended 30 June
2022 2021
RMB million RMB million
Cash received by disposal of oil and gas pipelines and relevant assets - 3,756
Others 1 540
Total 1 4,296
(e) Other cash paid relating to financing activities：
Six-month period ended 30 June
2022 2021
RMB million RMB million
Repayments of lease liabilities 7,166 9,408
Others 1,774 2,050
Total 8,940 11,458
58 RELATED PARTIES AND RELATED PARTY TRANSACTIONS
(1) Related parties having the ability to exercise control over the Group
The name of the company : China Petrochemical Corporation
Unified social credit identifier : 9111000010169286X1
Registered address : No. 22, Chaoyangmen North Street, Chaoyang District, Beijing
Principal activities : Exploration, production, storage and transportation (including pipeline
transportation), sales and utilisation of crude oil and natural gas; refining;
wholesale and retail of gasoline, kerosene and diesel; production, sales,
storage and transportation of petrochemical and other chemical products;
industrial investment and investment management; exploration, construction,
installation and maintenance of petroleum and petrochemical constructions and
equipments; manufacturing electrical equipment; research, development,
application and consulting services of information technology and alternative
energy products; import & export of goods and technology.
Relationship with the Group : Ultimate holding company
Types of legal entity : State-owned
Authorised representative : Ma Yongsheng
Registered capital : RMB326,547 million
Sinopec Group Company is an enterprise controlled by the PRC government.
Sinopec Group Company directly and indirectly holds 68.77% shareholding of the
Company.
(2) Related parties not having the ability to exercise control over the
Group
Related parties under common control of a parent company with the Company:
Sinopec Finance (Note)
Sinopec Shengli Petroleum Administration Bureau
Sinopec Zhongyuan Petroleum Exploration Bureau
Sinopec Assets Management Corporation
Sinopec Engineering Incorporation
Sinopec Century Bright Capital Investment Limited
Sinopec Petroleum Storage and Reserve Limited
Associates of the Group:
PipeChina
Sinopec Finance
Sinopec Capital
Zhongtian Synergetic Energy
CIR
Joint ventures of the Group:
FREP
BASF-YPC
Taihu
YASREF
Sinopec SABIC Tianjin
Note: Sinopec Finance is under common control of a parent company
with the Company and is also the associate of the Group.
58 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(3) 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:
The Group
Note Six-month period ended 30 June
2022 2021
RMB million RMB million
Sales of goods (i) 169,483 131,981
Purchases (ii) 80,755 90,070
Transportation and storage (iii) 9,474 6,928
Exploration and development services (iv) 15,512 15,046
Production related services (v) 19,092 14,606
Ancillary and social services (vi) - 617
Agency commission income (vii) 91 97
Interest income (viii) 382 381
Interest expense (ix) 216 196
Net deposits placed with related parties (viii) 17,410 733
Net funds obtained from related parties (x) 29,695 6,241
The amounts set out in the table above in respect of the six-month periods
ended 30 June 2022 and 2021 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 2022 are: a) purchases by the Group from Sinopec Group Company and
fellow subsidiaries amounting to RMB68,143 million (six-month period ended 30
June 2021: RMB76,693 million) comprising purchases of products and services
(i.e. procurement, transportation and storage, exploration and development
services and production related services) of RMB61,818 million (six-month
period ended 30 June 2021: RMB69,981 million), ancillary and social services
provided by Sinopec Group Company and fellow subsidiaries of RMB0 million
(six-month period ended 30 June 2021: RMB617 million), lease charges for land,
buildings and others paid by the Group of RMB5,568 million, RMB470 million and
RMB71 million (six-month period ended 30 June 2021: RMB5,402 million, RMB423
million and RMB74 million), respectively and interest expenses of RMB216
million (six-month period ended 30 June 2021: RMB196 million); and b) sales by
the Group to Sinopec Group Company and fellow subsidiaries amounting to
RMB31,238 million (six-month period ended 30 June 2021: RMB21,492 million),
comprising RMB30,832 million (six-month period ended 30 June 2021: RMB21,075
million) for sales of goods, RMB382 million (six-month period ended 30 June
2021: RMB381 million) for interest income and RMB24 million (six-month period
ended 30 June 2021: RMB36 million) for agency commission income.
For the six-month period ended 30 June 2022, no individually significant
right-of-use assets were leased from Sinopec Group Company and fellow
subsidiaries, associates and joint ventures by the Group. The interest expense
recognised for the six-month period ended 30 June 2022 on lease liabilities in
respect of amounts due to Sinopec Group Company and fellow subsidiaries,
associates and joint ventures was RMB3,953 million (six-month period ended 30
June 2021: RMB3,730 million).
For the six-month period ended 30 June 2022, the amount of rental the Group
paid to Sinopec Group Company and fellow subsidiaries, associates and joint
ventures for land, buildings and others are RMB5,571 million, RMB471 million
and RMB133 million (six-month period ended 30 June 2021: RMB5,404 million,
RMB425 million and RMB151 million).
As at 30 June 2022 and 31 December 2021, there was no guarantee given to banks
by the Group in respect of banking facilities to Sinopec Group Company and
fellow subsidiaries, associates and joint ventures, except for the guarantees
disclosed in Note 63(b). Guarantees given to banks by the Group in respect of
banking facilities to associates and joint ventures are disclosed in Note
63(b).
Notes:
(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,
and management services.
58 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(3) 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: (Continued)
Notes: (Continued)
(vi) Ancillary and social services represent expenditures for social welfare
and support services such as educational facilities, media communication
services, sanitation, accommodation, canteens and property maintenance. The
"Agreement for Provision of Cultural and Educational, Health Care and
Community Services" has expired on December 31, 2021. As the scale of such
services has been significantly reduced after the separation and transfer of
assets and operations of the supply of water, power, gas and property
management, the "Agreement for Provision of Cultural and Educational, Health
Care and Community Services" will not be renewed, and the training-related or
similar services such as cultural education and auxiliary services under it
have been merged into the Mutual Provision Agreement.
(vii) 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.
(viii) Interest income represents interest received from deposits placed
with Sinopec Finance 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.
(ix) Interest expense represents interest charges on the loans obtained from
Sinopec Group Company and fellow subsidiaries.
(x) The Group obtained loans, discounted bills and others from 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 2021. The terms of these agreements are
summarised as follows:
(a) 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:
‧ the government-prescribed price;
‧ where there is no government-prescribed price, the government-guidance
price;
‧ where there is neither a government-prescribed price nor a
government-guidance price, the market price; or
‧ 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%.
(b) 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
agreed to in the above Mutual Provision Agreement.
(c) The Company has entered into a number 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.
(d) 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.
(e) The Company has entered into a service station 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.
(f) On the basis of a series of continuing connected transaction
agreements signed in 2000, the Company and Sinopec Group Company have signed
the Sixth Supplementary Agreement on 27 August 2021, which took effect on 1
January 2022 and made adjustment to "Mutual Supply Agreement" and "Buildings
Leasing Contract", etc.
58 RELATED PARTIES AND RELATED PARTY TRANSACTIONS (Continued)
(4) Balances with Sinopec Group Company and fellow subsidiaries, associates
and joint ventures
The balances with Sinopec Group Company and fellow subsidiaries, associates
and joint ventures at 30 June 2022 and 31 December 2021 are as follows:
The ultimate holding company Other related companies
At 30 June At 31 December At 30 June At 31 December
2022 2021 2022 2021
RMB million RMB million RMB million RMB million
Cash at bank and on hand - - 79,092 61,682
Accounts receivable 15 30 12,573 8,625
Receivables financing - - 109 186
Other receivables - - 17,512 13,941
Prepayments and other current assets 23 19 1,765 577
Other non-current assets - - 3,738 3,116
Bills payable - 5 3,086 3,798
Accounts payable 104 228 12,627 10,139
Contract liabilities 34 50 4,628 4,627
Other payables and other current liabilities 140 85 60,409 50,564
Other non-current liabilities - - 4,177 2,779
Short-term loans - - 3,112 2,407
Long-term loans (including current portion) - - 15,237 14,156
Lease liabilities (including current portion) 71,817 72,176 87,183 86,585
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 23 and Note 32.
As at and for the six-month period ended 30 June 2022, and as at and for the
year ended 31 December 2021, no individually significant impairment losses for
bad and doubtful debts were recorded in respect of amounts due from Sinopec
Group Company and fellow subsidiaries, associates and joint ventures.
(5) 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 compensations are as follows:
Six-month period ended 30 June
2022 2021
RMB thousand RMB thousand
Short-term employee benefits 5,075 1,771
Retirement scheme contributions 270 120
Total 5,345 1,891
59 PRINCIPAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group's financial condition and results of operations are sensitive to
accounting methods, assumptions and estimates that underlie the preparation of
the financial statements. The Group bases the assumptions and estimates on
historical experience and on various other assumptions that it believes to be
reasonable and which form the basis for making judgements about matters that
are not readily apparent from other sources. On an on-going basis, management
evaluates its estimates. Actual results may differ from those estimates as
facts, circumstances and conditions change.
The selection of critical accounting policies, the judgements and other
uncertainties affecting application of those policies and the sensitivity of
reported results to changes in conditions and assumptions are factors to be
considered when reviewing the financial statements. The significant accounting
policies are set forth in Note 3. The Group believes the following critical
accounting policies involve the most significant judgements and estimates used
in the preparation of the financial statements.
59 PRINCIPAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
(a) Oil and gas properties and reserves
The accounting for the exploration and production segment's oil and gas
activities is subject to accounting rules that are unique to the oil and gas
industry. The Group has used the successful efforts method to account for oil
and gas business activities. The successful efforts method reflects the
volatility that is inherent in exploring for mineral resources in that costs
of unsuccessful exploratory efforts are charged to expense. These costs
primarily include dry hole costs, seismic costs and other exploratory costs.
Engineering estimates of the Group's oil and gas reserves are inherently
imprecise and represent only approximate amounts because of the subjective
judgements involved in developing such information. There are authoritative
guidelines regarding the engineering criteria that have to be met before
estimated oil and gas reserves can be designated as "proved". Proved and
proved developed reserves estimates are updated at least annually and take
into account recent production and technical information about each field. In
addition, as prices and cost levels change from year to year, the estimate of
proved and proved developed reserves also changes. This change is considered a
change in estimate for accounting purposes and is reflected on a prospective
basis in related depreciation rates. Oil and gas reserves have a direct impact
on the assessment of the recoverability of the carrying amounts of oil and gas
properties reported in the financial statements. If proved reserves estimates
are revised downwards, the Group's earnings could be affected by changes in
depreciation expense or an immediate write-down of the carrying amount of oil
and properties.
Future dismantlement costs for oil and gas properties are estimated with
reference to engineering estimates after taking into consideration the
anticipated method of dismantlement required in accordance with industry
practices in the similar geographic area, including estimation of economic
life of oil and gas properties, technology and price level. The present values
of these estimated future dismantlement costs are capitalised as oil and gas
properties with equivalent amounts recognised as provisions for dismantlement
costs.
Despite the inherent imprecision in these engineering estimates, these
estimates are used in determining depreciation expense, impairment expense and
future dismantlement costs. Capitalised costs of proved oil and gas properties
are amortised on a unit-of-production method based on volumes produced and
reserves.
(b) Impairment for assets
If circumstances indicate that the net book value of a long-lived asset may
not be recoverable, the asset may be considered "impaired", and an impairment
loss may be recognised in accordance with "CASs 8 - Impairment of Assets". The
carrying amounts of long-lived assets are reviewed periodically in order to
assess whether the recoverable amounts have declined below the carrying
amounts. These assets are tested for impairment whenever events or changes in
circumstances indicate that their recorded carrying amounts may not be
recoverable. When such a decline has occurred, the carrying amount is reduced
to recoverable amount. For goodwill, the recoverable amount is estimated
annually. The recoverable amount is the greater of the fair value less costs
to sell and the present value of expected future cash flows. It is difficult
to precisely estimate the fair value because quoted market prices for the
Group's assets or cash-generating units are not readily available. In
determining the value of expected future cash flows, expected cash flows
generated by the asset or the cash-generating unit are discounted to their
present value, which requires significant judgement relating to sales volume,
selling price, amount of operating costs and discount rate. The Group uses all
readily available information in determining an amount that is a reasonable
approximation of recoverable amount, including estimates based on reasonable
and supportable assumptions and projections of sales volume, selling price,
amount of operating costs and discount rate.
(c) Depreciation
Fixed assets are depreciated on a straight-line basis over the estimated
useful lives of the assets, after taking into account the estimated residual
value. Management reviews the estimated useful lives of the assets at least
annually in order to determine the amount of depreciation expense to be
recorded during any reporting period. The useful lives are based on the
Group's historical experience with similar assets and taking into account
anticipated technological changes. The depreciation expense for future periods
is adjusted if there are significant changes from previous estimates.
(d) Measurement of expected credit losses
ECLs are a probability-weighted estimate of credit losses. Credit losses are
measured as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and
the cash flows that the Group expects to receive).
The Group measures and recognises expected credit losses, considering
reasonable and supportable information about the relevant past events, current
conditions and forecasts of future economic conditions. The Group regularly
monitors and reviews the assumptions used for estimating expected credit
losses.
(e) Allowance for diminution in value of inventories
If the costs of inventories become higher than their net realisable values, an
allowance for diminution in value of inventories is recognised. Net realisable
value represents the estimated selling price in the ordinary course of
business, less the estimated costs of completion and the estimated costs
necessary to make the sale. Management bases the estimates on all available
information, including the current market prices of the finished goods and raw
materials, and historical operating costs. If the actual selling prices were
to be lower or the costs of completion were to be higher than estimated, the
actual allowance for diminution in value of inventories would be higher than
estimated.
60 PRINCIPAL SUBSIDIARIES
The Company's principal subsidiaries have been consolidated into the Group's
financial statements for the six-month period ended 30 June 2022. The
following list contains the particulars of subsidiaries which principally
affected the results, assets and liabilities of the Group:
Full name of enterprise Principal activities Registered Actual Percentage Minority
capital/ investment of equity Interests at
paid-up at 30 June interest/ 30 June 2022
capital 2022 voting right
held by the
Group
million million % RMB million
(a) Subsidiaries acquired through group restructuring:
China Petrochemical International Company Limited Trading of petrochemical products RMB1,400 RMB1,856 100.00 10
China International United Petroleum and Chemical Trading of crude oil and petrochemical products RMB5,000 RMB6,585 100.00 5,380
Company Limited
Sinopec Catalyst Company Limited Production and sale of catalyst products RMB1,500 RMB2,424 100.00 251
Sinopec Yangzi Petrochemical Company Limited Manufacturing of intermediate petrochemical RMB15,651 RMB15,651 100.00 -
products and petroleum products
Sinopec Lubricant Company Limited Production and sale of refined petroleum products, RMB3,374 RMB3,374 100.00 92
lubricant base oil, and petrochemical materials
Sinopec Yizheng Chemical Fibre Limited Production and sale of polyester chips and RMB4,000 RMB6,713 100.00 -
Liability Company
polyester fibres
Sinopec Marketing Co. Limited ("Marketing Company") Marketing and distribution of refined RMB28,403 RMB20,000 70.42 79,870
petroleum products
Sinopec Kantons Holdings Limited ("Sinopec Kantons") Provision of crude oil jetty services and natural HKD248 HKD3,952 60.33 5,090
gas pipeline transmission services
Sinopec Shanghai Petrochemical Company Limited Manufacturing of synthetic fibres, resin and plastics, RMB10,824 RMB5,820 50.44 14,440
("Shanghai Petrochemical")
intermediate petrochemical products and
petroleum products
Fujian Petrochemical Company Limited Manufacturing of plastics, intermediate petrochemical RMB10,492 RMB5,246 50.00 6,784
("Fujian Petrochemical") (i)
products and petroleum products
(b) Subsidiaries established by the Group:
Sinopec International Petroleum Exploration and Investment in exploration, production and sale of petroleum and natural gas RMB8,250 RMB8,250 100.00 4,653
Production Limited ("SIPL")
Sinopec Overseas Investment Holding Limited ("SOIH") Investment holding of overseas business USD3,374 USD3,374 100.00 -
Sinopec Chemical Sales Company Limited Marketing and distribution of petrochemical products RMB1,000 RMB1,165 100.00 142
Sinopec Great Wall Energy & Chemical Coal chemical industry investment management, RMB22,761 RMB22,795 100.00 20
Company Limited
production and sale of coal chemical products
Sinopec Beihai Refining and Chemical Limited Import and processing of crude oil, production, RMB5,294 RMB5,240 98.98 131
Liability Company
storage and sale of petroleum products and
petrochemical products
ZhongKe (Guangdong) Refinery & Petrochemical Crude oil processing and petroleum products manufacturing RMB6,397 RMB5,776 90.30 2,460
Company Limited
Sinopec Qingdao Refining and Chemical Manufacturing of intermediate petrochemical products RMB5,000 RMB4,250 85.00 1,916
Company Limited
and petroleum products
Sinopec-SK (Wuhan) Petrochemical Company Limited Production, sale, research and development of RMB7,193 RMB7,193 59.00 4,779
("Sinopec-SK")
ethylene and downstream byproducts
(c) Subsidiaries acquired through business combination under common control:
Sinopec Hainan Refining and Chemical Manufacturing of intermediate petrochemical products RMB9,606 RMB12,615 100.00 25
Company Limited
and petroleum products
Sinopec Qingdao Petrochemical Company Limited Manufacturing of intermediate petrochemical products RMB1,595 RMB7,233 100.00 -
and petroleum products
Gaoqiao Petrochemical Company Limited Manufacturing of intermediate petrochemical products RMB10,000 RMB4,804 55.00 8,068
and petroleum products
Sinopec Baling Petrochemical Co. Ltd. Crude oil processing and petroleum products RMB3,000 RMB3,340 55.00 2,599
("Baling Petrochemical") (ii)
manufacturing
(d) Subsidiaries acquired through business combination not under common
control:
Shanghai SECCO Production and sale of petrochemical products RMB500 RMB500 67.59 2,272
* The minority interests of subsidiaries which the Group holds 100%
of equity interests at the end of the period are the minority interests of
their subsidiaries.
Except for Sinopec Kantons and SOIH, which are incorporated in Bermuda and
Hong Kong SAR, respectively, all of the above principal subsidiaries are
incorporated and operate their businesses principally in the PRC.
Note:
(i) The Group consolidated the financial statements of the entity
because it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those return through
its power over the entity.
60 PRINCIPAL SUBSIDIARIES (Continued)
Summarised financial information on subsidiaries with material minority
interests
Set out below are the summarised financial information which the amount before
inter-company eliminations for each subsidiary whose minority interests that
are material to the Group.
Summarised consolidated balance sheet
Marketing Company SIPL Shanghai Petrochemical Fujian Petrochemical Sinopec Kantons Shanghai SECCO Sinopec-SK
At 30 At 31 At 30 At 31 At 30 At 31 At 30 At 31 At 30 At 31 At 30 At 31 At 30 At 31
June December June December June December June December June December June December June December
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB
million million million million million million million million million million million million million million
Current assets 188,879 159,599 24,106 22,759 16,701 20,932 3,733 1,464 5,273 4,761 5,976 6,066 7,630 6,791
Current liabilities (204,256) (193,315) (10,988) (1,430) (12,614) (15,796) (1,355) (142) (402) (196) (7,166) (5,434) (11,090) (8,122)
Net current (15,377) (33,716) 13,118 21,329 4,087 5,136 2,378 1,322 4,871 4,565 (1,190) 632 (3,460) (1,331)
(liabilities)/assets
Non-current assets 319,994 326,437 10,052 8,954 25,780 26,106 11,893 13,208 8,079 8,195 9,664 11,402 19,761 20,650
Non-current liabilities (58,073) (59,604) (11,594) (17,823) (862) (847) (704) (700) (160) (170) (1,465) (1,418) (5,335) (7,512)
Net non-current 261,921 266,833 (1,542) (8,869) 24,918 25,259 11,189 12,508 7,919 8,025 8,199 9,984 14,426 13,138
assets/(liabilities)
Summarised consolidated statement of comprehensive income and cash flow
Six-month period Marketing Company SIPL Shanghai Petrochemical Fujian Petrochemical Sinopec Kantons Shanghai SECCO Sinopec-SK
ended 30 June 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million RMB million
Turnover 790,246 633,752 2,053 762 45,900 37,137 2,639 2,771 268 277 12,927 14,459 27,988 23,172
Net profit/(loss) for the period 12,771 12,969 1,117 643 (431) 1,249 (275) 1,025 295 558 (854) 2,328 119 974
Total comprehensive income 14,952 12,981 830 465 (157) 1,302 (275) 1,025 447 411 (854) 2,328 119 974
Comprehensive income attributable 5,161 4,527 247 275 (75) 648 (137) 512 177 221 (277) 754 49 399
to minority interests
Dividends paid to 622 1,008 - - 547 536 - - 98 98 898 1,028 397 -
minority interests
Net cash flow generated from/ 7,603 15,743 1,370 282 (6,405) (2,390) 1,257 87 58 (639) (1,284) 1,735 (664) 751
(used in) operating activities
61 CHANGE IN THE SCOPE OF CONSOLIDATION
Business combination under common control
Business combination under common control in 2021
Pursuant to resolution passed at the Director's meeting on 26 March 2021, the
Company entered into agreements with Sinopec Assets Management Corporation
("SAMC") and Beijing Orient Petrochemical Industry Co., Ltd. ("BJOPI"), and
its subsidiary,Sinopec Beihai Refining and Chemical Limited Liability Company
entered into an agreement with Beihai Petrochemical Limited Liability Company
of Sinopec Group ("BHP"). According to the relevant agreements, the Company
proposed to acquire non equity assets such as the polypropylene devices and
utility business assets of Cangzhou Branch held by SAMC, organic plant
business held by BJOPI, and the pier operation platform held by BHP.
Pursuant to the resolution passed at the Directors' meeting on 29 November
2021, the Company entered into agreements with SAMC, and Sinopec Beijing
Yanshan Petrochemical Co., Ltd. ("SBJYSP"), and its subsidiary, Sinopec
Yizheng Chemical Fibre Company Limited entered into an agreement with SAMC.
According to the relevant agreements, the Group proposed to acquire non equity
assets such as thermal power, water and other business, PBT resin and other
business of Yizheng Branch held by SAMC, and thermal power and other
businesses held by SBJYSP.
As the Company, SAMC, BJOPI, BHP and SBJYSP are all under the control of
Sinopec Group Company, the transaction described above has been accounted as
business combination under common control. Accordingly, the equity and assets
acquired from Sinopec Group Company have been accounted for at historical
cost, and the consolidated financial statements of the Group prior to these
acquisitions have been restated to include the results of operation and the
assets and liabilities of Sinopec Group Company on a combined basis.
The transactions under the after-mentioned agreements will further improve the
integrated operation level of the Group, optimise the allocation of resources,
reduce connected transactions on the whole, so as to enhance the comprehensive
competitiveness of the Group in its business locations.
The financial condition as at 30 June 2021 and the results of operation for
the period ended 30 June 2021 previously reported by the Group have been
restated.
62 COMMITMENTS
Capital commitments
At 30 June 2022 and 31 December 2021, the capital commitments of the Group are
as follows:
At 30 June At 31 December
2022 2021
RMB million RMB million
Authorised and contracted for (i) 115,321 184,430
Authorised but not contracted for 105,534 90,227
Total 220,855 274,657
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 RMB1,713 million (31
December 2021: RMB3,648 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 Natural 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 minimum exploration
investment relating to the exploration blocks in respect of which the license
is issued. The Ministry of Natural 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 the
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 Natural Resources annually
which are expensed.
Estimated future annual payments are as follows:
At 30 June At 31 December
2022 2021
RMB million RMB million
Within one year 356 301
Between one and two years 123 112
Between two and three years 120 110
Between three and four years 96 102
Between four and five years 60 64
Thereafter 849 846
Total 1,604 1,535
The implementation of commitments in previous year and the Group's commitments
did not have material discrepancy.
63 CONTINGENT LIABILITIES
(a) The Company has been advised by its PRC lawyers that, except for
liabilities constituting or arising out of or relating to the business assumed
by the Company in the Reorganisation, no other liabilities were assumed by the
Company, and the Company is not jointly and severally liable for other debts
and obligations incurred by Sinopec Group Company prior to the Reorganisation.
(b) At 30 June 2022 and 31 December 2021, the guarantees by the Group in
respect of facilities granted to the parties below are as follows:
At 30 June At 31 December
2022 2021
RMB million RMB million
Joint ventures (i) 9,025 9,117
Associates (ii) 4,394 5,746
Total 13,419 14,863
Note:
(i) The Group provided a guarantee in respect to standby credit
facilities granted to Zhongan United Coal Chemical Co., Ltd. ("Zhongan
United") by banks amounting to RMB7,100 million (31 December 2021: RMB7,100
million). As at 30 June 2022, the amount withdrawn (the portion corresponding
to the shareholding ratio of the Group) by Zhongan United from banks and
guaranteed by the Group was RMB5,467 million (31 December 2021: RMB5,680
million).
The Group provided a guarantee in respect to standby credit facilities granted
to Amur Gas Chemical Complex Limited Liability Company ("Amur Gas") by banks
amounting to RMB17,643 million (31 December 2021: RMB23,208 million), and
secured by a pledge of its 40% equity interest in Amur Gas. As at 30 June
2022, the amount withdrawn (the portion corresponding to the shareholding
ratio of the Group) by Amur Gas from banks and guaranteed by the Group was
RMB3,538 million (31 December 2021: RMB3,264 million).
The Group provided a guarantee in respect to payment obligation under the raw
material supply agreement of Amur Gas amounting to RMB16,309 million (31
December 2021: RMB15,493 million). As at 30 June 2022, Amur Gas has not yet
incurred the relevant payment obligations and therefore the Group has no
guarantee amount (31 December 2021: Nil).
The Group provided a guarantee in respect the engineering services agreement
of Amur Gas amounting to RMB2,924 million (31 December 2021: RMB3,012
million). As at 30 June 2022, the relevant payables for constructions of Amur
Gas (the portion corresponding to the shareholding ratio of the Group) and
guaranteed by the Group was RMB20 million (31 December 2021: RMB173 million).
(ii) The Group provided a guarantee in respect to standby credit
facilities granted to Zhongtian Synergetic Energy by banks amounting to
RMB17,050 million(31 December 2021: RMB17,050 million). As at 30 June 2022,
the amount withdrawn (the portion corresponding to the shareholding ratio of
the Group) by Zhongtian Synergetic Energy and guaranteed by the Group was
RMB4,394 million (2021: RMB5,746 million).
Management monitors the risk that the specified debtor will default on the
contract and recognises a provision when ECLs on the financial guarantees are
determined to be higher than the carrying amount in respect of the guarantees.
At 30 June 2022 and 31 December 2021, the Group estimates that there is no
material liability has been accrued for ECLs related to the Group's obligation
under these guarantee arrangements.
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 the Group'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 recognised normal routine pollutant discharge fees of approximately
RMB4,355 million in the consolidated financial statements for the six-month
period ended 30 June 2022 (six-month period ended 30 June 2021: RMB4,211
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.
64 SEGMENT REPORTING
Segment information is presented in respect of the Group's operating 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, which 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 to external
customers.
(v) Corporate and others - which largely comprise 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.
(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 profit 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 cash at bank and on
hand, long-term equity investments, deferred tax assets and other unallocated
assets. Segment liabilities exclude short-term loans, non-current liabilities
due within one year, long-term loans, debentures payable, deferred tax
liabilities, other non-current liabilities and other unallocated liabilities.
64 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets
and liabilities (Continued)
Reportable information on the Group's operating segments is as follows:
Six-month period ended 30 June
2022 2021
RMB million RMB million
Income from principal operations
Exploration and production
External sales 95,825 67,727
Inter-segment sales 60,314 39,391
156,139 107,118
Refining
External sales 98,941 79,792
Inter-segment sales 674,791 543,681
773,732 623,473
Marketing and distribution
External sales 767,183 613,521
Inter-segment sales 4,916 2,967
772,099 616,488
Chemicals
External sales 234,168 197,756
Inter-segment sales 39,089 30,030
273,257 227,786
Corporate and others
External sales 386,119 272,727
Inter-segment sales 525,043 340,701
911,162 613,428
Elimination of inter-segment sales (1,304,153) (956,770)
Consolidated income from principal operations 1,582,236 1,231,523
Income from other operations
Exploration and production 2,029 2,408
Refining 1,904 2,392
Marketing and distribution 19,894 18,682
Chemicals 4,953 4,857
Corporate and others 1,110 911
Consolidated income from other operations 29,890 29,250
Consolidated operating income 1,612,126 1,260,773
Six-month period ended 30 June
2022 2021
RMB million RMB million
Operating profit
By segment
Exploration and production 25,358 5,218
Refining 28,751 39,177
Marketing and distribution 17,964 16,583
Chemicals 120 12,845
Corporate and others 18,164 1,646
Elimination (11,210) (12,860)
Total segment operating profit 79,147 62,609
Investment income
Exploration and production 2,087 1,772
Refining 404 617
Marketing and distribution (793) 887
Chemicals 1,524 4,891
Corporate and others (13,529) (3,277)
Total segment investment (loss)/income (10,307) 4,890
Less: Financial expenses 5,337 4,902
Add: Other income 2,121 1,244
(Losses)/gains from changes in fair value (1,558) 116
Asset disposal gains 135 281
Operating profit 64,201 64,238
Add: Non-operating income 855 696
Less: Non-operating expenses 1,079 1,081
Profit before taxation 63,977 63,853
64 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets
and liabilities (Continued)
At 30 June At 31 December
2022 2021
RMB million RMB million
Assets
Segment assets
Exploration and production 384,553 371,100
Refining 351,070 304,785
Marketing and distribution 393,481 377,499
Chemicals 242,373 222,803
Corporate and others 185,924 133,961
Total segment assets 1,557,401 1,410,148
Cash at bank and on hand 233,937 221,989
Long-term equity investments 219,347 209,179
Deferred tax assets 20,179 19,389
Other unallocated assets 28,950 28,550
Total assets 2,059,814 1,889,255
Liabilities
Segment liabilities
Exploration and production 169,851 159,358
Refining 69,282 129,103
Marketing and distribution 207,241 210,215
Chemicals 70,613 65,103
Corporate and others 259,004 197,447
Total segment liabilities 775,991 761,226
Short-term loans 43,169 27,366
Non-current liabilities due within one year 66,409 28,651
Long-term loans 77,556 49,341
Debentures payable 14,868 42,649
Deferred tax liabilities 8,860 7,910
Other non-current liabilities 20,146 18,276
Other unallocated liabilities 121,143 37,795
Total liabilities 1,128,142 973,214
Six-month period ended 30 June
2022 2021
RMB million RMB million
Capital expenditure
Exploration and production 33,337 23,965
Refining 8,929 7,913
Marketing and distribution 3,072 6,773
Chemicals 18,214 19,042
Corporate and others 1,102 355
64,654 58,048
Depreciation, depletion and amortisation
Exploration and production 21,604 23,745
Refining 10,273 10,039
Marketing and distribution 11,645 11,459
Chemicals 8,639 7,735
Corporate and others 1,477 1,488
53,638 54,466
Impairment losses on long-lived assets
Exploration and production - -
Refining 2 427
Marketing and distribution - 52
Chemicals - 50
Corporate and others - -
2 529
64 SEGMENT REPORTING (Continued)
(2) Geographical information
The following tables set out information about the geographical information of
the Group's external sales and the Group's non-current assets, excluding
financial assets and deferred tax assets. In presenting information on the
basis of geographical segments, segment revenue is based on the geographical
location of customers, and segment assets are based on the geographical
location of the assets.
Six-month period ended 30 June
2022 2021
RMB million RMB million
External sales
Mainland China 1,243,368 972,498
Singapore 193,966 141,109
Others 174,792 147,166
1,612,126 1,260,773
At 30 June At 31 December
2022 2021
RMB million RMB million
Non-current assets
Mainland China 1,288,998 1,268,814
Others 42,004 40,551
1,331,002 1,309,365
65 FINANCIAL INSTRUMENTS
Overview
Financial assets of the Group include cash at bank and on hand, financial
assets held for trading, derivative financial assets, accounts receivable,
receivables financing, other receivables and other equity instrument
investments. Financial liabilities of the Group include short-term loans,
derivative financial liabilities, bills payable, accounts payable, employee
benefits payable, other payables, long-term loans, debentures payable and
lease liabilities.
The Group has exposure to the following risks from its uses of financial
instruments:
‧ credit risk;
‧ liquidity risk; and
‧ market risk.
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework, and developing and
monitoring the Group's risk management policies.
The Group's risk management policies are established to identify and analyse
the risks faced by the Group, and set appropriate risk limits and controls and
to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Group's
activities. The Group, through its training and management standards and
procedures, aims to develop a disciplined and constructive control environment
in which all employees understand their roles and obligations. Internal audit
department undertakes both regular and ad hoc reviews of risk management
controls and procedures, the results of which are reported to the Group's
audit committee.
Credit risk
(i) Risk management
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group's deposits placed with
financial institutions (including structured deposits) and receivables from
customers. To limit exposure to credit risk relating to deposits, the Group
primarily places cash deposits only with large financial institutions in the
PRC with acceptable credit ratings. The majority of the Group's accounts
receivable relates to sales of petroleum and chemical products to related
parties and third parties operating in the petroleum and chemical industries.
No single customer accounted for greater than 10% of total accounts receivable
at 30 June 2022, except for the amounts due from Sinopec Group Company and
fellow subsidiaries. The Group performs ongoing credit evaluations of its
customers' financial condition and generally does not require collateral on
accounts receivable. The Group maintains an impairment loss for doubtful
accounts and actual losses have been within management's expectations.
The carrying amounts of cash at bank and on hand, financial assets held for
trading, derivative financial assets, accounts receivable, receivables
financing, other receivables and long-term receivables, represent the Group's
maximum exposure to credit risk in relation to financial assets.
65 FINANCIAL INSTRUMENTS (Continued)
Credit risk (Continued)
(ii) Impairment of financial assets
The Group's primary type of financial assets that are subject to the expected
credit loss model is accounts receivable, receivables financing and other
receivables.
The Group's cash deposits are placed only with large financial institutions
with acceptable credit ratings, and there is no material impairment loss
identified.
For accounts receivable, and receivables financing, the Group applies the
"No.22 Accounting Standards for Business Enterprises - Financial instruments:
recognition and measurement" simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all accounts
receivable, and receivables financing.
To measure the expected credit losses, accounts receivable, and receivables
financing have been grouped based on shared credit risk characteristics and
the days past due.
The expected loss rates are based on the payment profiles of sales over a
period of 36 months before 30 June 2022 or 31 December 2021, respectively, and
the corresponding historical credit losses experienced within this period. The
historical loss rates are adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of the customers to
settle the accounts receivable, and receivables financing.
The detailed analysis of accounts receivable and receivables financing is
listed in Note 8 and Note 9.
The Group's other receivables are considered to have low credit risk, and the
loss allowance recognised during the period was therefore limited to 12 months
expected credit losses. The Group considers "low credit risk" for other
receivables when they have a low risk of default and the issuer has a strong
capacity to meet its contractual cash flow obligations in the near term.
Liquidity risk
Liquidity risk is the risk that the Group encounters short fall of capital
when meeting its obligation of financial liabilities. The Group's approach to
managing liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and
stressed capital conditions, without incurring unacceptable losses or risking
damage to the Group's reputation. The Group prepares monthly cash flow budget
to ensure that they will always have sufficient liquidity to meet its
financial obligations as they fall due. The Group arranges and negotiates
financing with financial institutions and maintains a certain level of standby
credit facilities to reduce the liquidity risk.
At 30 June 2022, the Group has standby credit facilities with several PRC
financial institutions which provide the Group to borrow up to RMB453,635
million (31 December 2021: RMB441,559 million) on an unsecured basis, at a
weighted average interest rate of 2.70% per annum (2021: 2.81%). At 30 June
2022, the Group's outstanding borrowings under these facilities were RMB34,507
million (31 December 2021: RMB11,700 million) and were included in loans.
The following table sets out the remaining contractual maturities at the
balance sheet date of the Group's financial liabilities, which are based on
contractual undiscounted cash flows (including interest payments computed
using contractual rates or, if floating, based on prevailing rates at the
balance sheet date) and the earliest date the Group would be required to
repay:
At 30 June 2022
Carrying Total Within one More than More than More than
amount contractual year or on one year but two years but five years
undiscounted demand less than less than
cash flow two years five years
RMB million RMB million RMB million RMB million RMB million RMB million
Short-term loans 43,169 43,749 43,749 - - -
Derivative financial liabilities 15,367 15,367 15,367 - - -
Bills payable 11,347 11,347 11,347 - - -
Accounts payable 236,871 236,871 236,871 - - -
Other payables 122,481 122,481 122,481 - - -
Non-current liabilities due within one year 66,409 68,112 68,112 - - -
Short-term corporate bonds 74,008 74,545 74,545 - - -
Long-term loans 77,556 84,141 1,922 11,138 64,844 6,237
Debentures payable 14,868 18,700 473 2,423 10,323 5,481
Lease liabilities 168,646 283,344 - 12,819 36,882 233,643
Total 830,722 958,657 574,867 26,380 112,049 245,361
65 FINANCIAL INSTRUMENTS (Continued)
Liquidity risk (Continued)
At 31 December 2021
Carrying Total Within one More than More than More than
amount contractual year or on one year but two years but five years
undiscounted demand less than less than
cash flow two years five years
RMB million RMB million RMB million RMB million RMB million RMB million
Short-term loans 27,366 27,787 27,787 - - -
Derivative financial liabilities 3,223 3,223 3,223 - - -
Bills payable 11,721 11,721 11,721 - - -
Accounts payable 203,919 203,919 203,919 - - -
Other payables 128,749 128,749 128,749 - - -
Non-current liabilities due within one year 28,651 29,554 29,554 - - -
Long-term loans 49,341 53,704 1,230 19,350 27,786 5,338
Debentures payable 42,649 47,553 1,195 30,645 10,443 5,270
Lease liabilities 170,233 280,652 - 12,030 35,412 233,210
Total 665,852 786,862 407,378 62,025 73,641 243,818
Management believes that the Group's current cash on hand, expected cash flows
from operations and available standby credit facilities from financial
institutions will be sufficient to meet the Group's short-term and long-term
capital requirements.
Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates and interest rates. The objective of market risk management is
to manage and control market risk exposures within acceptable parameters,
while optimising the return on risk.
(a) Currency risk
Currency risk arises on financial instruments that are denominated in a
currency other than the functional currency in which they are measured.
The Group does not have significant financial instruments that are denominated
in foreign currencies other than the functional currencies of respective
entities as at 30 June, and consequently does not have significant exposure to
foreign currency risk.
(b) Interest rate risk
The Group's interest rate risk exposure arises primarily from its short-term
and long-term loans. Loans carrying interest at variable interest rates and at
fixed interest rates expose the Group to cash flow interest rate risk and fair
value interest rate risk respectively. The interest rates and terms of
repayment of short-term and long-term loans of the Group are disclosed in Note
23 and Note 32, respectively.
At 30 June 2022, it is estimated that a general increase/decrease of 100 basis
points in variable interest rates, with all other variables held constant,
would decrease/increase the Group's net profit for the period by approximately
RMB485 million (31 December 2021: decrease/increase RMB254 million). This
sensitivity analysis has been determined assuming that the change of interest
rates was applied to the Group's debts outstanding at the balance sheet date
with exposure to cash flow interest rate risk. The analysis is performed on
the same basis for 2021.
(c) Commodity price risk
The Group engages in oil and gas operations and is exposed to commodity price
risk related to price volatility of crude oil, refined oil products and
chemical products. The fluctuations in prices of crude oil, refined oil
products and chemical products could have significant impact on the Group. The
Group uses derivative financial instruments, including commodity futures and
swaps contracts, to manage a portion of such risk.
Evaluate and monitor market risk exposure arising from trading positions based
on dynamic market research and judgment, combined with resource demand and
production and management plans, to continuously manage and hedge the risk of
commodity price fluctuations arising from market changes.
At 30 June 2022, the Group had certain commodity contracts of crude oil,
refined oil products and chemical products designated as qualified cash flow
hedges and economic hedges. At 30 June 2022, the fair value of such derivative
hedging financial instruments is derivative financial assets of RMB39,965
million (31 December 2021: RMB18,359 million) and derivative financial
liabilities of RMB15,349 million (31 December 2021: RMB3,214 million).
65 FINANCIAL INSTRUMENTS (Continued)
Market risk (Continued)
(c) Commodity price risk (Continued)
At 30 June 2022, it is estimated that a general increase/decrease of USD10 per
barrel in basic price of derivative financial instruments, with all other
variables held constant, would impact the fair value of derivative financial
instruments, which would decrease/increase the Group's net profit for the
period by approximately RMB2,700 million (31 December 2021: decrease/increase
RMB2,996 million), and increase/decrease the Group's other comprehensive
income by approximately RMB2,383 million (31 December 2021: decrease/increase
RMB1,160 million). This sensitivity analysis has been determined assuming that
the change in prices had occurred at the balance sheet date and the change was
applied to the Group's derivative financial instruments at that date with
exposure to commodity price risk. The analysis is performed on the same basis
for 2021.
Fair values
(i) Financial instruments carried at fair value
The following table presents the carrying value of financial instruments
measured at fair value at the balance sheet date across the three levels of
the fair value hierarchy. With the fair value of each financial instrument
categorised in its entirely based on the lowest level of input that is
significant to that fair value measurement. The levels are defined as follows:
‧ Level 1 (highest level): fair values measured using quoted prices
(unadjusted) in active markets for identical financial instruments.
‧ Level 2: fair values measured using quoted prices in active markets for
similar financial instruments, or using valuation techniques in which all
significant inputs are directly or indirectly based on observable market data.
‧ Level 3 (lowest level): fair values measured using valuation techniques
in which any significant input is not based on observable market data.
At 30 June 2022
The Group
Level 1 Level 2 Level 3 Total
RMB million RMB million RMB million RMB million
Assets
Financial assets held for trading:
- Structured deposits - - 1,009 1,009
- Exchange traded fund 3 - - 3
Derivative financial assets:
- Derivative financial assets 13,287 27,102 - 40,389
Receivables financing:
- Receivables financing - - 5,889 5,889
Other equity instrument investments:
- Other Investments 171 - 600 771
13,461 27,102 7,498 48,061
Liabilities
Derivative financial liabilities:
- Derivative financial liabilities 2,773 12,594 - 15,367
2,773 12,594 - 15,367
65 FINANCIAL INSTRUMENTS (Continued)
Fair values (Continued)
(i) Financial instruments carried at fair value (Continued)
At 31 December 2021
The Group
Level 1 Level 2 Level 3 Total
RMB million RMB million RMB million RMB million
Assets
Derivative financial assets:
- Derivative financial assets 5,883 12,488 - 18,371
Receivables financing:
- Receivables financing - - 5,939 5,939
Other equity instrument investments:
- Other Investments 179 - 588 767
6,062 12,488 6,527 25,077
Liabilities
Derivative financial liabilities:
- Derivative financial liabilities 804 2,419 - 3,223
804 2,419 - 3,223
During the six-month period ended 30 June 2022, there was no transfer between
instruments in Level 1 and Level 2.
Management of the Group uses discounted cash flow model with inputted interest
rate and commodity index, which were influenced by historical fluctuation and
the probability of market fluctuation, to evaluate the fair value of the
structured deposits and receivables financing classified as Level 3 financial
assets.
(ii) Fair values of financial instruments carried at other than fair value
The fair values of the Group's financial instruments carried at other than
fair value (other than long-term indebtedness and investments in unquoted
equity securities) approximate their carrying amounts due to the short-term
maturity of these instruments. The fair values of long-term indebtedness are
estimated by discounting future cash flows using current market interest rates
offered to the Group for debt with substantially the same characteristic and
maturities range from 2.15% to 4.45% (31 December 2021: from 0.30% to 4.65%).
The following table presents the carrying amount and fair value of the Group's
long-term indebtedness other than loans from Sinopec Group Company and fellow
subsidiaries at 30 June 2022 and 31 December 2021:
At 30 June At 31 December
2022 2021
RMB million RMB million
Carrying amount 123,161 88,593
Fair value 119,810 85,610
The Group has not developed an internal valuation model necessary to estimate
the fair value of loans from Sinopec Group Company and fellow subsidiaries as
it is not considered practicable to estimate their fair value because the cost
of obtaining discount and borrowing rates for comparable borrowings would be
excessive based on the Reorganisation of the Group, its existing capital
structure and the terms of the borrowings.
Except for the above items, the financial assets and liabilities of the Group
are carried at amounts not materially different from their fair values at 30
June 2022 and 31 December 2021.
66 BASIC AND DILUTED EARNINGS PER SHARE
(i) Basic earnings per share
Basic earnings per share is calculated by the net profit attributable to
equity shareholders of the Company and the weighted average number of
outstanding ordinary shares of the Company:
Six-month period ended 30 June
2022 2021
Net profit attributable to equity shareholders of the Company (RMB million) 43,530 39,426
Weighted average number of outstanding ordinary shares of the Company 121,071 121,071
(million)
Basic earnings per share (RMB/share) 0.360 0.326
The calculation of the weighted average number of ordinary shares is as
follows:
Six-month period ended 30 June
2022 2021
Weighted average number of outstanding ordinary shares of the Company at 1 121,071 121,071
January (million)
Weighted average number of outstanding ordinary shares of the Company at 30 121,071 121,071
June (million)
(ii) Diluted earnings per share
There are no potential dilutive ordinary shares, and the diluted earnings per
share are equal to the basic earnings per share.
67 RETURN ON NET ASSETS AND EARNINGS PER SHARE
In accordance with "Regulation on the Preparation of Information Disclosures
of Companies Issuing Public Shares No.9 - Calculation and Disclosure of the
Return on Net Assets and Earnings Per Share" (2010 revised) issued by the CSRC
and relevant accounting standards, the Group's return on net assets and
earnings per share are calculated as follows:
Six-month period ended 30 June 2022 2021
Weighted Basic Diluted Weighted Basic Diluted
average earnings earnings per average earnings earnings per
return on per share share return on per share share
net assets net assets
(%) (RMB/Share) (RMB/Share) (%) (RMB/Share) (RMB/Share)
Net profit attributable to the Company's ordinary equity shareholders 5.57 0.360 0.360 5.20 0.326 0.326
Net profit deducted extraordinary gains attributable to the Company's ordinary 5.50 0.355 0.355 5.06 0.317 0.317
equity shareholders
68 NON-RECURRING PROFIT/LOSS ITEMS
Non-recurring profit/loss items Six-month period ended Six-month period ended
30 June 2022 30 June 2021
(Profit)/loss (RMB Million) (Profit)/loss (RMB Million)
Net profit on disposal of non-current assets (135) (281)
Donations 101 8
Government grants (1,340) (1,549)
Gains on holding and disposal of business and various investments (125) (166)
Other non-operating income and expenses, net 288 690
Net profit/(loss) acquired through business combination under - (376)
common control during the reporting period
Subtotal (1,211) (1,674)
Tax effect 475 491
Total (736) (1,183)
Attributable to:
Equity shareholders of the Company (570) (1,006)
Minority interests (166) (177)
REPORT OF THE INTERNATIONAL AUDITOR
Review report to the Board of Directors of China Petroleum & Chemical
Corporation
(Incorporated in the People's Republic of China with limited liability)
Introduction
We have reviewed the interim financial report set out on page 109 to 142 which
comprises the consolidated statement of financial position of China Petroleum
& Chemical Corporation (the "Company") as of 30 June 2022 and the related
consolidated income statement, statement of comprehensive income, statement of
changes in equity and statement of cash flow for the six-month period then
ended and explanatory notes. The Rules Governing the Listing of Securities on
The Stock Exchange of Hong Kong Limited require the preparation of an interim
financial report to be in compliance with the relevant provisions thereof and
International Accounting Standard 34, Interim Financial Reporting, issued by
the International Accounting Standards Board. The directors are responsible
for the preparation and presentation of the interim financial report in
accordance with International Accounting Standard 34.
Our responsibility is to form a conclusion, based on our review, on the
interim financial report and to report our conclusion solely to you, as a
body, in accordance with our agreed terms of engagement, and for no other
purpose. We do not assume responsibility towards or accept liability to any
other person for the contents of this report.
Scope of Review
We conducted our review in accordance with Hong Kong Standard on Review
Engagements 2410, Review of Interim Financial Information Performed by the
Independent Auditor of the Entity, issued by the Hong Kong Institute of
Certified Public Accountants. A review of the interim financial report
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with Hong Kong Standards on Auditing and consequently does not enable us to
obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial report as at 30 June 2022 is not prepared,
in all material respects, in accordance with International Accounting Standard
34, Interim Financial Reporting.
KPMG
Certified Public Accountants
8th Floor, Prince's Building
10 Chater Road
Central, Hong Kong
26 August 2022
(B) FINANCIAL STATEMENTS PREPARED UNDER INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRS")
UNAUDITED INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
For the six-month period ended 30 June 2022
(Amounts in million, except per share data)
Notes Six-month period ended 30 June
2022 2021
RMB RMB
Revenue
Revenue from primary business 3 1,582,236 1,231,523
Other operating revenues 29,890 29,250
1,612,126 1,260,773
Operating expenses
Purchased crude oil, products and operating supplies and expenses (1,262,183) (945,555)
Selling, general and administrative expenses (26,797) (25,810)
Depreciation, depletion and amortisation (53,638) (54,466)
Exploration expenses, including dry holes (5,738) (4,846)
Personnel expenses (49,223) (45,195)
Taxes other than income tax 4 (134,409) (120,900)
Impairment reversal on trade and other receivables 72 55
Other operating income/(expenses), net (17,286) (5,570)
Total operating expenses (1,549,202) (1,202,287)
Operating profit 62,924 58,486
Finance costs
Interest expense (8,124) (7,660)
Interest income 3,012 2,663
Foreign currency exchange (losses)/gains, net (225) 95
Net finance costs (5,337) (4,902)
Investment income 126 114
Share of profits less losses from associates and joint ventures 7,327 11,133
Profit before taxation 65,040 64,831
Income tax expense 5 (14,461) (15,052)
Profit for the period 50,579 49,779
Attributable to:
Shareholders of the Company 44,451 40,227
Non-controlling interests 6,128 9,552
Profit for the period 50,579 49,779
Earnings per share:
Basic 7 0.367 0.332
Diluted 7 0.367 0.332
Notes to the financial statements on pages 116 to 142 are parts of the interim
condensed consolidated financial statements. Details of dividends payable to
shareholders of the Company attributable to the profit for the period are set
out in Note 6.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six-month period ended 30 June 2022
(Amounts in million)
Notes Six-month period ended 30 June
2022 2021
RMB RMB
Profit for the period 50,579 49,779
Other comprehensive income:
Item that may not be reclassified subsequently to profit or loss
Equity investments at fair value through other comprehensive income (17) 8
Total items that may not be reclassified subsequently to profit or loss (17) 8
Items that may be reclassified subsequently to profit or loss
Share of other comprehensive income of associates and joint ventures 3,397 121
Cash flow hedges 10,258 8,640
Cost of hedging reserve (844) (40)
Foreign currency translation differences 3,913 (621)
Total items that may be reclassified subsequently to profit or loss 16,724 8,100
Total other comprehensive income 16,707 8,108
Total comprehensive income for the period 67,286 57,887
Attributable to:
Shareholders of the Company 60,484 48,211
Non-controlling interests 6,802 9,676
Total comprehensive income for the period 67,286 57,887
Notes to the financial statements on pages 116 to 142 are parts of the interim
condensed consolidated financial statements.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
(Amounts in million)
Notes 30 June 31 December
2022 2021
RMB RMB
Non-current assets
Property, plant and equipment, net 8 599,254 598,925
Construction in progress 9 169,056 155,939
Right-of-use assets 10 267,501 268,408
Goodwill 8,727 8,594
Interest in associates 158,314 148,729
Interest in joint ventures 61,033 60,450
Financial assets at fair value through other comprehensive income 13 771 767
Deferred tax assets 20,179 19,389
Long-term prepayments and other assets 11 68,546 70,030
Total non-current assets 1,353,381 1,331,231
Current assets
Cash and cash equivalents 139,178 108,590
Time deposits with financial institutions 94,759 113,399
Financial assets at fair value through profit or loss 1,012 -
Derivative financial assets 40,389 18,371
Trade accounts receivable 12 63,717 34,861
Financial assets at fair value through other comprehensive income 13 5,889 5,939
Inventories 285,032 207,433
Prepaid expenses and other current assets 76,457 69,431
Total current assets 706,433 558,024
Current liabilities
Short-term debts 14 159,555 35,252
Loans from Sinopec Group Company and fellow subsidiaries 14 3,596 2,873
Lease liabilities 15 16,239 15,173
Derivative financial liabilities 15,367 3,223
Trade accounts payable and bills payable 16 248,218 215,640
Contract liabilities 124,411 124,622
Other payables 221,055 239,688
Income tax payable 5,182 4,809
Total current liabilities 793,623 641,280
Net current liabilities 87,190 83,256
Total assets less current liabilities 1,266,191 1,247,975
Non-current liabilities
Long-term debts 14 77,671 78,300
Loans from Sinopec Group Company and fellow subsidiaries 14 14,753 13,690
Lease liabilities 15 168,646 170,233
Deferred tax liabilities 8,860 7,910
Provisions 44,443 43,525
Other long-term liabilities 21,077 19,243
Total non-current liabilities 335,450 332,901
930,741 915,074
Equity
Share capital 17 121,071 121,071
Reserves 665,178 653,111
Total equity attributable to shareholders of the Company 786,249 774,182
Non-controlling interests 144,492 140,892
Total equity 930,741 915,074
These financial statements have been approved and authorised for issue by the
board of directors on 26 August 2022.
Ma Yongsheng Yu Baocai Shou Donghua
Chairman President Chief Financial Officer
(Legal representative)
Notes to the financial statements on pages 116 to 142 are parts of the interim
condensed consolidated financial statements.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six-month period ended 30 June 2021
(Amounts in million)
Share Capital Share Statutory Discretionary Other Retained Total equity Non- Total equity
capital reserve premium surplus surplus reserves earnings attributable to controlling
reserve reserve shareholders interests
of the
Company
RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB
Balance at 31 December 2020 121,071 29,432 55,850 92,280 117,000 3,500 322,361 741,494 141,364 882,858
Adjustment for business combination - 4,831 - - - - - 4,831 13 4,844
of entities under common control (Note 19)
Balance at 1 January 2021 121,071 34,263 55,850 92,280 117,000 3,500 322,361 746,325 141,377 887,702
Profit for the period - - - - - - 40,227 40,227 9,552 49,779
Other comprehensive income - - - - - 7,984 - 7,984 124 8,108
Total comprehensive income for the period - - - - - 7,984 40,227 48,211 9,676 57,887
Amounts transferred to initial carrying - - - - - (8,121) - (8,121) (549) (8,670)
amount of hedged items
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners:
Final dividend for 2020 (Note 6) - - - - - - (15,739) (15,739) - (15,739)
Distributions to non-controlling interests - - - - - - - - (1,885) (1,885)
Contributions to subsidiaries - - - - - - - - 559 559
from non-controlling interests
Total contributions by and distributions to owners - - - - - - (15,739) (15,739) (1,326) (17,065)
Transaction with non-controlling interests - (1,384) - - - - - (1,384) (6,818) (8,202)
Total transactions with owners - (1,384) - - - - (15,739) (17,123) (8,144) (25,267)
Others - 121 - - - 778 (1,051) (152) (247) (399)
Balance at 30 June 2021 121,071 33,000 55,850 92,280 117,000 4,141 345,798 769,140 142,113 911,253
Notes to the financial statements on pages 116 to 142 are parts of the interim
condensed consolidated financial statements.
Share Capital Share Statutory Discretionary Other Retained Total equity Non- Total equity
capital reserve premium surplus surplus reserves earnings attributable to controlling
reserve reserve shareholders interests
of the
Company
RMB RMB RMB RMB RMB RMB RMB RMB RMB RMB
Balance at 1 January 2022 121,071 27,062 55,850 96,224 117,000 2,495 354,480 774,182 140,892 915,074
Profit for the period - - - - - - 44,451 44,451 6,128 50,579
Other comprehensive income - - - - - 16,033 - 16,033 674 16,707
Total comprehensive income for the period - - - - - 16,033 44,451 60,484 6,802 67,286
Amounts transferred to initial carrying amount of - - - - - (8,786) - (8,786) (430) (9,216)
hedged items
Transactions with owners, recorded directly in equity:
Contributions by and distributions to owners:
Final dividend for 2021 (Note 6) - - - - - - (37,532) (37,532) - (37,532)
Distributions to non-controlling interests - - - - - - - - (2,337) (2,337)
Contributions to subsidiaries from - - - - - - - - 1,420 1,420
non-controlling interests
Total contributions by and distributions - - - - - - (37,532) (37,532) (917) (38,449)
to owners
Return of capital to non-controlling interests - - - - - - - - (1,713) (1,713)
Total transactions with owners - - - - - - (37,532) (37,532) (2,630) (40,162)
Other equity movements under the equity method - (2,102) - - - - - (2,102) - (2,102)
Others - 3 - - - 902 (902) 3 (142) (139)
Balance at 30 June 2022 121,071 24,963 55,850 96,224 117,000 10,644 360,497 786,249 144,492 930,741
Notes:
(a) The usage of the discretionary surplus reserve is similar to that of
statutory surplus reserve.
(b) As at 30 June 2022, the amount of retained earnings available for
distribution was RMB106,400 million (30 June 2021: RMB108,194 million), being
the amount determined in accordance with CASs. According to the Articles of
Association of the Company, the amount of retained earnings available for
distribution to shareholders of the Company is lower of the amount determined
in accordance with the accounting policies complying with CASs and the amount
determined in accordance with the accounting policies complying with
International Financial Reporting Standards ("IFRS").
(c) The capital reserve primarily represents (i) the difference between
the total amount of the par value of shares issued and the amount of the net
assets transferred from Sinopec Group Company in connection with the
Reorganisation (Note 1); and (ii) the difference between the considerations
paid over or received the amount of the net assets of entities and related
operations acquired from or sold to Sinopec Group Company and non-controlling
interests.
(d) The application of the share premium account is governed by Sections
167 and 168 of the PRC Company Law.
Notes to the financial statements on pages 116 to 142 are parts of the interim
condensed consolidated financial statements.
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six-month period ended 30 June 2022
(Amounts in million)
Notes Six-month period ended 30 June
2022 2021
RMB RMB
Net cash generated from operating activities (a) 4,947 48,347
Investing activities
Capital expenditure (54,711) (49,435)
Exploratory wells expenditure (8,312) (6,787)
Purchase of investments (5,019) (2,576)
Payments for financial assets at fair value through profit or loss (1,008) (6,650)
Proceeds from settlement of financial assets at fair value through profit or 6 2,700
loss
Payment for acquisition of subsidiary, net of cash acquired (7,628) -
Proceeds from disposal of investments 437 4,937
Proceeds from disposal of property, plant, equipment and 107 502
other non-current assets
Increase in time deposits with maturities over three months (15,928) (33,073)
Decrease in time deposits with maturities over three months 34,568 17,558
Interest received 2,387 1,595
Investment and dividend income received 4,345 3,316
(Payments of)/proceeds from other investing activities (382) 1,923
Net cash used in investing activities (51,138) (65,990)
Financing activities
Proceeds from bank and other loans 348,900 170,144
Repayments of bank and other loans (224,161) (130,857)
Contributions to subsidiaries from non-controlling interests 987 302
Dividends paid by the Company (37,532) (15,739)
Distributions by subsidiaries to non-controlling interests (1,088) (1,581)
Interest paid (2,986) (2,239)
Payments made to acquire non-controlling interests - (1,410)
Repayments of lease liabilities (7,166) (9,408)
Proceeds from other financing activities 32 78
Payments of other financing activities (1,774) (640)
Net cash generated from financing activities 75,212 8,650
Net increase/(decrease) in cash and cash equivalents 29,021 (8,993)
Cash and cash equivalents at 1 January 108,590 87,559
Effect of foreign currency exchange rate changes 1,567 (452)
Cash and cash equivalents at 30 June 139,178 78,114
Notes to the financial statements on pages 116 to 142 are parts of the interim
condensed consolidated financial statements.
NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six-month period ended 30 June 2022
(Amounts in million)
(a) Reconciliation from profit before taxation to net cash generated from
operating activities
Six-month period ended 30 June
2022 2021
RMB RMB
Operating activities
Profit before taxation 65,040 64,831
Adjustments for:
Depreciation, depletion and amortisation 53,638 54,466
Dry hole costs written off 3,725 2,640
Share of profits less losses from associates and joint ventures (7,327) (11,133)
Investment income (126) (114)
Interest income (3,012) (2,663)
Interest expense 8,124 7,660
Loss on foreign currency exchange rate changes and derivative financial 2,405 520
instruments
Loss on disposal of property, plant, equipment and other non-current assets, 36 63
net
Impairment losses on assets 1,456 926
Impairment reversal on trade and other receivables (72) (55)
123,887 117,141
Net changes from:
Accounts receivable and other current assets (49,228) (46,447)
Inventories (79,034) (48,011)
Accounts payable and other current liabilities 18,842 41,379
14,467 64,062
Income tax paid (9,520) (15,715)
Net cash generated from operating activities 4,947 48,347
Notes to the financial statements on pages 116 to 142 are parts of the interim
condensed consolidated financial statements
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six-month period ended 30 June 2022
1 PRINCIPAL ACTIVITIES AND ORGANISATION
Principal activities
China Petroleum & Chemical Corporation (the "Company") is an energy and
chemical company incorporated in the People's Republic of China (the "PRC")
that, through its subsidiaries (hereinafter collectively referred to as the
"Group"), engages in oil and gas and chemical operations. Oil and gas
operations consist of exploring for, developing and producing crude oil and
natural gas; transporting crude oil and natural gas by pipelines; refining
crude oil into finished petroleum products; and marketing crude oil, natural
gas and refined petroleum products. Chemical operations include the
manufacture and marketing of a wide range of chemicals for industrial uses.
Organisation
The Company was established in the PRC on 25 February 2000 as a joint stock
limited company as part of the reorganisation (the "Reorganisation") of China
Petrochemical Corporation ("Sinopec Group Company"), the ultimate holding
company of the Group and a ministry-level enterprise under the direct
supervision of the State Council of the PRC. Prior to the incorporation of the
Company, the oil and gas and chemical operations of the Group were carried on
by oil administration bureaux, petrochemical and refining production
enterprises and sales and marketing companies of Sinopec Group Company.
As part of the Reorganisation, certain of Sinopec Group Company's core oil and
gas and chemical operations and businesses together with the related assets
and liabilities were transferred to the Company. On 25 February 2000, in
consideration for Sinopec Group Company transferring such oil and gas and
chemical operations and businesses and the related assets and liabilities to
the Company, the Company issued 68.8 billion domestic state-owned ordinary
shares with a par value of RMB1.00 each to Sinopec Group Company. The shares
issued to Sinopec Group Company on 25 February 2000 represented the entire
registered and issued share capital of the Company on that date. The oil and
gas and chemical operations and businesses transferred to the Company were
related to (i) the exploration, development and production of crude oil and
natural gas, (ii) the refining, transportation, storage and marketing of crude
oil and petroleum products, and (iii) the production and sales of chemicals.
2 BASIS OF PREPARATION
This interim condensed consolidated financial report for the half-year
reporting period ended 30 June 2022 has been prepared in accordance with
International Accounting Standard ("IAS") 34, Interim Financial Reporting.
The interim report does not include all the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the year ended 31 December 2021 and
any public announcements made by the Group during the interim reporting
period.
(a) New and amended standards and interpretations adopted by the Group
The International Accounting Standard Board ("IASB") has issued the following
amendments to IFRSs that are first effective for the current accounting period
of the Group:
‧ Amendment to IAS 16, Property, plant and equipment: Proceeds before
intended use
‧ Amendment to IAS 37, Onerous contracts - cost of fulfilling a contract
None of these developments have had a material effect on how the Group's
results and financial position for the current or prior periods have been
prepared or presented. The Group has not applied any new standard or
interpretation that is not yet effective for the current accounting period.
3 REVENUE FROM PRIMARY BUSINESS
Revenue from primary business mainly represents revenue from the sales of
refined petroleum products, chemical products, crude oil and natural gas,
which are recognised at a point in time.
Six-month period ended 30 June
2022 2021
RMB million RMB million
Gasoline 389,830 345,353
Diesel 327,767 226,151
Crude oil 278,099 204,510
Basic chemical feedstock 140,022 112,346
Synthetic resin 74,451 70,793
Kerosene 71,419 51,165
Natural gas 38,017 30,007
Synthetic fiber monomers and polymers 25,186 21,885
Others (i) 237,445 169,313
1,582,236 1,231,523
Note:
(i) Others are primarily liquefied petroleum gas and other refinery and
chemical by-products and joint products.
4 TAXES OTHER THAN INCOME TAX
Six-month period ended 30 June
2022 2021
RMB million RMB million
Consumption tax (i) 103,510 100,539
City construction tax (ii) 9,011 8,293
Special oil income levy 8,095 185
Education surcharge (ii) 6,486 6,132
Resources tax 4,404 3,004
Others 2,903 2,747
134,409 120,900
Notes:
(i) Consumption tax was levied based on sales quantities of taxable
products, tax rates of respective products are presented as below:
Products RMB/Ton
Gasoline 2,109.76
Diesel 1,411.20
Naphtha 2,105.20
Solvent oil 1,948.64
Lubricant oil 1,711.52
Fuel oil 1,218.00
Jet fuel oil 1,495.20
(ii) City construction tax and education surcharge are levied on an entity
based on its paid amount of value-added tax and consumption tax.
5 INCOME TAX EXPENSE
Income tax expense in the consolidated income statement represents:
Six-month period ended 30 June
2022 2021
RMB million RMB million
Current tax
- Provision for the period 14,135 17,389
- Adjustment of prior years 370 36
Deferred taxation (44) (2,373)
14,461 15,052
6 DIVIDENDS
Dividends payable to shareholders of the Company attributable to the period
represent:
Six-month period ended 30 June
2022 2021
RMB million RMB million
Interim dividends declared after the date of the statement of financial 19,371 19,371
position
of RMB0.16 per share (2021: RMB0.16 per share)
Pursuant to the Company's Articles of Association and a resolution passed at
the Directors' meeting on 26 August 2022, the directors authorised to declare
the interim dividends for the year ending 31 December 2022 of RMB0.16 (2021:
RMB0.16) per share totalling RMB19,371 million (2021: RMB19,371 million).
Dividends declared after the date of the statement of financial position are
not recognised as a liability at the date of the statement of financial
position.
Dividends payable to shareholders of the Company attributable to the previous
financial year, approved during the period represent:
Six-month period ended 30 June
2022 2021
RMB million RMB million
37,532 15,739
Final cash dividends in respect of the previous financial year, approved
during the period
of RMB0.31 per share (2021: RMB0.13 per share)
Pursuant to the shareholders' approval at the Annual General Meeting on 18 May
2022, a final dividend of RMB0.31 per share totalling RMB37,532 million
according to total shares on 9 June 2022 was approved. All dividends have been
paid in June 2022.
Pursuant to the shareholders' approval at the Annual General Meeting on 25 May
2021, a final dividend of RMB0.13 per share totalling RMB15,739 million
according to total shares on 16 June 2021 was approved. All dividends have
been paid in June 2021.
7 BASIC AND DILUTED EARNINGS PER SHARE
The calculation of basic earnings per share for the six-month period ended 30
June 2022 is based on profit attributable to ordinary shareholders of the
Company of RMB44,451 million (six-month period ended 30 June 2021: profit of
RMB40,227 million) and the weighted average number of shares of
121,071,209,646 (six-month period ended 30 June 2021: 121,071,209,646) during
the period.
There are no potential dilutive ordinary shares, and the diluted earnings per
share are equal to the basic earnings per share.
8 PROPERTY, PLANT AND EQUIPMENT
Equipment,
Plants and Oil and gas machinery
buildings properties and others Total
RMB million RMB million RMB million RMB million
Cost:
Balance at 1 January 2021 138,550 757,592 996,702 1,892,844
Additions 28 739 339 1,106
Transferred from construction in progress 2,016 14,967 18,268 35,251
Reclassifications 43 (32) (11) -
Invested into joint ventures and associates (1) - (5) (6)
Transferred to other long-term assets (396) (14) (359) (769)
Disposals (350) (188) (3,666) (4,204)
Exchange adjustments (23) (408) (38) (469)
Balance at 30 June 2021 139,867 772,656 1,011,230 1,923,753
Balance at 1 January 2022 143,165 793,045 1,048,227 1,984,437
Additions 265 867 2,756 3,888
Transferred from construction in progress 1,611 14,221 23,179 39,011
Reclassifications 395 (13) (382) -
Invested into joint ventures and associates (6) - (75) (81)
Transferred to other long-term assets (15) (5) (441) (461)
Disposals (147) (265) (1,869) (2,281)
Exchange adjustments 109 2,146 165 2,420
Balance at 30 June 2022 145,377 809,996 1,071,560 2,026,933
Accumulated depreciation and impairment losses:
Balance at 1 January 2021 63,540 620,720 614,969 1,299,229
Depreciation for the period 2,271 17,247 23,839 43,357
Impairment losses for the period 28 - 456 484
Reclassifications 111 (28) (83) -
Invested into joint ventures and associates - - (3) (3)
Transferred to other long-term assets (57) (5) (39) (101)
Written back on disposals (217) - (3,512) (3,729)
Exchange adjustments (12) (392) (21) (425)
Balance at 30 June 2021 65,664 637,542 635,606 1,338,812
Balance at 1 January 2022 68,166 660,838 656,508 1,385,512
Depreciation for the period 2,153 14,865 25,002 42,020
Impairment losses for the period - - 2 2
Reclassifications 240 (12) (228) -
Invested into joint ventures and associates (1) - (22) (23)
Transferred to other long-term assets (6) (3) (33) (42)
Written back on disposals (117) (249) (1,633) (1,999)
Exchange adjustments 52 2,057 100 2,209
Balance at 30 June 2022 70,487 677,496 679,696 1,427,679
Net book value:
Balance at 1 January 2021 75,010 136,872 381,733 593,615
Balance at 30 June 2021 74,203 135,114 375,624 584,941
Balance at 1 January 2022 74,999 132,207 391,719 598,925
Balance at 30 June 2022 74,890 132,500 391,864 599,254
The additions to oil and gas properties of the Group for the six-month period
ended 30 June 2022 included RMB867 million (six-month period ended 30 June
2021: RMB728 million) of estimated dismantlement costs for site restoration.
At 30 June 2022 and 31 December 2021, the Group had no individual significant
property, plant and equipment which have been pledged.
At 30 June 2022 and 31 December 2021, the Group had no individual significant
property, plant and equipment which were temporarily idle or pending for
disposal.
At 30 June 2022 and 31 December 2021, the Group had no individual significant
fully depreciated property, plant and equipment which were still in use.
9 CONSTRUCTION IN PROGRESS
Six-month period ended 30 June
2022 2021
RMB million RMB million
Balance at 1 January 155,939 125,525
Additions 59,688 54,889
Dry hole costs written off (3,725) (2,640)
Transferred to property, plant and equipment (39,011) (35,251)
Reclassification to other long-term assets (3,872) (4,021)
Disposals and others 5 12
Exchange adjustments 32 (26)
Balance at 30 June 169,056 138,488
As at 30 June 2022, the amount of capitalised cost of exploratory wells
included in construction in progress related to the exploration and production
segment was RMB14,310 million (31 December 2021: RMB12,255 million). The
geological and geophysical exploration costs paid during the period ended 30
June 2022 were RMB1,943 million (six-month period ended 30 June 2021: RMB2,103
million).
10 RIGHT-OF-USE ASSETS
Land Others Total
RMB million RMB million RMB million
Cost:
Balance at 1 January 2022 263,756 46,921 310,677
Additions 5,837 4,763 10,600
Decreases (2,985) (1,210) (4,195)
Balance at 30 June 2022 266,608 50,474 317,082
Accumulated depreciation:
Balance at 1 January 2022 27,122 15,147 42,269
Additions 5,231 3,712 8,943
Decreases (932) (699) (1,631)
Balance at 30 June 2022 31,421 18,160 49,581
Net book value:
Balance at 1 January 2022 236,634 31,774 268,408
Balance at 30 June 2022 235,187 32,314 267,501
11 LONG-TERM PREPAYMENTS AND OTHER ASSETS
30 June 31 December
2022 2021
RMB million RMB million
Operating rights of service stations 28,774 29,714
Long-term receivables due from and prepayment to Sinopec Group Company 2,295 1,520
and fellow subsidiaries
Prepayments for construction projects to third parties 7,293 7,470
Others (i) 30,184 31,326
68,546 70,030
Note:
(i) Others mainly comprise time deposits with terms of three years,
catalyst expenditures and improvement expenditures of property, plant and
equipment.
The cost of operating rights of service stations is charged to expense on a
straight-line basis over the respective periods of the rights. The movement of
operating rights of service stations is as follows:
Six-month period ended 30 June
2022 2021
RMB million RMB million
Operating rights of service stations
Cost:
Balance at 1 January 53,791 53,567
Additions 377 345
Decreases (221) (176)
Balance at 30 June 53,947 53,736
Accumulated amortisation:
Balance at 1 January 24,077 21,711
Additions 1,181 1,148
Decreases (85) (58)
Balance at 30 June 25,173 22,801
Net book value at 30 June 28,774 30,935
12 TRADE ACCOUNTS RECEIVABLE
30 June 31 December
2022 2021
RMB million RMB million
Amounts due from third parties 55,159 30,159
Amounts due from Sinopec Group Company and fellow subsidiaries 4,296 2,199
Amounts due from associates and joint ventures 8,342 6,536
67,797 38,894
Less: Loss allowance for expected credit losses (4,080) (4,033)
63,717 34,861
The ageing analysis of trade accounts receivable (net of loss allowance for
expected credit losses) is as follows:
30 June 31 December
2022 2021
RMB million RMB million
Within one year 63,254 34,180
Between one and two years 180 442
Between two and three years 254 221
Over three years 29 18
63,717 34,861
Loss allowance for expected credit losses are analysed as follows:
Six-month period ended 30 June
2022 2021
RMB million RMB million
Balance at 1 January 4,033 3,860
Provision for the period 156 14
Written back for the period (217) (50)
Written off for the period (33) (13)
Others 141 (40)
Balance at 30 June 4,080 3,771
Sales are generally on cash term. Credit is generally only available for major
customers with well-established trading records. Amounts due from Sinopec
Group Company and fellow subsidiaries are repayable under the same terms.
These receivables relate to a wide range of customers for whom there is no
recent history of default.
Information about the impairment of trade accounts receivable and the Group's
exposure to credit risk can be found in Note 22.
13 FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
30 June 31 December
2022 2021
RMB million RMB million
Non-current assets
Unlisted equity instruments 600 588
Listed equity instruments 171 179
Current assets
Trade accounts receivable and bills receivable (i) 5,889 5,939
6,660 6,706
Note:
(i) As at 30 June 2022, bills receivable and certain trade accounts
receivable were classified as financial assets at fair value through other
comprehensive income ("FVOCI"), as relevant business model is achieved both by
collecting contractual cash flows and selling of these assets.
14 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND
FELLOW SUBSIDIARIES
Short-term debts represent:
30 June 31 December
2022 2021
RMB million RMB million
Third parties' debts
Short-term bank loans 40,057 24,959
RMB denominated 40,057 24,959
Current portion of long-term bank loans 17,113 3,293
RMB denominated 17,113 3,281
USD denominated - 12
Current portion of long-term corporate bonds 28,377 7,000
RMB denominated 28,377 7,000
Corporate bonds 74,008 -
RMB denominated 74,008 -
159,555 35,252
Loans from Sinopec Group Company and fellow subsidiaries
Short-term loans 3,112 2,407
RMB denominated 1,402 1,320
USD denominated 1,516 934
Euro denominated 194 153
Current portion of long-term loans 484 466
RMB denominated 484 466
3,596 2,873
163,151 38,125
The Group's weighted average interest rate on short-term loans was 2.69% (31
December 2021: 2.72%) per annum at 30 June 2022. The above borrowings are
unsecured.
14 SHORT-TERM AND LONG-TERM DEBTS AND LOANS FROM SINOPEC GROUP COMPANY AND
FELLOW SUBSIDIARIES (Continued)
Long-term debts represent:
Interest rate and final maturity 30 June 31 December
2022 2021
RMB million RMB million
Third parties' debts
Long-term bank loans
RMB denominated Interest rates ranging from 1.08% to 4.00% per annum 79,865 38,880
at 30 June 2022 with maturities through 2039
USD denominated Interest rates at 0.00% per annum at 30 June 2022 51 64
with maturities through 2038
79,916 38,944
Corporate bonds(i)
RMB denominated Fixed interest rates ranging from 2.20% to 3.20% per 31,528 38,522
annum at 30 June 2022 with maturities through 2026
USD denominated Fixed interest rates ranging from 3.13% to 4.25% per 11,717 11,127
annum at 30 June 2022 with maturities through 2043
43,245 49,649
Total third parties' long-term debts 123,161 88,593
Less: Current portion (45,490) (10,293)
77,671 78,300
Long-term loans from Sinopec Group Company and fellow subsidiaries
RMB denominated Interest rates ranging from 1.08% to 5.23% per annum 14,966 12,988
at 30 June 2022 with maturities through 2037
USD denominated Interest rates at 3.86% per annum at 30 June 2022 271 1,168
with maturities through 2027
Less: Current portion (484) (466)
14,753 13,690
92,424 91,990
Short-term and long-term bank loans, short-term other loans and loans from
Sinopec Group Company and fellow subsidiaries are primarily unsecured and
carried at amortised cost.
Note:
(i) The total amount of the 180-day corporate bonds issued on 21 January
2022 is RMB2.00 billion with a fixed rate at 2.20% per annum; the total amount
of the 270-day corporate bonds issued on 21 January 2022 is RMB4.50 billion
with a fixed rate at 2.23% per annum; the total amount of the 270-day
corporate bonds issued on 18 February 2022 is RMB6.00 billion with a fixed
rate at 2.00% per annum; the total amount of the 120-day corporate bonds
issued on 7 March 2022 is RMB1.50 billion with a fixed rate at 2.01% per
annum; the total amount of the 244-day corporate bonds issued on 14 April 2022
is RMB20.00 billion with a fixed rate at 2.00% per annum; the total amount of
the 218-day corporate bonds issued on 18 May 2022 is RMB20.00 billion with a
fixed rate at 2.00% per annum; the total amount of the 161-day corporate bonds
issued on 8 June 2022 is RMB7.50 billion with a fixed rate at 1.83% per annum;
the total amount of the 90-day corporate bonds issued on 8 June 2022 is
RMB12.50 billion with a fixed rate at 1.70% per annum.
These corporate bonds are carried at amortised cost.
15 LEASE LIABILITIES
30 June 31 December
2022 2021
RMB million RMB million
Lease liabilities
Current 16,239 15,173
Non-current 168,646 170,233
184,885 185,406
16 TRADE ACCOUNTS PAYABLE AND BILLS PAYABLE
30 June 31 December
2022 2021
RMB million RMB million
Amounts due to third parties 224,140 193,547
Amounts due to Sinopec Group Company and fellow subsidiaries 3,976 4,227
Amounts due to associates and joint ventures 8,755 6,145
236,871 203,919
Bills payable 11,347 11,721
Trade accounts payable and bills payable measured at amortised cost 248,218 215,640
The ageing analysis of trade accounts payable and bills payable is as follows:
30 June 31 December
2022 2021
RMB million RMB million
Within 1 month or on demand 163,637 138,741
Between 1 month and 6 months 44,996 25,280
Over 6 months 39,585 51,619
248,218 215,640
17 SHARE CAPITAL
30 June 31 December
2022 2021
RMB million RMB million
Registered, issued and fully paid
95,557,771,046 listed A shares (30 June 2022: 95,557,771,046) of RMB1.00 each 95,558 95,558
25,513,438,600 listed H shares (30 June 2022: 25,513,438,600) of RMB1.00 each 25,513 25,513
121,071 121,071
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 RMB1.00 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 RMB1.00 each and offer not more than 19.5 billion
shares with a par value of RMB1.00 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 RMB1.00 each, representing 12,521,864,000 H shares and 25,805,750 American
Depositary Shares ("ADSs", each representing 100 H shares), at prices of Hong
Kong Dollar ("HKD")1.59 per H share and USD20.645 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 RMB1.00 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 RMB1.00 each at RMB4.22 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 RMB1.00 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 RMB1.00 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 RMB1.00 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 RMB1.00 each at the Placing Price of HKD8.45 per
share. The aggregate gross proceeds from the Placing amounted to approximately
HKD24,042,227,300.00 and the aggregate net proceeds (after deduction of the
commissions and estimated expenses) amounted to approximately
HKD23,970,100,618.00.
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 RMB1.00 each, as a result of exercise of conversion
by the holders of the 2011 Convertible Bonds.
17 SHARE CAPITAL (Continued)
During the year ended 31 December 2014, the Company issued 1,715,081,853
listed A shares with a par value of RMB1.00 each, as a result of exercise 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 RMB1.00 each, as a result of exercise 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 2022, the debt-to-capital ratio and the liability-to-asset ratio of
the Group were 10.5% (31 December 2021: 10.6%) and 54.8% (31 December 2021:
51.6%), respectively.
The schedule of the contractual maturities of loans and commitments are
disclosed in Note 14 and 18, 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.
18 COMMITMENTS AND CONTINGENT LIABILITIES
Capital commitments
At 30 June 2022 and 31 December 2021, capital commitments of the Group are as
follows:
30 June 31 December
2022 2021
RMB million RMB million
Authorised and contracted for (i) 115,321 184,430
Authorised but not contracted for 105,534 90,227
220,855 274,657
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 RMB1,713 million (31
December 2021: RMB3,648 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 Natural 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 minimum exploration
investment relating to the exploration blocks in respect of which the license
is issued. The Ministry of Natural 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 Natural Resources annually
which are expensed.
18 COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Exploration and production licenses (Continued)
Estimated future annual payments are as follows:
30 June 31 December
2022 2021
RMB million RMB million
Within one year 356 301
Between one and two years 123 112
Between two and three years 120 110
Between three and four years 96 102
Between four and five years 60 64
Thereafter 849 846
1,604 1,535
Contingent liabilities
At 30 June 2022 and 31 December 2021, the guarantees by the Group in respect
of facilities granted to the parties below are as follows:
30 June 31 December
2022 2021
RMB million RMB million
Joint ventures (ii) 9,025 9,117
Associates (iii) 4,394 5,746
13,419 14,863
Management monitors the risk that the specified debtor will default on the
contract and recognises a provision when expected credit losses on the
financial guarantees are determined to be higher than the carrying amount in
respect of the guarantees. At 30 June 2022 and 31 December 2021, the Group
estimates that there is no material liability has been accrued for expected
credit losses related to the Group's obligation under these guarantee
arrangements.
Notes:
(ii) The Group provided a guarantee in respect to standby credit
facilities granted to Zhongan United Coal Chemical Co., Ltd. ("Zhongan
United") by banks amounting to RMB7,100 million (31 December 2021: RMB7,100
million). As at 30 June 2022, the amount withdrawn (the portion corresponding
to the shareholding ratio of the Group) by Zhongan United from banks and
guaranteed by the Group was RMB5,467 million (31 December 2021: RMB5,680
million).
The Group provided a guarantee amounting to RMB17,643 million (31 December
2021: RMB23,208 million) in respect to standby credit facilities granted to
Amur Gas Chemical Complex Limited Liability Company ("Amur Gas") by banks and
pledged the 40% equity interest in Amur Gas held by the Group to the relevant
banks. As at 30 June 2022, the amount withdrawn (the portion corresponding to
the shareholding ratio of the Group) by Amur Gas from banks and guaranteed by
the Group was RMB3,538 million (31 December 2021: RMB3,264 million).
The Group provided a guarantee in respect to payment obligation under the raw
material supply agreement of Amur Gas amounting to RMB16,309 million (31
December 2021: RMB15,493 million). As at 30 June 2022, Amur Gas has not yet
incurred the relevant payment obligations and therefore the Group has no
guarantee amount (31 December 2021: Nil).
The Group provided a guarantee in respect the engineering services agreement
of Amur Gas amounting to RMB2,924 million (31 December 2021: RMB3,012
million). As at 30 June 2022, the relevant payables for constructions of Amur
Gas (the portion corresponding to the shareholding ratio of the Group) and
guaranteed by the Group was RMB20 million (31 December 2021: RMB173 million).
(iii) The Group provided a guarantee in respect to standby credit facilities
granted to Zhongtian Synergetic Energy by banks amounting to RMB17,050 million
(31 December 2021: RMB17,050 million). As at 30 June 2022, the amount
withdrawn (the portion corresponding to the shareholding ratio of the Group)
by Zhongtian Synergetic Energy and guaranteed by the Group was RMB4,394
million (31 December 2021: RMB5,746 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 paid normal routine pollutant discharge fees of approximately
RMB4,355 million for the six-month period ended 30 June 2022 (six-month period
ended 30 June 2021: RMB4,211 million).
18 COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Legal contingencies
The Group is 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.
19 BUSINESS COMBINATION
Pursuant to resolution passed at the Director's meeting on 26 March 2021, the
Company entered into agreements with Sinopec Assets Management Corporation
("SAMC") and Beijing Orient Petrochemical Industry Co., Ltd. ("BJOPI"), and
its subsidiary,Sinopec Beihai Refining and Chemical Limited Liability Company
entered into an agreement with Beihai Petrochemical Limited Liability Company
of Sinopec Group ("BHP"). According to the relevant aggreements, the Company
proposed to acquire non equity assets such as the polypropylene devices and
utility business assets of Cangzhou Branch held by SAMC, organic plant
business held by BJOPI, and the pier operation platform held by BHP.
Pursuant to the resolution passed at the Directors' meeting on 29 November
2021, the Company entered into agreements with SAMC, and Sinopec Beijing
Yanshan Petrochemical Co., Ltd. ("SBJYSP"), and its subsidiary, Sinopec
Yizheng Chemical Fibre Company Limited entered into an agreement with SAMC.
According to the relevant agreements, the Group proposed to acquire non equity
assets such as thermal power, water and other business, PBT resin and other
business of Yizheng Branch held by SAMC, and thermal power and other
businesses held by SBJYSP.
The consideration of the transaction amounted to RMB6,124 million.
As the Company,SAMC, BJOPI, BHP and SBJYSP are all under the control of
Sinopec Group Company, the transaction described above has been accounted as
business combination under common control. Accordingly, the equity and assets
acquired from Sinopec Group Company have been accounted for at historical
cost, and the consolidated financial statements of the Group prior to these
acquisitions have been restated to include the results of operation and the
assets and liabilities of Sinopec Group Company on a combined basis.
The transactions under the above-mentioned agreements will further improve the
integrated operation level of the Group, optimise the allocation of resources,
reduce connected transactions on the whole, so as to enhance the comprehensive
competitiveness of the Group in its business locations.
The results of operation for the six-month period ended 30 June 2021
previously reported by the Group have been restated, as set out below:
The Group, Acquired assets Elimination The Group,
as previously and liabilities and Adjustment as restated
reported of Sinopec
Group Company
RMB million RMB million RMB million RMB million
Summarised consolidated income statement for
the six-month period ended 30 June 2021：
Revenue 1,261,603 6,413 (7,243) 1,260,773
Profit attributable to shareholders of the Company 39,954 273 - 40,227
Profit attributable to non-controlling interests 9,552 - - 9,552
Basic earnings per share (RMB) 0.330 0.002 - 0.332
Diluted earnings per share (RMB) 0.330 0.002 - 0.332
Summarised consolidated statement of cash flows
for the six-month period ended 30 June 2021：
Net cash generated from operating activities 47,736 611 - 48,347
Net cash used in investing activities (65,791) (199) - (65,990)
Net cash generated from financing activities 9,062 (412) - 8,650
Net decrease in cash and cash equivalents (8,993) - - (8,993)
20 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:
Note Six-month period ended 30 June
2022 2021
RMB million RMB million
Sales of goods (i) 169,483 131,981
Purchases (ii) 80,755 90,070
Transportation and storage (iii) 9,474 6,928
Exploration and development services (iv) 15,512 15,046
Production related services (v) 19,092 14,606
Ancillary and social services (vi) - 617
Agency commission income (vii) 91 97
Interest income (viii) 382 381
Interest expense (ix) 216 196
Net deposits placed with related parties (viii) 17,410 733
Net funds obtained from related parties (x) 29,695 6,241
The amounts set out in the table above in respect of the six-month periods
ended 30 June 2022 and 2021 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 2022 are: a) purchases by the Group from Sinopec Group Company and
fellow subsidiaries amounting to RMB68,143 million (six-month period ended 30
June 2021: RMB76,693 million) comprising purchases of products and services
(i.e. procurement, transportation and storage, exploration and development
services and production related services) of RMB61,818 million (six-month
period ended 30 June 2021: RMB69,981 million), ancillary and social services
provided by Sinopec Group Company and fellow subsidiaries of RMB0 million
(six-month period ended 30 June 2021: RMB617 million), lease charges for land,
buildings and others paid by the Group of RMB5,568 million, RMB470 million and
RMB71 million (six-month period ended 30 June 2021: RMB5,402 million, RMB423
million and RMB74 million), respectively and interest expenses of RMB216
million (six-month period ended 30 June 2021: RMB196 million); and b) sales by
the Group to Sinopec Group Company and fellow subsidiaries amounting to
RMB31,238 million (six-month period ended 30 June 2021: RMB21,492 million),
comprising RMB30,832 million (six-month period ended 30 June 2021: RMB21,075
million) for sales of goods, RMB382 million (six-month period ended 30 June
2021: RMB381 million) for interest income and RMB24 million (six-month period
ended 30 June 2021: RMB36 million) for agency commission income.
For the six-month period ended 30 June 2022, no individually significant
right-of-use assets were leased from Sinopec Group Company and fellow
subsidiaries, associates and joint ventures by the Group. The interest expense
recognised for the six-month period ended 30 June 2022 on lease liabilities in
respect of amounts due to Sinopec Group Company and fellow subsidiaries,
associates and joint ventures was RMB3,953 million (six-month period ended 30
June 2021: RMB3,730 million).
For the six-month period ended 30 June 2022, the amount of rental the Group
paid to Sinopec Group Company and fellow subsidiaries, associates and joint
ventures for land, buildings and others are RMB5,571 million, RMB471 million
and RMB133 million (six-month period ended 30 June 2021: RMB5,404 million,
RMB425 million and RMB151 million).
20 RELATED PARTY TRANSACTIONS (Continued)
(a) Transactions with Sinopec Group Company and fellow subsidiaries,
associates and joint ventures (Continued)
As at 30 June 2022 and 31 December 2021, there was no guarantee given to banks
by the Group in respect of banking facilities to Sinopec Group Company and
fellow subsidiaries, associates and joint ventures, except for the guarantees
disclosed in Note 18. Guarantees given to banks by the Group in respect of
banking facilities to associates and joint ventures are disclosed in Note 18.
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, environmental protection and
management services.
(vi) Ancillary and social services represent expenditures for social welfare
and support services such as educational facilities, media communication
services, sanitation, accommodation, canteens and property maintenance. The
term of the Cultural, Educational, Hygiene and Auxiliary Service Agreement
expired on 31 December 2021, and is not renewed due to the significant
decrease in the service scale after the separation and transfer of assets and
business such as the Three Supplies and One Industry Assets etc. Cultural and
educational services related or similar to training and auxiliary services
thereunder have been incorporated into the Mutual Supply Agreement.
(vii) 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.
(viii) Interest income represents interest received from deposits placed
with Sinopec Finance Company Limited ("Sinopec Finance") 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 2022
was RMB79,092 million (31 December 2021: RMB61,682 million).
(ix) Interest expense represents interest charges on the loans obtained from
Sinopec Group Company and fellow subsidiaries.
(x) The Group obtained loans, discounted bills and issued the acceptance
bills from 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 2022. 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%.
20 RELATED PARTY TRANSACTIONS (Continued)
(a) Transactions with Sinopec Group Company and fellow subsidiaries,
associates and joint ventures (Continued)
‧ 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.
‧ On the basis of a series of continuing connected transaction agreements
signed in 2000, the Company and Sinopec Group Company have signed the Sixth
Supplementary Agreement on 27 August 2021, which took effect on 1 January 2022
and made adjustment to "Mutual Supply Agreement" and "Buildings Leasing
Contract", etc.
Amounts due from/to Sinopec Group Company and fellow subsidiaries, associates
and joint ventures included in the following accounts captions are summarised
as follows:
30 June 31 December
2022 2021
RMB million RMB million
Trade accounts receivable 12,588 8,655
Financial assets at fair value through other comprehensive income 109 186
Prepaid expenses and other current assets 19,300 14,537
Long-term prepayments and other assets 3,738 3,116
Total 35,735 26,494
Trade accounts payable and bills payable 15,817 14,170
Contract liabilities 4,662 4,677
Other payables 60,549 50,649
Other long-term liabilities 4,177 2,779
Short-term loans and current portion of long-term loans from Sinopec Group 3,596 2,873
Company
and fellow subsidiaries
Long-term loans excluding current portion from Sinopec Group Company and 14,753 13,690
fellow subsidiaries
Lease liabilities (including to be paid within one year) 159,000 158,761
Total 262,554 247,599
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 14.
As at and for the six-month period ended 30 June 2022, and as at and for the
year ended 31 December 2021, no individually significant loss allowance for
expected credit losses were recognised in respect of amounts due from Sinopec
Group Company and fellow subsidiaries, associates and joint ventures.
20 RELATED PARTY TRANSACTIONS (Continued)
(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 period ended 30 June
2022 2021
RMB'000 RMB'000
Short-term employee benefits 5,075 1,771
Retirement scheme contributions 270 120
5,345 1,891
(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. As at 30 June
2022 and 31 December 2021, the accrual for the contribution to post-employment
benefit plans was not material.
(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.
21 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 comprise the trading activities of
the import and export companies of the Group and research and development
undertaken by other subsidiaries.
21 SEGMENT REPORTING (Continued)
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.
(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 profit 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, non-current financial assets at fair value through other
comprehensive income, deferred tax assets, cash and cash equivalents, time
deposits with financial institutions and other unallocated assets. Segment
liabilities exclude short-term debts, 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 period ended 30 June
2022 2021
RMB million RMB million
Revenue from primary business
Exploration and production
External sales 95,825 67,727
Inter-segment sales 60,314 39,391
156,139 107,118
Refining
External sales 98,941 79,792
Inter-segment sales 674,791 543,681
773,732 623,473
Marketing and distribution
External sales 767,183 613,521
Inter-segment sales 4,916 2,967
772,099 616,488
Chemicals
External sales 234,168 197,756
Inter-segment sales 39,089 30,030
273,257 227,786
Corporate and others
External sales 386,119 272,727
Inter-segment sales 525,043 340,701
911,162 613,428
Elimination of inter-segment sales (1,304,153) (956,770)
Revenue from primary business 1,582,236 1,231,523
Other operating revenues
Exploration and production 2,029 2,408
Refining 1,904 2,392
Marketing and distribution 19,894 18,682
Chemicals 4,953 4,857
Corporate and others 1,110 911
Other operating revenues 29,890 29,250
Revenue 1,612,126 1,260,773
21 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets
and liabilities (Continued)
Six-month period ended 30 June
2022 2021
RMB million RMB million
Result
Operating profit/(loss)
By segment
- Exploration and production 26,302 6,233
- Refining 29,768 39,398
- Marketing and distribution 16,855 16,068
- Chemicals 810 13,382
- Corporate and others 399 (3,735)
- Elimination (11,210) (12,860)
Total segment operating profit 62,924 58,486
Share of profits from associates and joint ventures
- Exploration and production 1,936 1,472
- Refining 380 596
- Marketing and distribution 831 1,606
- Chemicals 1,620 4,933
- Corporate and others 2,560 2,526
Aggregate share of profits from associates and joint ventures 7,327 11,133
Investment income/(loss)
- Exploration and production - 47
- Refining 32 (5)
- Marketing and distribution 39 7
- Chemicals (108) (42)
- Corporate and others 163 107
Aggregate investment income 126 114
Net finance costs (5,337) (4,902)
Profit before taxation 65,040 64,831
30 June 31 December
2022 2021
RMB million RMB million
Assets
Segment assets
- Exploration and production 384,553 371,100
- Refining 351,070 304,785
- Marketing and distribution 393,481 377,499
- Chemicals 242,373 222,803
- Corporate and others 185,924 133,961
Total segment assets 1,557,401 1,410,148
Interest in associates and joint ventures 219,347 209,179
Financial assets at fair value through other comprehensive income 771 767
Deferred tax assets 20,179 19,389
Cash and cash equivalents, time deposits with financial institutions 233,937 221,989
Other unallocated assets 28,179 27,783
Total assets 2,059,814 1,889,255
Liabilities
Segment liabilities
- Exploration and production 178,439 166,486
- Refining 87,505 146,763
- Marketing and distribution 226,329 228,826
- Chemicals 75,842 69,977
- Corporate and others 268,305 198,828
Total segment liabilities 836,420 810,880
Short-term debts 159,555 35,252
Income tax payable 5,182 4,809
Long-term debts 77,671 78,300
Loans from Sinopec Group Company and fellow subsidiaries 18,349 16,563
Deferred tax liabilities 8,860 7,910
Other unallocated liabilities 23,036 20,467
Total liabilities 1,129,073 974,181
21 SEGMENT REPORTING (Continued)
(1) Information of reportable segmental revenues, profits or losses, assets
and liabilities (Continued)
Six-month period ended 30 June
2022 2021
RMB million RMB million
Capital expenditure
Exploration and production 33,337 23,965
Refining 8,929 7,913
Marketing and distribution 3,072 6,773
Chemicals 18,214 19,042
Corporate and others 1,102 355
64,654 58,048
Depreciation, depletion and amortisation
Exploration and production 21,604 23,745
Refining 10,273 10,039
Marketing and distribution 11,645 11,459
Chemicals 8,639 7,735
Corporate and others 1,477 1,488
53,638 54,466
Impairment losses on long-lived assets
Exploration and production - -
Refining 2 427
Marketing and distribution - 52
Chemicals - 50
Corporate and others - -
2 529
(2) Geographical information
The following tables set out information about the geographical information of
the Group's external sales and the Group's non-current assets, excluding
financial instruments and deferred tax assets. In presenting information on
the basis of geographical segments, segment revenue is based on the
geographical location of customers, and segment assets are based on the
geographical location of the assets.
Six-month period ended 30 June
2022 2021
RMB million RMB million
External sales
Mainland China 1,243,368 972,498
Singapore 193,966 141,109
Others 174,792 147,166
1,612,126 1,260,773
30 June 31 December
2022 2021
RMB million RMB million
Non-current assets
Mainland China 1,288,998 1,268,814
Others 42,004 40,551
1,331,002 1,309,365
22 FINANCIAL RISK MANAGEMENT AND FAIR VALUES
Overview
Financial assets of the Group include cash and cash equivalents, time deposits
with financial institutions, financial assets at fair value through profit or
loss, derivative financial assets, trade accounts receivable, amounts due from
Sinopec Group Company and fellow subsidiaries, amounts due from associates and
joint ventures, financial assets at FVOCI and other receivables. Financial
liabilities of the Group include short-term debts, loans from Sinopec Group
Company and fellow subsidiaries, derivative financial liabilities, trade
accounts payable and bills payable, amounts due to Sinopec Group Company and
fellow subsidiaries, amounts due to associates and joint ventures, other
payables, long-term debts and lease liabilities.
The Group has exposure to the following risks from its uses of financial
instruments:
‧ credit risk;
‧ liquidity risk; and
‧ market risk.
The Board of Directors has overall responsibility for the establishment,
oversight of the Group's risk management framework, and developing and
monitoring the Group's risk management policies.
The Group's risk management policies are established to identify and analyse
the risks faced by the Group, and set appropriate risk limits and controls to
monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Group's
activities. The Group, through its training and management controls and
procedures, aims to develop a disciplined and constructive control environment
in which all employees understand their roles and obligations. Internal audit
department undertakes both regular and ad hoc reviews of risk management
controls and procedures, the results of which are reported to the Group's
audit committee.
Credit risk
(i) Risk management
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group's deposits placed with
financial institutions (including structured deposits) and receivables from
customers. To limit exposure to credit risk relating to deposits, the Group
primarily places cash deposits only with large financial institutions in the
PRC with acceptable credit ratings. The majority of the Group's trade accounts
receivable relate to sales of petroleum and chemical products to related
parties and third parties operating in the petroleum and chemical industries.
No single customer accounted for greater than 10% of total trade accounts
receivable at 30 June 2022, except the amounts due from Sinopec Group Company
and fellow subsidiaries. Management performs ongoing credit evaluations of the
Group's customers' financial condition and generally does not require
collateral on trade accounts receivable. The Group maintains a loss allowance
for expected credit losses and actual losses have been within management's
expectations.
The carrying amounts of cash and cash equivalents, time deposits with
financial institutions, financial assets at fair value through profit or loss,
derivative financial assets, trade accounts receivable, financial assets at
FVOCI and other receivables, represent the Group's maximum exposure to credit
risk in relation to financial assets.
(ii) Impairment of financial assets
The Group's primary type of financial assets that are subject to the expected
credit loss model is cash deposits, trade accounts receivable and bills
receivable and other receivables.
The Group's cash deposits are placed only with large financial institutions
with acceptable credit ratings, and there is no material impairment loss
identified.
For trade accounts receivable and financial assets at FVOCI, the Group applies
the IFRS 9 simplified approach to measuring expected credit losses which uses
a lifetime expected loss allowance for all trade accounts receivable and
financial assets at FVOCI.
To measure the expected credit losses, trade accounts receivable and financial
assets at FVOCI have been grouped based on shared credit risk characteristics
and the days past due.
The expected credit losses were calculated based on historical actual credit
loss experience. The rates were considered the differences between economic
conditions during the period over which the historical data has been
collected, current conditions and the Group's view of economic conditions over
the expected lives of the receivables. The Group performed the calculation of
expected credit loss rates by the operating segment.
22 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Credit risk (Continued)
(ii) Impairment of financial assets (Continued)
The following table provides information about the exposure to credit risk and
expected credit losses for accounts receivable as at 30 June 2022 and 31
December 2021.
Impairment provision Impairment provision
on individual basis on provision matrix basis
Gross Carrying Impairment Weighted- Impairment Loss
carrying amount provision on average provision allowance
amount individual basis loss rate
30 June 2022 RMB million RMB million RMB million % RMB million RMB million
Current and within 1 year past due 63,297 9,390 - 0.1% 43 43
1 to 2 years past due 260 69 49 16.2% 31 80
2 to 3 years past due 3,623 3,559 3,338 48.4% 31 3,369
Over 3 years past due 617 257 228 100.0% 360 588
Total 67,797 13,275 3,615 465 4,080
Impairment provision Impairment provision
on individual basis on provision matrix basis
Gross Carrying Impairment Weighted- Impairment Loss
carrying amount provision on average provision allowance
amount individual basis loss rate
31 December 2021 RMB million RMB million RMB million % RMB million RMB million
Current and within 1 year past due 34,263 4,280 26 0.2% 57 83
1 to 2 years past due 623 500 137 35.8% 44 181
2 to 3 years past due 3,411 3,324 3,146 50.6% 44 3,190
Over 3 years past due 597 208 190 100.0% 389 579
Total 38,894 8,312 3,499 534 4,033
All of the entity's other receivables are considered to have low credit risk,
and the loss allowance recognised during the period was therefore limited to
12 months expected losses. The Group considers there was no significant
increase in credit risk for other receivables by taking into account of their
past history of making payments when due and current ability to pay, and thus
the impairment provision recognised during the period was limited to 12 months
expected losses.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group's approach to managing
liquidity is to ensure, as far as possible, that it will always have
sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage
to the Group's reputation. Management prepares monthly cash flow budget to
ensure that the Group will always have sufficient liquidity to meet its
financial obligations as they fall due. The Group arranges and negotiates
financing with financial institutions and maintains a certain level of standby
credit facilities to reduce the Group's liquidity risk.
As at 30 June 2022, the Group has standby credit facilities with several PRC
financial institutions which provide borrowings up to RMB453,635 million (31
December 2021: RMB441,559 million) on an unsecured basis, at a weighted
average interest rate of 2.70% per annum (2021: 2.81%). As at 30 June 2022,
the Group's outstanding borrowings under these facilities were RMB34,507
million (31 December 2021: RMB11,700 million) and were included in debts.
22 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Liquidity risk (Continued)
The following table sets out the remaining contractual maturities at the date
of the statement of financial position of the Group's financial liabilities,
which are based on contractual undiscounted cash flows (including interest
payments computed using contractual rates or, if floating, based on prevailing
rates current at the date of the statement of financial position) and the
earliest date the Group would be required to repay:
30 June 2022
Total
contractual Within More than 1 More than 2
Carrying undiscounted 1 year or year but less years but less More than
amount cash flow on demand than 2 years than 5 years 5 years
RMB million RMB million RMB million RMB million RMB million RMB million
Short-term debts 159,555 161,584 161,584 - - -
Long-term debts 77,671 86,187 2,073 12,777 64,092 7,245
Loans from Sinopec Group Company 18,349 20,336 4,004 784 11,075 4,473
and fellow subsidiaries
Lease liabilities 184,885 300,288 16,944 12,819 36,882 233,643
Derivative financial liabilities 15,367 15,367 15,367 - - -
Trade accounts payable and bills payable 248,218 248,218 248,218 - - -
Other payables 126,677 126,677 126,677 - - -
830,722 958,657 574,867 26,380 112,049 245,361
31 December 2021
Total
contractual Within More than 1 More than 2
Carrying undiscounted 1 year or year but less years but less More than
amount cash flow on demand than 2 years than 5 years 5 years
RMB million RMB million RMB million RMB million RMB million RMB million
Short-term debts 35,252 35,871 35,871 - - -
Long-term debts 78,300 85,718 2,169 49,390 27,518 6,641
Loans from Sinopec Group Company 16,563 18,457 3,174 604 10,712 3,967
and fellow subsidiaries
Lease liabilities 185,406 296,485 15,833 12,031 35,411 233,210
Derivative financial liabilities 3,223 3,223 3,223 - - -
Trade accounts payable and bills payable 215,640 215,640 215,640 - - -
Other payables 131,468 131,468 131,468 - - -
665,852 786,862 407,378 62,025 73,641 243,818
Management believes that the Group's current cash on hand, expected cash flows
from operations and available standby credit facilities from financial
institutions will be sufficient to meet the Group's short-term and long-term
capital requirements.
Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates and interest rates. The objective of market risk management is
to manage and control market risk exposures within acceptable parameters,
while optimising the return on risk.
22 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Market risk (Continued)
(a) Currency risk
Currency risk arises on financial instruments that are denominated in a
currency other than the functional currency in which they are measured.
The Group does not have significant financial instruments that are denominated
in foreign currencies other than the functional currencies of respective
entities as at 30 June, and consequently does not have significant exposure to
foreign currency risk.
(b) Interest rate risk
The Group's interest rate risk exposure arises primarily from its short-term
and long-term debts and loans from Sinopec Group Company and fellow
subsidiaries. Debts bearing interest at variable rates and at fixed rates
expose the Group to cash flow interest rate risk and fair value interest rate
risk respectively. The interest rates and terms of repayment of short-term and
long-term debts, and loans from Sinopec Group Company and fellow subsidiaries
of the Group are disclosed in Note 14.
As at 30 June 2022, it is estimated that a general increase/decrease of 100
basis points in variable interest rates, with all other variables held
constant, would decrease/increase the Group's profit for the period by
approximately RMB485 million (31 December 2021: decrease/increase by
approximately RMB254 million). This sensitivity analysis has been determined
assuming that the change of interest rates was applied to the Group's debts
outstanding at the date of the statement of financial position with exposure
to cash flow interest rate risk. The analysis is performed on the same basis
for 2021.
(c) Commodity price risk
The Group engages in oil and gas operations and is exposed to commodity price
risk related to price volatility of crude oil, refined petroleum products and
chemical products. The fluctuations in prices of crude oil, refined petroleum
products and chemical products could have significant impact on the Group. The
Group uses derivative financial instruments, including commodity futures and
swaps contracts, to manage a portion of this risk.
Based on the dynamic study and judging of the market, combined with the
resource demand and production and operation plan, the Group evaluate and
monitor the market risk exposure caused by transaction positions, and
continuously manage and hedge the risk of commodity price fluctuation caused
by market changes.
As at 30 June 2022, the Group had certain commodity contracts of crude oil,
refined petroleum products and chemical products designated as qualified cash
flow hedges and economic hedges. As at 30 June 2022, the fair value of such
derivative hedging financial instruments is derivative financial assets of
RMB39,965 million (31 December 2021: RMB18,359 million) and derivative
financial liabilities of RMB15,349 million (31 December 2021: RMB3,214
million).
As at 30 June 2022, it is estimated that a general increase/decrease of USD10
per barrel in basic price of derivative financial instruments, with all other
variables held constant, would impact the fair value of derivative financial
instruments, which would decrease/increase the Group's profit for the period
by approximately RMB2,700 million (31 December 2021: decrease/increase
RMB2,996 million), and increase/decrease the Group's other reserves by
approximately RMB2,383 million (31 December 2021: decrease/increase RMB1,160
million). This sensitivity analysis has been determined assuming that the
change in prices had occurred at the date of the statement of financial
position and the change was applied to the Group's derivative financial
instruments at that date with exposure to commodity price risk. The analysis
is performed on the same basis for 2021.
22 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
Fair values
(i) Financial instruments carried at fair value
The following table presents the carrying value of financial instruments
measured at fair value at the date of the statement of financial position
across the three levels of the fair value hierarchy defined in IFRS 7,
Financial Instruments: Disclosures, with the fair value of each financial
instrument categorised in its entirety based on the lowest level of input that
is significant to that fair value measurement. The levels are defined as
follows:
‧ Level 1 (highest level): fair values measured using quoted prices
(unadjusted) in active markets for identical financial instruments.
‧ Level 2: fair values measured using quoted prices in active markets for
similar financial instruments, or using valuation techniques in which all
significant inputs are directly or indirectly based on observable market data.
‧ Level 3 (lowest level): fair values measured using valuation techniques
in which any significant input is not based on observable market data.
At 30 June 2022
Level 1 Level 2 Level 3 Total
RMB million RMB million RMB million RMB million
Assets
Financial assets at fair value through profit or loss:
- Structured deposits - - 1,009 1,009
- Exchange traded fund 3 - - 3
Derivative financial assets:
- Derivative financial assets 13,287 27,102 - 40,389
Financial assets at fair value through other
comprehensive income:
- Equity instruments 171 - 600 771
- Trade accounts receivable and bills receivable - - 5,889 5,889
13,461 27,102 7,498 48,061
Liabilities
Derivative financial liabilities
- Derivative financial liabilities 2,773 12,594 - 15,367
2,773 12,594 - 15,367
At 31 December 2021
Level 1 Level 2 Level 3 Total
RMB million RMB million RMB million RMB million
Assets
Derivative financial assets:
- Derivative financial assets 5,883 12,488 - 18,371
Financial assets at fair value through other
comprehensive income:
- Equity instruments 179 - 588 767
- Trade accounts receivable and bills receivable - - 5,939 5,939
6,062 12,488 6,527 25,077
Liabilities
Derivative financial liabilities
- Derivative financial liabilities 804 2,419 - 3,223
804 2,419 - 3,223
During the six-month period ended 30 June 2022, there was no transfer between
instruments in Level 1 and Level 2.
Management of the Group uses discounted cash flow model with inputted interest
rate and commodity index, which were influenced by historical fluctuation and
the probability of market fluctuation, to evaluate the fair value of the
structured deposits and trade accounts receivable and bills receivable
classified as Level 3 financial assets.
22 FINANCIAL RISK MANAGEMENT AND FAIR VALUES (Continued)
(ii) Fair values of financial instruments carried at other than fair value
The disclosures of the fair value estimates, and their methods and assumptions
of the Group's financial instruments, are made to comply with the requirements
of IFRS 7 and IFRS 9 and should be read in conjunction with the Group's
consolidated financial statements and related notes. The estimated fair value
amounts have been determined by the Group using market information and
valuation methodologies considered appropriate. However, considerable
judgement is required to interpret market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Group could realise in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The fair values of the Group's financial instruments carried at other than
fair value (other than long-term indebtedness and investments in unquoted
equity securities) approximate their carrying amounts due to the short-term
maturity of these instruments. The fair values of long-term indebtedness are
estimated by discounting future cash flows using current market interest rates
offered to the Group for debt with substantially the same characteristic and
maturities range from 2.15% to 4.45% (31 December 2021: 0.30% to 4.65%). The
following table presents the carrying amount and fair value of the Group's
long-term indebtedness other than loans from Sinopec Group Company and fellow
subsidiaries at 30 June 2022 and 31 December 2021:
30 June 31 December
2022 2021
RMB million RMB million
Carrying amount 123,161 88,593
Fair value 119,810 85,610
The Group has not developed an internal valuation model necessary to estimate
the fair values of loans from Sinopec Group Company and fellow subsidiaries as
it is not considered practicable to estimate their fair values because the
cost of obtaining discount and borrowing rates for comparable borrowings would
be excessive based on the Reorganisation of the Group, the Group's existing
capital structure and the terms of the borrowings.
Except for the above items, the financial assets and liabilities of the Group
are carried at amounts not materially different from their fair values at 30
June 2022 and 31 December 2021.
23 ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group's financial condition and results of operations are sensitive to
accounting methods, assumptions and estimates that underlie the preparation of
the interim consolidated financial statements. Management bases the
assumptions and estimates on historical experience and on various other
assumptions that it believes to be reasonable and which form the basis for
making judgements about matters that are not readily apparent from other
sources. On an ongoing basis, management evaluates its estimates. Actual
results may differ from those estimates as facts, circumstances and conditions
change.
The selection of critical accounting policies, the judgements and other
uncertainties affecting application of such policies and the sensitivity of
reported results to changes in conditions and assumptions are factors to be
considered when reviewing the interim consolidated financial statements.
Management believes the following critical accounting policies involve the
most significant judgements and estimates used in the preparation of the
interim consolidated financial statements.
23 ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
Oil and gas properties and reserves
The accounting for the exploration and production's oil and gas activities is
subject to accounting rules that are unique to the oil and gas industry. There
are two methods to account for oil and gas business activities, the successful
efforts method and the full cost method. The Group has elected to use the
successful efforts method. The successful efforts method reflects the
volatility that is inherent in exploring for mineral resources in that costs
of unsuccessful exploratory efforts are charged to expense as they are
incurred. These costs primarily include dry hole costs, seismic costs and
other exploratory costs. Under the full cost method, these costs are
capitalised and written-off or depreciated over time.
Engineering estimates of the Group's oil and gas reserves are inherently
imprecise and represent only approximate amounts because of the subjective
judgements involved in developing such information. There are authoritative
guidelines regarding the engineering criteria that have to be met before
estimated oil and gas reserves can be designated as "proved". Proved and
proved developed reserves estimates are updated at least annually and take
into account recent production and technical information about each field. In
addition, as prices and cost levels change from year to year, the estimates of
proved and proved developed reserves also change. This change is considered a
change in estimate for accounting purposes and is reflected on a prospective
basis in relation to depreciation rates. Oil and gas reserves have a direct
impact on the assessment of the recoverability of the carrying amounts of oil
and gas properties reported in the financial statements. If proved reserves
estimates are revised downwards, earnings could be affected by changes in
depreciation expense or an immediate write-down of the property's carrying
amount.
Future dismantlement costs for oil and gas properties are estimated with
reference to engineering estimates after taking into consideration the
anticipated method of dismantlement required in accordance with industry
practices in similar geographic area, including estimation of economic life of
oil and gas properties, technology and price level. The present values of
these estimated future dismantlement costs are capitalised as oil and gas
properties with equivalent amounts recognised as provisions for dismantlement
costs.
Despite the inherent imprecision in these engineering estimates, these
estimates are used in determining depreciation expense, impairment loss and
future dismantlement costs. Capitalised costs of proved oil and gas properties
are amortised on a unit-of-production method based on volumes produced and
reserves.
Impairment for long-lived assets
If circumstances indicate that the net book value of a long-lived asset may
not be recoverable, the asset may be considered "impaired", and an impairment
loss may be recognised in accordance with IAS 36, Impairment of Assets. The
carrying amounts of long-lived assets are reviewed periodically in order to
assess whether the recoverable amounts have declined below the carrying
amounts. These assets are tested for impairment whenever events or changes in
circumstances, including environmental protection and energy structure
transition variables, indicate that their recorded carrying amounts may not be
recoverable. When such a decline has occurred, the carrying amount is reduced
to recoverable amount. For goodwill, the recoverable amount is estimated
annually. The recoverable amount is the greater of the net selling price and
the value in use. It is difficult to precisely estimate selling price because
quoted market prices for the Group's assets or cash-generating units are not
readily available. In determining the value in use, expected cash flows
generated by the asset or the cash-generating units are discounted to their
present value, which requires significant judgement relating, selling prices
of crude oil, natural gas, refined and chemical products, the production
costs, the product mix, production volumes, production profiles, the oil and
gas reserves and discount rate. Management uses all readily available
information in determining an amount that is a reasonable approximation of
recoverable amount, including estimates based on reasonable and supportable
assumptions and projections of sale volume, selling price, amount of operating
costs and discount rate.
Depreciation
Property, plant and equipment, other than oil and gas properties, are
depreciated on a straight-line basis over the estimated useful lives of the
assets, after taking into account the estimated residual value. Management
reviews the estimated useful lives of the assets at least annually in order to
determine the amount of depreciation expense to be recorded during any
reporting period. The useful lives are based on the Group's historical
experience with similar assets and take into account anticipated technological
changes. The depreciation expense for future periods is adjusted if there are
significant changes from previous estimates.
23 ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
Measurement of expected credit losses
The Group measures and recognises expected credit losses using readiness
matrix considering reasonable and supportable information about the relevant
past events, current conditions and forecasts of future economic conditions.
The Group regularly monitors and reviews the assumptions used for estimating
expected credit losses.
Allowance for diminution in value of inventories
If the costs of inventories become higher than their net realisable values, an
allowance for diminution in value of inventories is recognised. Net realisable
value represents the estimated selling price in the ordinary course of
business, less the estimated costs of completion and the estimated costs
necessary to make the sale. Management bases the estimates on all available
information, including the current market prices of the finished goods and raw
materials, and historical operating costs. If the actual selling prices were
to be lower or the costs of completion were to be higher than estimated, the
actual allowance for diminution in value of inventories could be higher than
estimated.
24 STANDARDS ISSUED BUT NOT YET EFFECTIVE
A number of new standards and amendments to standards are effective for annual
periods beginning after 1 January 2022 and earlier application is permitted.
The Group has not early adopted any of the forthcoming new or amended
standards in preparing these condensed consolidated interim financial
statements.
(C) DIFFERENCES BETWEEN CONSOLIDATED FINANCIAL STATEMENTS PREPARED IN
ACCORDANCE WITH
THE ACCOUNTING POLICIES COMPLYING WITH CASs AND IFRS
(UNAUDITED)
Other than the differences in the classifications of certain financial
statements captions and the accounting for the items described below, there
are no material differences between the Group's consolidated financial
statements prepared in accordance with the accounting policies complying with
CASs and IFRS. The reconciliation presented below is included as supplemental
information, is not required as part of the basic financial statements and
does not include differences related to classification, presentation or
disclosures. Such information has not been subject to independent audit or
review. The major differences are:
(i) GOVERNMENT GRANTS
Under CASs, grants from the government are credited to capital reserve if
required by relevant governmental regulations. Under IFRS, government grants
relating to the purchase of fixed assets are recognised as deferred income and
are transferred to the income statement over the useful life of these assets.
(ii) SAFETY PRODUCTION FUND
Under CASs, safety production fund should be recognised in profit or loss with
a corresponding increase in reserve according to PRC regulations. Such reserve
is reduced for expenses incurred for safety production purposes or, when
safety production related fixed assets are purchased, is reduced by the
purchased cost with a corresponding increase in the accumulated depreciation.
Such fixed assets are not depreciated thereafter. Under IFRS, payments are
expensed as incurred, or capitalised as fixed assets and depreciated according
to applicable depreciation methods.
Effects of major differences between the shareholders' equity under CASs and
the total equity under IFRS are analysed as follows:
Note 30 June 31 December
2022 2021
RMB million RMB million
Shareholders' equity under CASs 931,672 916,041
Adjustments:
Government grants (i) (931) (967)
Total equity under IFRS* 930,741 915,074
Effects of major differences between the net profit under CASs and the profit
for the period under IFRS are analysed as follows:
Note Six-month period ended 30 June
2022 2021
RMB million RMB million
Net profit under CASs 49,516 48,801
Adjustments:
Government grants (i) 36 25
Safety production fund (ii) 1,043 953
Others (16) -
Profit for the period under IFRS* 50,579 49,779
* The figures are extracted from the consolidated financial
statements prepared in accordance with the accounting policies complying with
IFRS.
INDEX OF DOCUMENTS FOR INSPECTION
The following documents will be available for inspection during the normal
business hours after 26 August 2022 (Friday) at the registered address of
Sinopec Corp. upon the request by the relevant regulatory authorities or
shareholders in accordance with the Articles of Association of Sinopec Corp.
or relevant laws or regulations:
1 The original interim report for the first half of 2022 signed by Mr.
Ma Yongsheng, the Chairman;
2 The original financial statements and consolidated financial
statements of Sinopec Corp. for the six-month period ended 30 June 2022
prepared in accordance with the CASs and IFRS, signed by Mr. Ma Yongsheng, the
Chairman, Mr. Yu Baocai, the President and Ms. Shou Donghua, the Chief
Financial Officer and head of the accounting department of Sinopec Corp.;
3 The original report on review of the above financial statements signed
by the auditors; and
4 Copies of disclosure documents published by Sinopec Corp. in the
newspapers designated by the CSRC during the reporting period.
By Order of the Board
Ma Yongsheng
Chairman
Beijing, PRC, 26 August 2022
If there is any inconsistency between the Chinese and English version of this
interim report, the Chinese version shall prevail.
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