Sinopec offers record dividend as fuels power profit higher

Sinopec proposed a 0.5 yuan (10 Singapore cents) per share total dividend payout for 2017, the most since its listing in 2000 and above a forecast for 0.17 yuan in data compiled by Bloomberg. PHOTO: AFP

HONG KONG (Bloomberg) - China Petroleum & Chemical Corp, the world's biggest refiner, will pay a record-high dividend as its massive fuels and chemical segments helped boost annual profit by about 10 per cent.

Net income climbed to 51.1 billion yuan (S$10.6 billion), the company known as Sinopec said in a statement to the Hong Kong stock exchange on Sunday (March 25).

The company proposed a 0.5 yuan per share total dividend payout for 2017, the most since its listing in 2000 and above a forecast for 0.17 yuan in data compiled by Bloomberg. The company also flagged about 22 billion yuan in impairments, mostly in its upstream assets.

Sinopec's refining and chemicals divisions have continued to support its earnings, with margins from turning crude into fuels rising 7 per cent and the company reported selling greater volumes of higher value-added products.

Rising oil prices in 2017 also increased the value of the company's petroleum inventories, boosting its refining profit, Wang Dehua, the company's chief financial officer, said at a press conference on Monday afternoon.

"The strong result was driven by better profitability in refining and chemicals divisions," analysts at Goldman Sachs Group including Mark Wiseman wrote in a research note. The dividend payout was "the major positive surprise".

Shares rose 5.2 per cent to HK$6.93, the highest settlement since Feb 2. The city's benchmark Hang Seng Index climbed 0.8 per cent.

The company has been shifting its upstream focus toward producing more natural gas, seeking to support President Xi Jinping's drive of using more of the fuel instead of coal.

Total output gained 3.4 per cent to 446 million barrels of oil equivalent last year, it said in January, with gas rising 19 per cent while crude slid 3.3 per cent. It forecasts crude production will drop for a fourth year in 2018 and gas will rise further.

Sinopec's profit missed a 53.6 billion yuan median estimate from 18 analysts surveyed by Bloomberg. Revenue rose 22 percent to 2.36 trillion yuan.

The company's Hong Kong statement identified writedowns in its exploration and production segment of almost 13.6 billion yuan, citing a reduction in oil and gas reserves and high operating and development costs at some fields. Impairment losses in chemicals and refining were 4.92 billion yuan and 1.9 billion yuan, respectively.

While the company reported a narrower loss on E&P using Chinese accounting standards, they widened using international standards, which the company said in a Hong Kong filing was hit by higher liquefied natural gas procurement costs and expenses related to the restructuring of the Sichuan-to-East China Natural Gas Pipeline Co.

"It just shows how difficult it was for Sinopec to make a profit in oil and gas production, even as oil prices were edging toward US$60 a barrel," said Anna Yu, a Hong Kong-based analyst at ICBC International Research.

"Refining and chemicals are the backbone of Sinopec's assets and those sectors will continue to benefit from China's growing fuel demand."

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