Sinopec Profits Shrink as Economic Woes Weigh on Fuel Demand

(Bloomberg) -- Sinopec’s first-half profits shrank amid lower oil prices and fuel demand being weighed down by China’s sluggish economic recovery.  

China Petroleum & Chemical Corp., as it’s officially known, posted net income of 36.12 billion yuan ($4.96 billion), according to international financial reporting standards. That compared with a revised 44.8 billion yuan a year earlier.

Sinopec shares opened 1.8% higher Monday morning in Hong Kong.

Its domestic sales of refined oil products rose 18% in the first six months from the previous year, when residents in megacities like Shanghai were completely locked down for months on end. Still, a lingering property crisis and weaker overseas demand for exports have kept the recovery in check. 

Chemicals were a particularly weak spot, with demand flagging just as new capacity came online, leading to a loss for the segment over the first half. The company expects chemicals consumption to rebound in the second half, along with more growth in refined product and natural gas demand in China.

Meanwhile, crude prices were 24% lower than the year before, reducing the value of Sinopec’s global oil and gas production. The company maintained oil output near the same level from the first half of 2022 while boosting natural gas production 7.6%. 

The company spent 74.7 billion yuan on capital projects in the first half and expects to accelerate that to 104 billion yuan in the second half. That full year amount would be less than it spent in 2022. 

Sinopec said in a separate stock exchange filing Sunday that it plans to spend 800 million yuan to 1.5 billion yuan on a share buyback on the A-share market. It declared an interim dividend of 0.145 yuan a share compared with 0.16 yuan a year earlier. 

PetroChina Co., the largest of China’s three state-owned oil goliaths, will report earnings Wednesday. The country’s offshore driller, Cnooc Ltd., said earlier this month that first-half profit fell on lower oil prices. 

(Updates with share prices, new details in paragraphs 3 through 7.)

©2023 Bloomberg L.P.