SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
For the month of April, 2006
CHINA PETROLEUM & CHEMICAL CORPORATION
A6, Huixindong Street,
Chaoyang District Beijing, 100029
People's Republic of China
Tel: (8610) 6499-0060
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
--------- ---------
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934. )
Yes No X
--------- ---------
(If "Yes" is marked, indicate below the file number assigned to
registrant in connection with Rule 12g3-2(b): 82-__________. )
N/A
This Form 6-K consists of:
The announcement on results for the year ended December 31, 2005 of China
Petroleum & Chemical corporation (the "Registrant"), made by the Registrant in
English on March 31, 2006.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
China Petroleum & Chemical Corporation
By: /s/ Chen Ge
-----------
Name: Chen Ge
Title: Secretary to the Board of Directors
Date: April 3, 2006
[GRAPHIC OMITTED]
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock Code : 0386)
Results for the Year Ended 31 December 2005
ss.1. Important Notice
1.1 The Board of Directors of China Petroleum & Chemical Corporation
("Sinopec Corp.") and the Directors, Supervisors and Senior
Management warrant that there are no material omissions from, or
misrepresentations or misleading statements contained in this
announcement, and jointly and severally accept full responsibility
for the authenticity, accuracy and completeness of the information
contained in this announcement.
This announcement is a summary of the annual report. The entire
report can be downloaded from the websites of the Shanghai Stock
Exchange (www.sse.com.cn) and Sinopec Corp. (www.sinopec.com).
Investors should read the annual report for the year 2005 for more
details.
1.2 The annual report for this year has been approved unanimously at the
twenty-fifth meeting of the Second Session of the Board. No Director
has any doubt as to, or the inability to warrant, the truthfulness,
accuracy and completeness of the annual report.
1.3 Messrs., Gao Jian, Fan Yifei, Ho Tsu Kwok, Charles and Zhang Youcai,
Directors of Sinopec Corp., could not attend the twenty-fifth
meeting of the Second Session of the Board for reasons of official
duties. Mr. Gao Jian and Ho Tsu Kwok, Charles, Directors of Sinopec
Corp., authorised Mr. Cao Xianghong, Mr. Fan Yifei, Director of
Sinopec Corp., authorised Mr. Wang Jiming, Vice Chairman and Mr.
Zhang Youcai, Directors of Sinopec Corp., authorised Mr. Shi
Wanpeng, to vote on their behalf in respect of the resolutions put
forward in the twenty-fifth meeting of the Second Session of the
Board.
1.4 The financial statements for the year ended 31 December 2005 of
Sinopec Corp. and its subsidiaries ("the Company") prepared in
accordance with the PRC Accounting Rules and Regulations and
International Financial Reporting Standards ("IFRS") have been
audited by KPMG Huazhen and KPMG, respectively, and both firms have
issued unqualified opinions on the financial statements.
1.5 Mr. Chen Tonghai (Chairman of the Board), Mr. Wang Tianpu
(President), Mr. Zhang Jiaren (Director and Chief Financial Officer)
and Mr. Liu Yun (Head of the Accounting Department) warrant the
authenticity and completeness of the financial statements contained
in the annual report for the year ended 31 December 2005.
ss.2. Basic Information about Sinopec Corp.
2.1 Basic information
Stock name SINOPEC CORP SINOPEC CORP SINOPEC CORP SINOPEC CORP
Stock code 0386 SNP SNP 600028
Place of listing Hong Kong New York London Shanghai
Stock Exchange Stock Exchange Stock Exchange Stock Exchange
Registered address 6A Huixindong Street, Chaoyang District, Beijing, China
and office address
Postcode 100029
Website http://www.sinopec.com
E-mail ir@sinopec.com.cn / media@sinopec.com.cn
2.2 Contact persons of Sinopec Corp. and means of communication
Secretary Representative on
to the Board Securities Matters Authorised representatives
Name Mr. Chen Ge Mr. Huang Wensheng Mr.Wang Jiming Mr. Chen Ge
Address 6A Huixindong Street, Chaoyang District, Beijing, China
Tel 86-10-6499 0060 86-10-6499 0060 86-10-6499 0060 86-10-6499 0060
Fax 86-10-6499 0022 86-10-6499 0022 86-10-6499 0022 86-10-6499 0022
E-mail ir@sinopec.com.cn / media@sinopec.com.cn
ss.3. SUMMARY OF ACCOUNTING DATA AND FINANCIAL INDICATORS
3.1 Principal accounting data and financial indicators prepared under
the PRC Accounting Rules and Regulations for the year 2005
3.1.1 Principal accounting data
For the For the For the
year ended year ended year ended
31 December 31 December Increase/ 31 December
Item 2005 2004 decrease (%) 2003
Income from principal operations
(RMB million) 799,115 590,632 35.30 417,191
Profit before taxation (RMB million) 61,482 53,535 14.84 30,015
Net Profit (RMB million) 39,558 32,275 22.57 19,011
Net profit before non-operating
profits/losses (RMB million) 34,999 35,996 -2.77 22,307
============ ============= ============ ============
At At At
31 December 31 December Increase/ 31 December
Item 2005 2004 decrease (%) 2003
Total assets (RMB million) 520,572 460,081 13.15 390,213
Shareholders' funds
(excluding minority interests)
(RMB million) 215,623 186,350 15.71 162,946
Net cash flow from operating
activities (RMB million) 84,963 70,139 21.14 64,448
============ ============= ============ ============
3.1.2 Principal financial indicators
For the For the For the
year ended year ended year ended
31 December 31 December Increase/ 31 December
Item 2005 2004 decrease (%) 2003
Earnings per share (RMB) (Fully diluted) 0.456 0.372 22.57 0.219
Return on net assets (%) (Fully diluted) 18.346 17.320 1.026 11.667
percentage
point
Return (adjusted for non-operating profits/
(losses) on net assets (%) -3.084
(Fully diluted) 16.232 19.316 prcentage 13.690
points
(Weighted average) 17.414 20.524 -3.110 14.137
percentage
points
Net cash flow from operating
activities per share (RMB) 0.980 0.809 21.14 0.743
============ ============= ============ ============
For the For the For the
year ended year ended year ended
31 December 31 December Increase/ 31 December
Item 2005 2004 decrease (%) 2003
Net assets per share (RMB)
(Fully diluted) 2.487 2.149 15.71 1.879
Adjusted net assets per share (RMB) 2.426 2.102 15.41 1.850
============ ============= ============ ============
Notes:(i) The Company adopted the revised "Accounting Standard for
Business Enterprises - Events occurring after the balance
sheet date" that resulted in a change in accounting
policy which has been applied retrospectively. Please
refer to Note 2 of the financial statements prepared
under the PRC Accounting Rules and Regulations for
details.
3.1.3 Items under non-operating profits/losses:
For the year ended
31 December 2005
(Income)/expense
(RMB million)
Loss on disposal of long-term equity investments (25)
Written back of provisions on assets provided in previous years (1,115)
Non-operating expenses (excluding normal provisions on assets provided in
accordance with the Accounting Regulations for Business Enterprises) 4,118
of which: loss on disposal of fixed assets 2,422
employee reduction expenses 369
donations 203
Non-operating income (367)
Subsidy income (9,415)
Tax effect 2,245
------------
Total (4,559)
============
3.2 Principal accounting data and financial indicators prepared under
International Financial Reporting Standards ("IFRS") for the year
2005
For the For the For the
year ended year ended year ended
31 December 31 December Increase/ 31 December
Item 2005 2004 decrease (%) 2003
Operating profit (RMB million) 66,814 63,069 5.94 38,883
Profit attributable to shareholders
(RMB million) 40,920 36,019 13.61 22,424
Return on capital employed* (%) -0.85
percentage
11.99 12.84 points 9.01
Basic earnings per share (RMB) 0.472 0.415 13.61 0.259
Net cash flow from operating
activities per share (RMB) 0.882 0.797 10.66 0.716
============ ============= ============ ============
* Return on capital employed = operating profit x (1-income tax rate)/capital employed
At At At
31 December 31 December Increase/ 31 December
Item 2005 2004 decrease (%) 2003
Current assets (RMB million) 145,291 120,271 20.80 103,039
Current liabilities (RMB million) 170,649 146,277 16.66 129,272
Total Assets (RMB million) 537,321 474,594 13.22 420,184
Equity attributable to equity shareholders
of the Company (RMB million) 223,556 193,040 15.81 171,515
Net assets per share (RMB) 2.578 2.226 15.81 1.978
Adjusted net assets per share (RMB) 2.518 2.187 15.13 1.950
============ ============= ============ ============
3.3 Material differences between the PRC Accounting Rules and Regulations
and IFRS
[ X ] Applicable [ ] Not applicable
The PRC
Accounting Rules and Regulations IFRS
Net profit (RMB million) 39,558 40,920
============ ===========
Explanation on the differences See Subsection 9.2.3
ss. 4. Changes in Share Capital and Shareholdings of the Principal
Shareholders
[ X ] Applicable [ ] Not applicable
4.1 CHANGES IN THE SHARE CAPITAL OF SINOPEC CORP.
UNIT: 1,000 SHARES
Pre-movement Increase/(decrease) Post-movement
Conversion
Percentage New shares Bonus from Percentage
Numbers % issued issued reserves Others Sub-total Number %
Shares not listed 67,121,951 77.4 - - - - - 67,121,951 77.4
1 Promoter shares 58,885,561 67.9 - - - 2,871,764 2,871,764 61,757,325 71.2
Of which:
State-owned shares 58,885,561 67.9 - - - 2,871,764 2,871,764 61,757,325 71.2
2 Raised legal person shares - - - - - - -
3 Internal employee shares - - - - - - - - -
4 Preferential shares or others *8,236,390 9.5 - - - (2,871,764) (2,871,764) 5,364,626 6.2
Total listed outstanding shares 19,580,488 22.6 - - - - - 19,580,488 22.6
1 RMB ordinary shares 2,800,000 3.2 - - - - - 2,800,000 3.2
2 Shares traded in non-RMB currencies
and listed domestically - - - - - - - - -
3 Shares traded in non-RMB currencies
and listed overseas 16,780,488 19.4 - - - - - 16,780,488 19.4
4 Others - - - - - - - - -
Total Shares 86,702,439 100.0 - - - - - 86,702,439 100.0
* "Preferential shares or others" under "Shares not listed"
refers to the balance of shares which were transferred from
China Petrochemical Corporation, the promoter of Sinopec Corp.,
to domestic asset management corporations in 2000, after
deducting the shares which were subsequently transferred to
China Petrochemical Corporation.
4.2 Number of Shareholders and shareholdings of principal shareholders
Number of shareholders of Sinopec Corp. as at 31 December 2005 was
224,808, including 215,258 holders of A Shares and 9,550 holders of
H Shares.
(1) Top ten Shareholders
UNIT: 1,000 SHARES
Percentage Number of
among total shares held
shares held at the end of Number of Number of
Nature of at the end of reporting non-tradable pledges or
Name of shareholders shareholders reporting period period shares lock-ups
China Petrochemical Corporation State-owned shares 71.2% 61,757,325 61,757,325 -
HKSCC (Nominees) Limited H shares 19.2% 16,679,304 - unknown
China Cinda Asset Management State-owned shares 3.3% 2,848,886 2,848,886 -
Corp.
China Orient Asset Management State-owned shares 1.5% 1,296,410 1,296,410 -
Corp.
China Development Bank State-owned shares 0.7% 632,570 632,570 -
Guo Tai Jun An Corp. State-owned legal 0.7% 605,041* 586,760 548,530(pledges)/
person shares + A 38,230
Shares (lock-ups)
Fortis Haitong Growth A Shares 0.1% 89,668 - -
Investment Fund
EFUND 50 Securities Investment A Shares 0.1% 70,984 - -
Fund
Shanghai Securities 50ETF A Shares 0.1% 67,016 - -
Investment Fund
Qingdao Port (Group) Co Ltd. A Shares 0.1% 60,000 - -
* of which 586,760,000 shares are state-owned legal person shares and the remaining 18,281,000 shares are A share.
(2) Top ten shareholders with tradable shares
Unit: 1,000 shares
Number of
Type of
Name of shareholders tradable shares held shares held
HKSCC (Nominees) Limited 16,679,304 H Shares
Fortis Haitong Growth Investment Fund 89,668 A Shares
EFUND 50 Securities Investment Fund 70,984 A Shares
Shanghai Securities 50ETF Investment Fund 67,016 A Shares
Qingdao Port (Group) Co., Ltd. 60,000 A Shares
Boshi Selected Equity Securities Investment Fund 45,931 A Shares
Jingfu Securities Investment Fund 41,103 A Shares
Communication-Shroders Selected Equity
Securities Investment Fund 40,019 A Shares
CITIC Classic Securities Co., Ltd. 38,850 A Shares
Tianyuan Securities Investment Fund 38,000 A Shares
We are not aware of any connection or activities in concert among
the top ten shareholders and top ten shareholders with tradable
shares or between them.
4.3 Information about the controlling shareholder and the effective
controller
4.3.1 Changes of the controlling shareholder and the effective
controller in the reporting period
[ ] Applicable [ X ] Not applicable
4.3.2 Basic information about the controlling shareholder and the
other effective controller
(1) Controlling shareholder
The controlling shareholder of Sinopec Corp. is China
Petrochemical Corporation ("Sinopec Group Company").
Established in July 1998, Sinopec Group Company is a State
authorised investment organisation and a State-owned
company. Its registered capital is RMB 104.9 billion, and
the legal representative is Mr. Chen Tonghai. Through
reorganisation in 2000, Sinopec Group Company injected its
principal petroleum and petrochemical operations into
Sinopec Corp. and retained certain petrochemical
facilities and small-scale refineries. It provides
well-drilling services, oil testing services, downhole
operation services, services in connection with
manufacturing and maintenance of production equipment,
engineering construction, utility services and social
services.
(2) Basic information of other legal person shareholders
holding 10% or more of shares of Sinopec Corp. other than
HKSCC (Nominees) Limited None.
(3) Basic information of the effective controller
China Petrochemical Corporation is the effective
controller of Sinopec Corp.
(4) Diagram of the equity and controlling relationship between
Sinopec Corp. and its effective controller
[GRAPHIC OMITTED]
ss.5. Directors, Supervisors and Senior Management and Employees
5.1 Information on the changes in the shares held by the directors,
supervisors and senior management and employees
[ ] Applicable [ X ] Not applicable
5.1.1 Information of Directors
Shares Held at Sinopec
Position with Term of from any shareholderReason of
Name Gender Age Sinopec Corp. Office (as at 31 December) change
2005 2004
Chen Tonghai M 57 Chairman 2003.4-2006.4 0 0 -
Wang Jiming M 63 Vice Chairman 2003.4-2006.4 0 0 -
Mou Shuling M 61 Director 2003.4-2006.4 0 0 -
Zhang Jiaren M 61 Director and 2003.4-2006.4 0 0 -
Chief Financial Officer
Cao Xianghong M 60 Director 2003.4-2006.4 0 0 -
Liu Genyuan M 60 Director 2003.6-2006.4 0 0 -
Gao Jian M 56 Director 2004.5-2006.4 0 0 -
Fan Yifei M 42 Director 2003.4-2006.4 0 0 -
Chen Qingtai M 68 Independent 2003.4-2006.4 0 0 -
Non-executive Director
Ho Tsu Kwok Charles M 56 Independent 2003.4-2006.4 0 0 -
Non-executive Director
Shi Wanpeng M 68 Independent 2003.4-2006.4 0 0 -
Non-executive Director
Zhang Youcai M 64 Independent 2003.4-2006.4 0 0 -
Non-executive Director
Cao Yaofeng M 52 Employee 2003.4-2006.4 0 0 -
Representative Director
5.1.2 Supervisors
Shares Held at Sinopec
Position with Term of from any shareholderReason of
Name Gender Age Sinopec Corp. Office (as at 31 December) change
2005 2004
Wang Zuoran M 55 Chairman of the 2003.4-2006.4 0 0 -
Supervisory Committee
Zhang Chongqing M 61 Supervisor 2003.4-2006.4 0 0 -
Wang Peijun M 60 Supervisor 2003.4-2006.4 0 0 -
Wang Xianwen M 61 Supervisor 2003.4-2006.4 0 0 -
Zhang Baojian M 61 Supervisor 2003.4-2006.4 0 0 -
Kang Xianzhang M 57 Supervisor 2003.4-2006.4 0 0 -
Cui Jianmin M 73 Independent Supervisor 2003.4-2006.4 0 0 -
Li Yonggui M 65 Independent Supervisor 2003.4-2006.4 0 0 -
Su Wensheng M 49 Employee Representative 2003.4-2006.4 0 0 -
Supervisor
Cui Guoqi M 52 Employee Representative 2003.4-2006.4 0 0 -
Supervisor
Zhang Xianglin M 59 Employee Representative 2003.4-2006.4 0 0 -
Supervisor
Zhang Haichao M 48 Employee Representative 2003.4-2005.11 0 0 -
Supervisor
5.1.3 Other Members of the Senior Management
Shares Held at Sinopec
Position with Term of from any shareholder Reason of
Name Gender Age Sinopec Corp. Office (as at 31 December) change
2005 2004
Wang Tianpu M 43 President 2005.3 0 0 -
Zhang Jianhua M 41 Senior Vice President 2005.3 0 0 -
Wang Zhigang M 48 Senior Vice President 2005.3 0 0 -
Cai Xiyou M 44 Senior Vice President 2005.11 0 0 -
Dai Houliang M 42 Vice President 2005.11 0 0 -
Zhang Haichao M 48 Vice President 2005.11 0 0 -
Chen Ge M 43 Secretary to the 2003.4-2006.4 0 0 -
Board of Directors
5.1.4 Remunerations of Directors and Superisors
Total remuneration this year RMB 4.648 million Total remunerations
of top 3 directors RMB 1.39 million Total remunerations of top 3
senior management RMB 1.39 million Allowance to independent
directors and RMB 141.000
independent supervisor
Other benefits to independent directors Reasonable costs related to Sinopec Corp., such as
attending board meetings and general
meetings (eg. accommodation and travelling expenses)
Directors and supervisors not receiving Messers Chen Tonghai, Liu Genyuan, Gao Jian,
remuneration or allowance from the company Fan Yifei, Wang Zuoran,
Zhang Chongqing, Wong Peijun,
Wang Peijun, Wang Xianwen,
Zhang Baojian and Kang Xianzhang.
Range of remuneration (RMB)
400,000-500,000 5
200,000-300,000 7
100,000-200,000 3
5.2 NEW APPOINTMENT OR TERMINATION OF DIRECTORS, SUPERVISORS AND SENIOR
MANAGEMENT
The 16th Meeting of the Second Session of the Board of Directors of
China Petroleum & Chemical Corporation approved the resignation by
Mr. Wang Jiming as President of Sinopec Corp. and the resignation by
Mr. Mou Shuling as Senior Vice President of Sinopec Corp. for
work-related reasons. Mr. Wang Tianpu was appointed as President of
Sinopec Corp. Mr. Zhang Jianhua and Mr. Wang Zhigang were appointed
as Senior Vice Presidents of Sinopec Corp. The 22nd Meeting of the
Second Session of the Board of Directors of China Petroleum &
Chemical Corporation approved the resignation by Mr. Zhang Jiaren as
the Senior Vice President of Sinopec Corp., the resignation by Mr.
Cao Xianghong as the Senior Vice President of Sinopec Corp. and the
resignation by Mr. Li Chunguang as Vice President of Sinopec Corp.
Mr. Cai Xiyou was appointed as Senior Vice President of Sinopec
Corp. Mr. Dai Houliang and Mr. Zhang Haichao was appointed as Vice
President of Sinopec Corp.
ss.6 Report of the Board of Directors
6.1 Business review in the reportly period
6.1.1 Business review
In 2005, the Chinese economy continued to grow at a steady and rapid
rate, with a GDP growth rate of 9.9%, and domestic demand for
petroleum and petrochemical products kept increasing. In a market
environment characterised with soaring international crude oil
price, tight government control of domestic refined oil products
prices and volatile petrochemical market, the Company managed to
achieve satisfactory operating results, maintained growth in
production and profitability and improved asset quality by relying
on the collective efforts of its employees, leveraging on its
overall advantages, strengthening internal management and optimising
production operations with a market-based approach and a focus on
profits.
6.1.1.1 Review of Market Environment
(1) Crude oil market
In 2005, international crude oil prices were fluctuating at
high levels. The Platts' Brent spot price averaged US$ 54.53
per barrel, up by 42.5% compared with 2004. The domestic crude
oil price basically followed the trend in the international
market. Average realised crude oil price produced by the
Company was RMB 2,664.7 per tonne in 2005, up by 36.2% compared
with 2004.
[GRAPHIC OMITTED]
Price Trend of International Crude Oil
(2) Refined oil products market
In 2005, domestic demand for refined oil products maintained a
moderate growth. According to the Company's statistics, the
apparent domestic consumption of refined oil products
(inclusive of gasoline, diesel and kerosene including jet fuel)
in 2005 was 164.44 million tonnes, up by 4.7% compared with
2004. International refined oil prices experienced a
significant increase following the trend in the international
crude oil market. However, due to tight control over the
domestic prices of refined oil products, there was a
significant gap between domestic and international prices of
refined oil products.
(3) Chemicals market
In 2005, domestic demand for chemicals continued to show a
relatively strong growth. According to the Company's
statistics, the apparent consumption of synthetic fibers and
synthetic rubbers increased by 10.2% compared with 2004 while
domestic ethylene equivalent consumption increased by 8.6%
compared with 2004. Domestic chemicals prices witnessed a
similar trend as that of the international market. However, due
to the rise of chemical feedstock prices in the second half of
2005, the gross profit margin of chemicals declined noticeably.
6.1.1.2 Production and Operation
(1) Exploration and production
In 2005, the Company achieved good results in oil and gas
exploration and production by intensifying its exploration
activities, optimising and adjusting its exploration and
production plans.
In connection with exploration activities, the Company attached
great importance to new discoveries in both mature and new
blocks, completed 15,380 kilometers of 2D seismic and 7,164
square kilometers of 3D seismic, and drilled 545 exploration
wells with a total footage of 1,467 kilometers. Relying on
theoretical innovation and technological advances, the Company
discovered the largest and most aboundant gas field in marine
facies carbonate sturcture ever found in China, the Puguang Gas
Field. Important discoveries were also made in exploration
activities in mature blocks in east China as well as in Junger
and Tahe blocks, achieving over 100% replacement of oil and gas
reserves and laying a solid foundation for future resources.
In oil and gas production, the Company intensified its
progressive exploration activities and oil reserve evaluation,
and effectively developed proved reserves. Under the high oil
price environment, the company actively developed low yield
reverves and improved the quality and efficiency of new
capacity construction in the new blocks to increase oil and gas
production. The Company also put a premium on application of
new processes and new technologies to the development of mature
blocks, continually improving recovery rate in mature blocks.
In 2005, 2,348 development wells were drilled with total
drilling footage of 5,109 kilometers, and new capacities
totaling 5.79 million tonnes per annum and 2.1 billion cubic
meters per annum. In 2005, the Company's production of crude
oil and natural gas reached 278.82 million barrels and 221.9
billion cubic feet, respectively, representing an increase of
1.7% and 7.2%, respectively, compared with 2004.
Summary of Operations of the Exploration and Production Segment
Change
from 2004
2005 2004 2003 to 2005 (%)
Crude oil production (mmbbls) 278.82 274.15 270.96 1.70
Natural gas production (bcf) 221.9 207.0 187.7 7.20
Newly added proved reserves of
crude oil (mmbbls) 306 284 208 7.75
Newly added proved reserves of
natural gas (bcf) 140.6 352.0 (254.3) (60.05)
Year-end proved reserves of
crude oil (mmbbls) 3,294 3,267 3,257 0.83
Year-end proved reserves of
natural gas (bcf) 2,951.7 3,033.0 2,887.6 (2.68)
Year-end proved reserves of
crude oil and natural gas (mmboe) 3,786 3,773 3,738 0.34
Summary of Production and Operations of Shengli Oil Field
Change
from 2004
2005 2004 2003 to 2005 (%)
Crude oil production (mmbbls) 191.31 189.88 189.25 0.75
Natural gas production (bcf) 31.1 31.8 28.6 (2.20)
Newly added proved reserves of
crude oil (mmbbls) 247 225 196 9.78
Newly added proved reserves of
natural gas (bcf) (3.6) 79.9 70.1 (104.51)
Year-end proved reserves of
crude oil (mmbbls) 2,362 2,306 2,271 2.43
Year-end proved reserves of
natural gas (bcf) 322.4 357.1 308.9 (9.72)
Year-end proved reserves of
crude oil and natural gas (mmboe) 2,415 2,366 2,322 2.07
Note: crude oil volume is converted at 1 tonne to 7.1
barrels, and gas volume is converted at 1 cubic meter
to 35.31 cubic feet
(2) Refining
In 2005, the Company actively worked on full-load operations to
meet market demand. Crude oil throughput reached 139.94 million
tonnes, up by 5.26% compared with 2004. The Company endeavored
to reduce crude oil purchase costs by optimising crude oil
procurement, allocation and transportation efficiency, and by
increasing the processing ratio of high sulphur and heavy crude
oil. The Company strived to increase the sales volume of higher
value-added products through optimised production plan and
product mix. It intensified technical revamping of refining
facilities and upgraded gasoline and diesel quality on
schedule. The Company also improved its main technical and
economic performance indicators in the refining segment by
relying on strengthened management and advances in
technologies. As a result, both light products yield and
overall refining yield went up.
Sources of Crude oil
Unit: million tonnes
from 2004
2005 2004 2003 to 2005 (%)
Self-supplied 28.62 28.14 28.20 1.71
PetroChina Company Ltd. 8.75 10.31 13.08 (15.13)
CNOOC Ltd. 5.05 6.69 5.57 (24.51)
Imported 99.13 89.03 71.14 11.34
Total 141.55 134.17 117.99 5.50
Summary of Production of the Refining Segment
Change
from 2004 to
2005 2004 2003 2005 (%)
Crude throughput (mbbls/day) 2,817.9 2,677.2 2,350.0 5.26
of which sour crude throughput
(mbbls/day): 698.8 551.1 478.7 26.80
Refining utilisation rate (%) 94.01 93.43 88.10 0.58
percentage
point
Gasoline, diesel and kerosene
including jet fuel (million tonnes) 84.53 80.83 69.01 4.58
of which: Gasoline (million tonnes) 22.98 23.58 21.79 (2.54)
Diesel (million tonnes) 54.92 50.89 41.91 7.92
Kerosene including jet fuel
(million tonnes) 6.63 6.36 5.31 4.25
Light chemical feedstock
(million tonnes) 21.10 17.70 16.46 19.21
Light products yield (%) 74.16 74.02 73.80 0.14
percentage
point
Overall refining yield (%) 93.24 93.09 92.63 0.15
percentage
point
Note: (1) Crude oil processing volume is converted at 1 tonne
to 7.35 barrels.
(2) The operational data for 2003 include operational
results of Xi'an Petrochemical and Tahe
Petrochemical.
(3) Marketing and distribution
In 2005, while maintaining full-load operations of its refining
facilities to increase production of refined oil products, the
Company increased procurement of refined oil products from
other sources to meet the market demand. It also endeavored to
reduce storage and transportation costs by fully leveraging its
modern logistics systems and optimising resource allocation. It
further expanded retail and direct sales by improving
service-oriented awareness, service quality and standards as
well as marketing structure . The sales of refined oil products
for 2005 exceeded 100 million tonnes for the first time,
representing a year on year increase of 10.54%, of which retail
volume increased by 19.29%. The efficiency of petrol stations
continued to improve with the annual throughput per petrol
station exceeding 2,321 tonnes, up by 15.88% compared with
2004. Retail and direct sales volume of refined oil products
accounted for 80.24% of the total domestic sales volume. In
addition, the Company is actively marketing its petrol IC
cards, which allows customers to use one single card at its
petrol stations across the nation.
Summary of Operations of Marketing and Distribution Segment
Change
Change
from 2004
2005 2004 2003 to 2005 (%)
Total domestic sales of refined oil
products (million tonnes) 104.56 94.59 75.92 10.54
Of which: Retail volume
(million tonnes) 63.52 53.25 38.85 19.29
Direct sales volume
(million tonnes) 20.38 19.65 15.33 3.72
Wholesale volume
(million tonnes) 20.66 21.69 21.74 (4.75)
Average annual throughput per
petrol station (tonne/station) 2,321 2,003 1,686 15.88
Total number of petrol stations
under SINOPEC brand 29,647 30,063 30,242 (1.38)
Of which: Number of COCO
petrol stations 27,367 26,581 24,506 2.96
Number of franchised
petrol stations 2,280 3,482 5,736 (34.52)
Retail volume/total domestic
sales volume (%) 60.7 56.3 51.2 4.4
percentage
points
(4) Chemicals
In 2005, the Company achieved safe, stable, sustained,
full-load and optimal operation of its core facilities. The
Company's two major ethylene joint ventures, Shanghai Secco and
BASF-YPC, were put into commercial operation on schedule, and
as a result, the Company's ethylene capacity significantly
increased. The Company produced 5.319 million tonnes of
ethylene in 2005, up by 30.56% from 2004. The Company
proactively tried to improve its chemicals product mix with
more higher value-added products, which allowed the Company to
further increase its production of performance compound resins
and differential fibres. The Company also established a
specialised sales company for chemical products to enhance its
overall competitiveness and gradually integrate or centralise
its marketing strategies, market development, logistics,
resource allocations, sales practices and branding.
Production of Major Chemicals
Unit: 1,000 tonnes
Change
from 2004
2005 2004 2003 to 2005 (%)
Ethylene 5,319 4,074 3,982 30.56
Synthetic resins 7,605 6,221 5,805 22.25
of which: performance compound
resins 3,498 3,034 2,707 15.29
Synthetic rubbers 626 561 553 11.59
Monomers and polymers for
synthetic fibres 6,725 6,021 5,633 11.69
Synthetic fibre, 1,570 1,654 1,659 (5.08)
of which: differential fibres 811 753 623 7.70
Urea 1,780 2,630 2,028 (32.32)
Note: (1) The operational data for 2003 and 2004 include
the production of Maoming Ethylene, and, also
that of various chemical assets acquired from
Sinopec Group in 2004.
(2) The operational data for 2005 include the
production of the two joint venture ethylene
facilities, Shanghai Secco and BASF-YPC.
(5) Research and development
In 2005, the Company adhered to the application of research and
engineering design into production, focused on technological
innovation and development of key technologies, achieved a
string of important scientific and technological results and
obtained 706 domestic and international patents. The
technologies in non-crystal state alloy catalyst and stable
magnetic bed reactor were used for commercial application for
the first time in the world, generating significant economic
benefits due to its lower catalyst consumption. With greater
air velocity ratio, which is 5 to 10 times of that of the
traditional reactor bed. Its catalyst consumption only accounts
for 30% of the amount consumed with traditional technologies.
The technology was the only grand prize awarded by the National
Technology Invention Prizes in 2005. Another ten technologies
including the geo-steering drilling technology, a new catalyst
cracking process which can increase production of propylene
while reducing olefin content in gasoline, and a 200,000 tonne
per annum EB/styrene, were successfully developed and put into
commercial application. Breakthroughs were made in researches
over 20 technologies, including technologies in the field of
oil reserve geophysics. A series of technologies, including a
catalytic cracking technology to maximise isoalkane production,
and aromatics extraction technology, were applied extensively,
generating meaningful economic benefits.
Information technologies were applied to improve management.
Applications of ERP and other IT systems are playing
increasingly important roles in the Company's business
development and operation management.
(6) Cost saving
In 2005, the Company took various measures to reduce cost, such
as reducing transportation costs by optimising resource
allocation and leveraging on existing logistics system,
reducing crude procurement cost by further increasing the
processing volume of sour and heavy crude oil and reducing
consumption of energy and materials in the production process
by optimising operation of the facilities. In 2005, the Company
effectively saved RMB 2.762 billion in cost, which exceeded the
original target of RMB 2.5 billion by RMB 262 million. Of the
total cost saved, the exploration and production segment, the
refining segment, the marketing and distribution segment and
the chemicals segment achieved cost saving of RMB 638 million,
RMB 706 million, RMB 712 million, and RMB 706 million,
respectively.
(7) Capital expenditure
In 2005, the Company adjusted and optimised its investment
allocation in line with its development strategy and core
businesses based on market conditions, and worked for better
organisation and implementation of major projects. The total
capital expenditure in 2005 was RMB 58.726 billion. Among
which, the expenditure for exploration and production segment
was RMB 23.095 billion. With the investment, significant amount
of oil and gas reserves were discovered in some major
exploratory areas, including Jiyang Depression, Tahe and
northeast Sichuan. Newly built crude oil and gas production
capacity increased by 5.79 million tonnes per annum and 2.1
billion cubic meters per annum respectively. The newly built
proved crude oil reserves reached 305.62 million barrels and
realised increases in both oil and gas reserves and production.
The expenditure for refining segment was RMB 14.127 billion.
With the investment, newly added crude oil processing capacity,
hydro-fining capacity and coking capacity increased by 6.7
million tonnes per annum, 3.73 million tonnes per annum and 2.8
million tonnes per annum, respectively; the revamping of
facilities for upgrading refined oil product quality was
completed on schedule and Ningbo-Shanghai-Nanjing pipeline for
imported crude oil was completed and put into operation. The
expenditure for marketing and distribution segment was RMB
10.954 billion. With the investment, the Southwest refined oil
pipeline was fully completed and put into operation, the
refined oil products sales network further improved by way of
construction, acquisition and renovation of petrol stations.
The Company's leading position in the strategic market was
further solidified, with a net increase of 786 self-operated
petrol stations. The expenditure for chemicals segment was RMB
9.386 billion. With the investment, Maoming Ethylene expansion
project, PTA revamping project at Shanghai Petrochemical and
Yangzi Petrochemical progressed smoothly, the coal gasification
projects for fertiliser production was on schedule. The
expenditure for corporate and others was RMB 1.164 billion.
With the investment, construction of the information technology
systems made new progresses.
In addition, the Company's two large joint ventures, Shanghai
Secco and BASF-YPC, with a total capital expenditure of RMB
2.602 billion, were successfully put into commercial operation.
6.1.2 Management Discussion and Analysis
The following discussion and analysis should be read in conjunction
with the company's Audited Financial Statements and the Accompanying
notes. Part of the Financial Information Presented in this section
in derived from the company's audited financial statements that have
been prepared in accordance with International Financial Reporting
Standards ("IFRS").
6.1.2.1 Consolidated results of operations
In 2005, the Company's turnover, other operating revenues and other
income were RMB 832.5 billion, and the operating profit was RMB 66.8
billion, representing an increase of 34.3% and 5.9%, respectively,
over those in the previous year. These results were largely
attributable to the following factors: International crude oil
prices continued to be volatile and remained at a high level;
chemical products prices remained at a high level; the Company
strived to mitigate the effect of the tight price control over
refined oil products, proactively developed the market, increased
oil and gas production, optimised crude oil processing and output
structure, increased chemicals production and sales of refined oil
products. In addition, the Company received a one-time refund of RMB
9.4 billion from the central government to compensate the Company's
inability to fully pass the increased crude oil costs to the refined
oil products due to the tight government control over prices of
domestic refined oil products, which to some extent relieved the
pressures imposed by the increased crude oil costs and contributed
to the comparatively good operating results.
The following table sets forth the major items in the consolidated
income statement of the Company for the indicated periods.
Years Ended 31 December Rate of
2005 2004 Change
(RMB in millions) (%)
Turnover, other operating revenues
and other income 832,532 619,783 34.3
Of which: Turnover 799,115 597,197 33.8
Other operating revenues 24,002 22,586 6.3
Other income 9,415 i-D N/A
Operating expenses (765,718) (556,714) 37.5
Of which: Purchased crude oil, products,
and operating supplies and expenses (653,056) (443,590) 47.2
Selling, general and administrative (33,709) (31,843) 5.9
expenses
Depreciation, depletion and amortisation (31,413) (32,342) (2.9)
Exploration expenses (including dry holes) (6,411) (6,396) 0.2
Personnel expenses (18,483) (18,634) (0.8)
Employee reduction expenses (369) (919) (59.8)
Taxes other than income tax (17,152) (16,324) 5.1
Other operating expenses, net (5,125) (6,666) (23.1)
Operating profit 66,814 63,069 5.9
Net finance costs (4,621) (4,371) 5.7
Investment income and share of profit less losses
from associates 1,035 908 14.0
Profit before tax 63,228 59,606 6.1
Taxation (19,388) (17,815) 8.8
Profit for the year 43,840 41,791 4.9
Attributable to:
Equity shareholders of the Company 40,920 36,019 13.6
Minority interests 2,920 5,772 (49.4)
(1) Turnover, Other Operating Revenues and Other Income
In 2005, the Company's turnover, other operating revenues and
other income were RMB 832.5 billion, of which, the turnover was
RMB 799.1 billion, representing an increase of 33.8% over 2004.
These results were largely attributable to the increase in
international prices of crude oil and chemical products, and
the Company's efforts in expanding the sales volume of our
petroleum and chemical products and optimising our sales and
marketing structure. In 2005, the Company's other operating
revenues went up to RMB 24 billion, representing an increase of
6.3% compared with 2004.
In 2005, the Company received from the central government a
one-time compensation of RMB 9.4 billion to compensate the
Company's inability to fully pass the increased crude oil costs
to refined oil products due to the tight government control
over prices of domestic refined petroleum products.
The following table sets forth the Company's external sales
volume, average realised prices and the respective rate of
changes from 2004 to 2005 for the Company's major products.
Average realised prices
Sales Volume (RMB per tonne, RMB per
(thousand tonnes) thousand cubic meters)
Rate of Rate of
Change change
2005 2004 (%) 2005 2004 (%)
Crude oil 5,289 6,012 (12.0) 2,680 1,872 43.2
Natural gas (million 4,356 3,775 15.4 673 609 10.5
cubic meters)
Gasoline 30,191 27,353 10.4 4,432 3,765 17.7
Diesel 67,247 60,419 11.3 3,772 3,221 17.1
Kerosene 6,003 5,680 5.7 3,710 2,923 26.9
Basic chemical feedstock8,658 6,664 29.9 4,846 4,429 9.4
Monomers and polymers
for synthetic fiber 2,993 2,704 10.7 8,879 8,022 10.7
Synthetic resin 6,343 5,401 17.4 9,005 7,986 12.8
Synthetic fiber 1,585 1,741 (9.0) 11,123 10,818 2.8
Synthetic rubber 678 556 21.9 13,040 10,238 27.4
Chemical fertiliser 1,822 2,622 (30.5) 1,539 1,355 13.6
Most of the crude oil and a small portion of the natural gas
produced by the Company were internally used for refining and
chemicals production, the remaining was sold to the refineries
of Sinopec Group Company and other customers. In 2005, the
turnover from crude oil and natural gas that were sold
externally amounted to RMB 19.9 billion, representing an
increase of 24.4% over 2004, accounting for 2.4% of the
Company's total turnover, other operating revenues and other
income. The increase was mainly due to the increase in crude
oil prices and expansion of natural gas business.
The Company's refining segment and marketing and distribution
segment sell refined oil products (mainly consisting of
gasoline, diesel, jet fuel, kerosene and other refined oil
products) to third parties. In 2005, the external sales revenue
of refined oil products by these two segments were RMB 542.1
billion, representing an increase of 33.5% over 2004,
accounting for 65.1% of the Company's turnover, other operating
revenues and other income. The increase was mainly due to the
rise of refined oil products price, and our proactive efforts
in increasing sales volume, optimising sales and marketing
structure and expanding the market of other refined oil
products. The sales revenues of gasoline, diesel and kerosene
were RMB 409.7 billion, representing an increase of 30.4% over
2004, and accounting for 75.6% of the total sales revenues of
refined oil products. The sales revenues of other refined oil
products were RMB 132.4 billion, representing an increase of
43.9% over 2004, accounting for 24.4% of the total sales
revenues of refined oil products.
The Company's external sales revenues of chemical products were
RMB 160.8 billion, representing an increase of 27.6% over 2004,
accounting for 19.3% of the Company's total turnover, other
operating revenues and other income. The increase was mainly
due to the fact that the Company captured the opportunity of
the high level price of chemical products and increased its
sales volume accordingly.
(2) Operating expenses
In 2005, the Company's operating expenses amounted to RMB 765.7
billion, representing an increase of 37.5% compared with 2004.
The operating expenses mainly consisted of the following:
Purchased Crude Oil, Products, and Operating Supplies and
Expenses
In 2005, the Company's purchased crude oil, products and
operating supplies and expenses were RMB 653.1 billion,
representing an increase of 47.2% over 2004, accounting for
85.3% of the total operating expenses, of which:
o Purchased crude oil expenses were RMB 338.2 billion,
representing an increase of 45.4% compared with 2004,
accounting for 44.2% of the total operating expenses, up
by 2.4 percentage points over 2004. To meet the increasing
market demands in the fast growing Chinese economy, the
Company increased its throughput of crude oil purchased
from third parties. In 2005, the throughput of the
Company's crude oil purchased externally was RMB 107.95
million tonnes (excluding amounts processed for third
parties), representing an increase of 7.3% compared with
2004. Average cost for crude oil purchased externally in
2005 was RMB 3,133 per tonne (approximately US$ 52.11 per
barrel), representing an increase of 35.5% compared with
2004.
o In 2005, the Company's other purchase expenses were RMB
314.9 billion, representing an increase of 49.2% compared
with 2004, accounting for 41.1% of the total operating
expenses. The increase was mainly due to the increased
costs of refined petroleum products and chemical feedstock
purchased externally.
Selling, general and administrative expenses
In 2005, the Company's selling, general and administrative
expenses totaled RMB 33.7 billion, representing an increase of
5.9% compared with 2004. The increase was largely due to:
o An increase of RMB 1.5 billion in the selling expenses,
such as transportation costs, compared with 2004, resulted
from the increase in the total sales volume of refined
petroleum products and chemical products, and increased
sales volume through retail and direct distribution;
o An increase of RMB 1.2 billion in operating lease expenses
compared with 2004 mainly due to the increased lease of
operating facilities to increase sales volume;
o A decrease in repairing and maintenance expenses by RMB
800 million, mainly as a result of the increased
maintenance carried out in 2004 for petrol stations.
Depreciation, depletion and amortisation
In 2005, the Company's depreciation, depletion and amortisation
were RMB 31.4 billion, down by 2.9% compared with 2004. The
decrease was mainly due to disposal of, and impairment loss on,
less efficient assets in the previous years.
Exploration expenses
In 2005, the Company's exploration expenses were RMB 6.4
billion, maintaining at the same level as in 2004.
Personnel expenses
In 2005, the Company's personnel expenses were RMB 18.5
billion, down by 0.8% compared with 2004. The decrease was
mainly due to the reduction of operating personnel resulting
from the disposal of downhole operation assets in 2004.
Employee reduction expenses
In 2005, in accordance with the Company's voluntary employee
reduction plan, the Company recorded employee reduction
expenses of approximately RMB 370 million.
Taxes other than income tax
In 2005, the Company's taxes other than income tax were RMB
17.2 billion, representing an increase of 5.1% compared with
2004. The increase was largely due to the increased consumption
tax and associated surcharges as a result of the increase in
the sales volume of gasoline and diesel.
Other operating expenses, net
In 2005, the Company's other operating expenses, net were RMB
5.1 billion, representing a decrease of 23.1% compared with
2004. The decrease was largely due to the decrease of RMB 2.1
billion in impairment loss on long-lived assets and an increase
of RMB 400 million in net losses of disposal of assets compared
with 2004.
(3) Operating profit
In 2005, the Company's operating profit was RMB 66.8 billion,
representing an increase of 5.9% compared with 2004.
(4) Net finance costs
In 2005, the Company's net finance costs were RMB 4.6 billion,
representing an increase of 5.7% over 2004. The increase was
mainly due to the following factors:
o An increase of RMB 1.3 billion in net interest expenses as
a result of the increase in long term loans borrowed in
accordance with the investment plans, and the increase in
short term debts attributable to the increased working
capital requirement, as a result of the increased crude
oil price and the expansion of production and operation;
o An increase of RMB 1.1 billion in net foreign exchange
gains due to fluctuation of the foreign exchange rate.
(5) Profit before income tax
In 2005, the Company's profit from ordinary activities before
income tax was RMB 63.2 billion, representing an increase of
6.1% compared with 2004.
(6) Taxation
In 2005, the Company's taxation was RMB 19.4 billion,
representing an increase of 8.8% compared with 2004.
(7) Profit attributable to minority interests
In 2005, the Company's profit attributable to minority
interests was RMB 2.9 billion, representing a decrease of 49.4%
compared with 2004. The decrease was largely due to the
decreased profit in certain subsidiaries and our privatisation
of Beijing Yanhua.
(8) Profit attributable to equity shareholders to the Company
In 2005, the Company's profit attributable to equity
shareholders of the Company was RMB 40.9 billion, up by 13.6%
over 2004.
6.1.2.2 Assets, Liabilities, Equity and Cash Flows
The Company's primary sources of funding were from operating
activities, short-term and long-term borrowings, and primary uses of
funds were for operating expenses, capital expenditures and
repayments for short-term and long-term borrowings.
(1) Assets, liabilities and equity
Unit: RMB in millions
As of 31 December Amount
2005 2004 Changes
Total assets 537,321 474,594 62,727
Current assets 145,291 120,271 25,020
Non-current assets 392,030 354,323 37,707
Total liabilities 284,325 250,508 33,817
Current liabilities 170,649 146,277 24,372
Non-current liabilities 113,676 104,231 9,445
Equity attributable to equity
shareholders of the Company 223,556 193,040 30,516
Share capital 86,702 86,702 i-D
Reserves 136,854 106,338 30,516
Minority interests 29,440 31,046 (1,606)
Total equity 252,996 224,086 28,910
The Company's total assets were RMB 537.321 billion,
representing an increase of RMB 62.727 billion compared with
those at the end of 2004, of which:
o The current assets increased by RMB 25.02 billion from
those at the end of 2004 to RMB 145.291 billion. The
increase was mainly due to the increases in inventories of
crude oil and refined oil products as a result of the
increase in prices and volume of crude oil and refined oil
products.
o The non-current assets increased by RMB 37.707 billion
from those at the end of 2004 to RMB 392.03 billion. The
increase was mainly due to the increase of RMB 30.45
billion in property, plant and equipment and the increase
of RMB 2.082 billion in construction in progress.
The total liabilities were RMB 284.325 billion, representing an
increase of RMB 33.817 billion compared with those at the end
of 2004, of which :
o The current liabilities increased by RMB 24.372 billion
from those at the end of 2004 to RMB 170.649 billion. The
increase was mainly due to the increase of RMB 29.175
billion in accounts payable associated with the expansion
of production and operation, and the decrease of RMB 7.554
billion in bills payable resulted from adjustment of
financing structures.
o The non-current liabilities increased by RMB 9.445 billion
from those at the end of 2004 to RMB 113.676 billion. The
decrease was mainly due to the fact that long-term loans
of the Company increased by RMB 9.405 billion compared
with those at the end of 2004.
The equity attributable to equity shareholders of the Company
was RMB 223.556 billion, representing an increase of RMB 30.516
billion in reserves compared with those at the end of 2004.
(2) Cash flow
In 2005, the Company's cash and cash equivalent decreased by
RMB 2.614 billion, which, together with the decrease of RMB 22
million due to the change in foreign exchange rates,
contributed to the net decrease of RMB 2.636 billion, down from
RMB 16.381 billion as of 31 December, 2004 to RMB 13.745
billion as of 31 December 2005.
The following table sets forth the major items on the
consolidated cash flow statements in 2004 and 2005.
Unit: RMB in millions
Years ended 31 December
Major items of cash flows 2005 2004
Net cash flow from operating activities 76,497 69,081
Net cash flow from investing activities (71,051) (73,992)
Net cash flow from financing activities (8,060) 5,028
Net (decrease)/increase in cash and cash equivalent (2,614) 117
Net cash flow from operating activities was RMB 76.497 billion.
In 2005, profit before taxation was RMB 63.228 billion; after
adjusting the non-cash expenses items, the adjusted cash flow
from operating activities was RMB 105.23 billion. Major
non-cash expense items included: depreciation, depletion and
amortisation of RMB 31.413 billion, dry holes costs of RMB
2.992 billion, net losses from disposal of properties, plants
and equipments of RMB 2.095 billion, and impairment losses on
long-lived assets of RMB 1.851 billion.
The changes in operating-related accounts receivable and
payable items reduced cash inflow of RMB 1.828 billion. In
order to meet the market demand, the Company expanded
production and operation, as a result, the working capital
required by the ordinary business settlement increased, of
which, the changes in inventory led to a decreased cash inflow
of RMB 24.998 billion , the increase in accounts payable due to
the increase in operation and purchase costs led to an
increased cash inflow of RMB 28.97 billion, and the increase in
accounts receivable and other assets led to a decreased cash
inflow of RMB 5.8 billion.
After adjusting the non-cash expense items and accounts
receivable and payable items with regard to the profit before
taxation, and deducting the cash outflow for payment of income
tax totaling RMB 20.998 billion, and the net cash outflow for
net interests paid as well as the dividend received totaling
RMB 5.907 billion, the net cash flow from operating activities
was RMB 76.497 billion.
Net cash flow for investing activities was RMB 71.051 billion.
The net cash flow for investing activities mainly represented
cash outflows of RMB 63.135 billion for capital expenditures
and RMB 4.324 billion for acquisition of minority interests in
subsidiaries such as Beijing Yanhua by the Company, and cash
outflows of RMB 2.474 billion for capital expenditures by the
Company's jointly controlled entities.
Net cash flow for financing activities was RMB 8.06 billion.
The net cash outflow for financing activities increased because
the amount of newly added bank loans and other loans by the
Company and its jointly controlled entities was less than the
amount of repayment of bank loans and other loans, resulting in
a cash outflow of RMB 2.921 billion. The net cash outflow for
financing activities was further increased by the distribution
of final dividend for 2004 and interim dividend for 2005
totaling RMB 10.404 billion; and the distribution of cash in
connection with petrochemical assets and catalyst assets
totaling RMB 3.128 billion. On the other hand, the cash outflow
was partially offset by the proceeds from the issuance of short
term financial bonds totaling RMB 9.875 billion.
During 2005, the Company captured the opportunity of robust
market demand to steadily increase cash flow from operating
activities. At the same time, the Company tightened its control
over integrated cash management and strictly controlled the
scale of cash and cash equivalents to decrease the amount of
idle cash, and accelerate capital turnover. As a result, the
overall cash efficiency of the Company improved.
(3) Contingent liabilities
Refer to the descriptions under Major Guarantees and
Performance in the section entitled Disclosure of Significant
Events.
(4) Capital expenditure
Refer to the descriptions under Capital Expenditure in the
section entitled Business Review and Prospects.
(5) Research and development expenses and environmental expenses
Research and development expenses refer to the expenses that
have been recognised during the period in which they incurred.
In 2005, the Company's research and development expenses were
RMB 2.243 billion.
Environmental expenses refer to the normal routine pollutant
discharge fees paid by the Company, excluding any capitalised
costs of pollutant discharge facilities. In 2005, the Company's
environmental expenses were RMB 493 million.
(6) Analysis of financial statements prepared under the PRC
Accounting Rules and Regulations
The major differences between the Company's financial
statements prepared under the IFRS and those under the PRC
Accounting Rules and Regulations are set out in section 9.2.3
of this announcement.
The following table sets forth each of its segments' income and
profit from principal operations, costs of sales, taxes and
surcharges, as prepared under the PRC Accounting Rules and
Regulations.
Unit: RMB in millions
Years Ended 31 December
2005 2004
Income from principal operations
Exploration and Production Segment 104,285 76,023
Refining Segment 469,266 352,548
Marketing and Distribution Segment 462,464 345,671
Chemicals Segment 172,982 122,118
Others 121,265 79,145
Elimination of inter-segment sales (531,147) (384,873)
-------------- --------------
Consolidated income from principal operations 799,115 590,632
============== ==============
Cost of sales, sales taxes and surcharges
Exploration and Production Segment 40,118 36,073
Refining Segment 477,843 340,360
Marketing and Distribution Segment 427,308 306,309
Chemicals Segment 149,431 96,994
Others 118,152 78,410
Elimination of inter-segment cost of sales (527,451) (382,736)
-------------- --------------
Consolidated cost of sales, sales taxes and surcharges 685,401 475,410
============== ==============
Profit from principal operations
Exploration and Production Segment 59,732 37,997
Refining Segment (7,838) 12,005
Marketing and Distribution Segment 35,156 39,362
Chemicals Segment 23,551 25,123
Others 3,113 735
-------------- --------------
Consolidated profit from principal operations 113,714 115,222
============== ==============
Net profit 39,558 32,275
============== ==============
Profit from principal operation: in 2005, the Company's
realised profit from principal operations was RMB 113.714
billion, representing a decrease of RMB 1.508 billion compared
with 2004. The decrease was mainly due to the fact that crude
oil price continued to be volatile and remained at a high level
in international market, and the Chinese government implemented
tight price control over domestic refined oil product,
resulting in smaller increase in the price of refined oil
products as compared with that in crude oil price. The Company
strived to expand sales volume and optimise marketing and
distribution structures, but was still unable to completely
offset the pressure from the increased crude oil costs. As a
result, profit from principal operations declined compared with
2004.
Net profit: in 2005, the net profit realised by the Company was
RMB 39.558 billion, representing an increase of RMB 7.283
billion, or 22.57%, over that in 2004.
Financial data prepared under the PRC Accounting Rules and
Regulations:
Unit: RMB in millions
At 31 December
2005 2004 Changes
Total assets 520,572 460,081 60,491
Long-term liabilities 107,774 98,407 9,367
Shareholders' funds 215,623 186,350 29,273
Analysis of changes:
Total assets: in 2005, the total assets increased by RMB 60.491
billion from those at the end of 2004 to RMB 520.572 billion.
The increase was primarily due to a number of factors, of
which, the fixed assets increased by RMB 32.706 billlion as a
result of the Company's implementation of a prudent investment
policy to meet the market demands; the current assets increased
by RMB 24.84 billion resulted from increases in inventories of
crude oil and refined oil products in line with the rise of
price and expansion of production and operation; other assets,
including intangible assets, increased by RMB 2.945 billion.
Long-term liabilities: the Company's long-term liabilities were
RMB 107.774 billion as of 31 December 2005, representing an
increase of RMB 9.367 billion from those as of 31 December
2004, which was primarily due to the increase in long term
borrowings in line with investment plans.
Shareholders' funds: At the end of 2005, shareholders' funds of
the Company was RMB 215.623 billion, representing an increase
of RMB 29.273 billion compared with those at the end of 2004.
This increase was primarily due to: first, the realised net
profit in 2005 amounted to RMB 39.558 billion; second, in 2005,
the distribution of the final dividend of 2004 amounted to RMB
6.936 billion and the interim dividend for 2005 totaled RMB
3.468 billion.
(7) Significant differences between the financial statements
prepared under IFRS and U.S. GAAP
The major differences between the Company's financial
statements prepared under IFRS and US GAAP are set out in
section 9.2.4 of this announcement.
6.2 The Principal Operations Categorised by Business Segments and the
Status of the Connected Transactions
The following data are extracted from the financial statements
prepared under the PRC Accounting Rules and Regulations.
Increase/ Increase/
Increase/income decrease of decrease
from principal cost of principal of gross profit
operations operation margin
compared compared compared
Income from Cost of with the with the with the
principal principal Gross preceding year preceding year preceding year
Categorised by operations operations profit margin percentage percentage percentage
business segments (RMB millions) (RMB millions) (%) points points points
Exploration and production 104,285 38,464 57.28 37.18 10.12 7.30
Refining 469,266 463,682 (1.67) 33.11 41.98 (5.08)
Chemicals 172,982 148,710 13.61 41.65 54.36 (6.96)
Marketing and distribution 462,464 426,727 7.60 33.79 39.59 (3.79)
Corporate and others 121,265 118,117 2.57 53.22 50.67 1.64
Elimination of inter-segment sales (531,147) (527,451) N/A N/A N/A N/A
Total 799,115 668,249 14.23 35.30 45.52 (5.28)
Of which: connected transactions 80,096 74,628 5.90 36.38 37.70 (1.45)
Connected transactions Please refer to "Connected Transactions" at 8.4 below
Principle of pricing for (1) Government-prescribed prices and government-guided prices are adopted for products or
connected transactions projects if such prices are available; (2) Where there is no government-prescribed price or
government-guided price for products or projects, the market price (inclusive of
bidding price) will apply; (3) Where none of the above is applicable, the price will be
decided based on the cost incurred plus a reasonable profit of not more than 6% of the
price.
* Gross profit = Profit from principal operations/income from principal operations
6.3 Principal operations in different regions
[ ] Applicable [ X ] Not applicable
6.4 Information about suppliers and customers
Total amount of purchase from RMB120,969 billion Percentage in Sinopec Corp.'s total
the top five suppliers amount of purchase 37.68%
Total amount of sales to the RMB62,115 billion Percentage in Sinopec Corp.'s total
top five Ecustomers amount of sales 8%
6.5 Operations of equity subsidiaries (applicable to the circumstance
when the return on investment is more than 10% of the listed
company's net profit)
[ ] Applicable [ X ] Not applicable
6.6 Explain the reason of material changes in the principal operations
and their structure
[ ] Applicable [ X ] Not applicable
6.7 Explain the reason of material changes in the principal operations'
earning power (gross profit ratio) as compared to the preceding year
[ ] Applicable [ X ] Not applicable
6.8 Analyze the reason of material changes in operating result and profit
composition as compared to the preceding year
[ X ] Applicable [ ] Not applicable
See 6.1.1 "Business Review" and 6.1.2 "Management's Discussion and
Analysis"
Analyze the reason of material changes in the overall financial
position as compared to the preceding year
[ X ] Applicable [ ] Not applicable
See 6.1.1 "Business Review" and 6.1.2 "Management's Discussion And
Analysis"
6.9 Explanation of the material changes in operating environment and
macro policies and rules and regulations that have produced, are
producing or will produce significant influences on the company's
financial conditions and operating result
[ ] Applicable [ X ] Not applicable
6.10 Fulfillment of the predicted profit
[ ] Applicable [ X ] Not applicable
6.11 Fulfillment of the operating plan
[ ] Applicable [ X ] Not applicable
The Company has not disclosed the Operating Plan for year 2005
(e.g. revenue, cost and expenses etc), and therefore it
is not applicable.
6.12 Use of the proceeds from share issue
[ X ] Applicable [ ] Not applicable
6.12.1 Use of the proceeds from A share issue
Unit: RMB billion
Total proceeds from share issue after deducting the issuance expenses 11.648
Total amount of proceeds used in this year 61.100
Total amount of proceeds already used 11.648
Proposed Whether Whether
investment Actual the planned the expected
Projects under in this year Any investment Yield progress is return is
commitment Amounts change Amounts Amounts satisfied satisfied
For the Company's
working capital 1.302 N 1.302 0.061 A Y
Acquisition of National Star
from Sinopec Group 6.446 N 6.446 1.200 A Y
Southwest refined oil product
pipeline project 2.436 N 2.436 0.146 A Y
For the Ningbo-Shanghai-Nanjing
crude oil pipeline 1.464 N 1.464 0.150 A Y
Total 11.648 - 11.648 - -
Reason of failure to satisfy the
planned progress and expected return
(according to specific project)
Reason and procedure of change
(according to specific project) N/A
6.12.2 Change of projects
[ X ] Applicable [ ] Not applicable
6.13 Projects not funded by proceeds from share issue
[ X ] Applicable [ ] Not applicable
Capital
investment
in project
Project name Project progress Project
(RMB billion) progress Profit from project
Exploration and
production segment:
Development in Shengli 23.095 progressing Crude output 39.27 million
Oilfields and capacity smoothly tons, gas output 6.285 billion
building in Xinjiang cubic meters, newly added
Tahe oilfield crude capacity 5.788 million tons,
newly added as capacity 2.1 billion
cubic meters in 2005. Realized
optimization of reserves and
growth of oil and gas production,
reinforced the foundation of
its resources, and rationalized
the possible, probable and
proved reserves
Refining segment: E
Expansion and revamping 14.127 progressing Newly added 6.7mta crude-run
of refining capacity of smoothly capacity. Products quality
Yanshan and Guangzhou is up to the National standard
and projects for improving
product quality and
structure
Marketing and distribution segment:
Mainly for construction of 10.343 progressing Further optimized the marketing
new pipeline for refined oil smoothly networks and secured our leading
products andEprojects of position in the principal market
construction and renovation and raised brand awareness and
of petrol stations and oil further enhanced customer loyalty
depots
Chemicals segment:
Expansion and revamping 9.386 progressing Newly added 1.5mta of ethylene
of Maoming ethylene project smoothly capacity, 1.67mta of PVC capacity
revamping of Yangzi PX, and 0.93mta synthetic fibre
PTA projects, and revamping monomer and polymer capacity
of Baling fertilizer project,
which stress the core
business and increase
the return ratio of
capital occupied
Scientific research
information and others
segment:
Mainly used for the 1.164 progressing The application of ERP was
Company's scientific smoothly expanded; the efficiency of
research development management was increased.
and IT construction Further optimized the associated
facilities of scientific research
Total 58.115 - -
6.14 Explanation of the board of directors about the accounting firm's
"non-standard comments"
[ ] Applicable [ X ] Not applicablee
6.15 Operating plan for the new fiscal year formulated by the Board of
Directors
Business Prospect
6.15.1 Market Outlook
Looking forward for 2006, China's economy is expected to maintain a
stable and rapid growth, which would help sustain a stable growth of
domestic demand for oil and petrochemical products, providing good
market conditions for the Company. The international crude oil
prices are expected to continue to maintain at a high price level.
The domestic prices of refined oil products are expected to
gradually reflect the international prices following the integrated
reform of crude oil pricing mechanism, but currently the refining
segment would likely to continue facing challenges. While the prices
for chemicals are expected to continue to stay at relatively high
level, but due to the expected increase of feedstock cost, the gross
profit margin for chemicals segment may experience further decline.
Meanwhile, with the opening of the domestic wholesale market of
refined oil products, competitions in domestic refined oil products
market may be stronger.
6.15.2 Production and Operation
Faced with the complicated market environment in 2006, the Company
intends to adopt flexible operating strategies and focus on the
following areas:
Exploration and production segment: The Company will make further
efforts to develop economic reserves, complement the construction of
production capacity in new blocks and accelerate construction of
natural gas production capacity, trial production and marketing to
ensure stable growth of oil and gas production and to improve the
recovery rate and commodity rate of oil and gas as well as total
production and economic benefits. The Company plans to produce 39.8
million tonnes of crude oil and 7 billion cubic meters of natural
gas in 2006.
Refining segment: The Company intends to optimise the existing
systems while increasing throughput of sour and heavy oil to reduce
crude oil costs. It intends to more efficiently utilise the capacity
of large wharfs, ports and pipeline transportation to reduce
transportation costs. It intends to optimise the processing plans of
each refinery to strive for more flexible adjustment of processing
volume in line with the demand of each regional market and the
overall situations of crude supply and demand, while endeavoring to
adjust product mix and increase production of higher value-added
products. The Company plans to process 146 million tonnes of crude
oil in 2006.
Marketing and distribution segment: The Company intends to better
deploy its marketing networks to improve service quality and
increase the percentage of retail and direct sales. Moreover, it
intends to better deploy its refined oil product pipelines to reduce
storage and transportation costs. The Company plans to have a total
sales volume of refined oil products of 110 million tonnes,
including a retail sales volume of 66.2 million tonnes.
Chemicals segment: The Company intends to strengthen its management
to ensure safe, stable and high load operation of its chemical
facilities, and intends to produce more higher value-added products.
Priority will be given to test run and commercial operation of those
revamping facilities including Maoming Ethylene revamping. It
intends to fully leverage on the strengths of its chemicals sales
subsidiary to improve competitiveness by optimising operational
process, improving sales networks and solidifying the linkage
between production and sales. In 2006, the Company plans to produce
5.92 million tonnes of ethylene, 8.15 million tonnes of synthetic
resins, 0.6 million tonnes of synthetic rubbers, 1.53 million tonnes
of synthetic fibers and 7.14 million tonnes of synthetic fiber
monomers and polymers.
Research and development: In line with the needs of production and
development, the Company intends to further refine exploration
technologies for uncovering operational process oil and gas in the
mature blocks in eastern China, strengthen its research over key
technologies, and accelerate theoretical innovation as well as key
technological innovation in marine facies oil and gas exploration in
western China. The Company also intends to intensify its efforts in
technologies for enhancing the quality of gasoline and diesel and
production technologies for increasing higher value-added new
chemical products, while accelerating application of technological
achievements and providing technical support for improving the
Company's core competitiveness.
Cost saving: In 2005, the Company intends to rely on scientific and
technological advancement and reinforced management practices to
deepen reforms and enhance operating efficiency. It plans to achieve
a cost saving of RMB 2.5 billion, among which exploration and
production segment plans to achieve a cost saving of RMB 600
million, refining segment RMB 600 million, chemicals segment RMB 700
million, and marketing and distribution segment RMB 600 million.
Capital expenditure: The Company's planned capital expenditure is
RMB 70 billion for 2006. The projected expenditure for exploration
and production segment is RMB 29.8 billion, for refining segment is
RMB 14.6 billion, for chemicals segment is RMB 12.5 billion, for
marketing and distribution segment is RMB 11 billion and for
corporate and others is RMB 2.1 billion. The capital expenditure
will be primarily invested in the following activities within each
of the various segments: in the exploration and production segment,
the Company will continue to pursue the principle of "coordination
of reserves, production, investment and returns", under which the
concept of oil reserve management will be strengthened, construction
of oil and gas production capacity in western China and development
of Puguang Gas Field in northeastern Sichuan will be accelerated.
The Company will also endeavor to enhance overall deployment of its
production capacity, increase the production in low-yield reserves
and maintain a positive balance between the production and newly
found reserves. In the refining segment, the Company will continue
to refine and accelerate construction of crude oil pipeline and
related receiving and unloading facilities, ensure the smooth
progress of the revamping efforts at refining facilities in
Guangzhou, Yanshan and other areas aimed at upgrading oil product
quality, and push forward Qingdao oil refining project and Fujian
integrated project. In the chemicals segment, the Company will focus
on the successful commencement of operation of the revamped
facilities at Maoming Ethylene, the PX and PTA facilities at Yangzi
Petrochemical and three fertiliser facilities, and the orderly
commencement of construction of the ethylene facilities at Fujian,
Tianjin and Zhenhai. In the marketing and distribution segment, the
Company will continue to optimise and adjust the sales network,
accelerate construction of refined oil product pipelines, and
construct more petrol stations in central cities, new urban
districts and along expressways.
Employee reduction: The Company plans to reduce its number of
employee by over 6,000 employees in 2006 so that the total number of
employee will be controlled at approximately 358,500 as of the end
of 2006, which would make the total employees reduction exceed
150,000 since the establishment of the Company.
In 2006, the Company will strive to overcome various difficulties
and meet operational objectives of 2006 in line with the operating
policies set forth by the Board of Directors, and will endeavor to
set new records, deliver sound performances in its business
operations and maintain sustainable development.
The Company has long been dedicated to achieving a coordinated
development between health, safety and environment (HSE) and
economic growth and has instituted a mechanism for effective
long-term operations. While maintaining full load and longer cycle
production, the Company in 2005 continued to focus on operational
safety and improved environmental protection and made continuous
efforts to care for the health of its employees and its relations
with the communities to achieve harmonious growth.
6.15.3 Risk Factors
In the course of its production and operations, Sinopec Corp. will
actively take various measures to mitigate operational risks.
However, in practice, it may not be possible to prevent all risks
and uncertainties.
(1) Fluctuation of Crude Oil Prices: a significant amount of the
Company's demand for crude oil is satisfied from external
purchases. In recent years, the international crude oil prices
continued to be volatile and remained at a high level and are
subject to wild fluctuations. Although the Company has taken
flexible measures to cope with the high prices, it may not be
fully shielded from risks associated with any wild fluctuation
of the international crude oil prices.
(2) Cyclic Effects: as an integrated energy and chemicals company,
the Company is also subject to cyclic effects which
characterise to the chemicals industry. Affected by the fast
growth of new production capacities worldwide and oil price
fluctuation, the gross profit margin in the chemicals industry
may fall, and the operational performance of the Chemicals
Segment may be affected by cyclic factors.
(3) Government Regulation: although the government is gradually
liberalising the petroleum and petrochemicals sector, the
petroleum and petrochemical industry in China are still subject
to some form of regulation, which include: issuing petroleum
production License, setting of guidance prices for retail of
gasoline and diesel, provision and pricing of certain resources
and services, determination of taxes and fees, formulation of
import & export quotas and procedures, formulation of safety,
quality and environmental protection standards. Such regulation
may have material effect over the operations and economic
returns of the Company.
(4) Full market access: under China's commitments for access into
the WTO, the refined oil products market will be fully opened
soon and market competition will grow fiercer. Although the
Company has actively taken various measures and optimised its
sales network for refined oil products, it may still experience
some of the impact from full market access.
(5) Uncertainties with Oil & Gas Reserves: various data disclosed
in this annual report, including the oil and gas reserves, are
only estimates derived by adoption of certain appraisal
methods. The reliability of such estimates depends on many
factors including techniques used and involves various
uncertainties, and there is a risk that the actual data may
differ substantially from such estimates.
(6) Operational Risks and Natural Disasters: the process of
chemical production is exposed to the risk of inflammation,
explosion and environmental pollution and is vulnerable to
natural disasters. Such contingencies may cause serious impact
to the society, grievous injuries to people and major financial
losses to the Company. The Company has formulated and is
implementing a strict HSE management system, in an effort to
avoid such risks as much as possible. The Company also
subscribed to the SPI Fund. However, it may happen that the
claimed proceeds under the SPI fund is not enough to cover
actual financial losses suffered by the Company.
(7) Exchange Rate and Interest Rate: according to the existing
rules of foreign exchange, the government has lifted the
control over foreign exchange transactions under current
accounts, but foreign exchange transactions under capital
accounts still need approval from the State Administration of
Foreign Exchange. These restrictions may influence the
Company's ability to get foreign currencies through financing
activities or the ability to get foreign currencies for capital
expenditure. On 21st July 2005, China began to adopt an
administered floating exchange rate regime based on market
supply and demand with reference to a basket of currencies.
Exchange rate fluctuation may also have certain impact on the
operations of the Company.
Profit forecast for the new fiscal year (if has)
[ ] Applicable [ X ] Not applicable
6.16 Plan of the board of directors for profit appropriation or dividend
dispatch
In accordance with the provisions of Sinopec Corp.'s Articles of
Association, the appropriation of profit for the relevant fiscal
year would be conducted on the basis of distributable profit
determined in accordance with the PRC Accounting Rules and
Regulations or IFRS, whichever is lower. Thus, on the basis of the
distributable profit of Sinopec Corp. audited under IFRS, which was
RMB 38.907 billion, after deducting the statutory surplus reserve
and the statutory public welfare fund totaled RMB7.912 billion, and
deducting the final dividend for year 2004 distributed in 2005, the
interim dividend for 2005 totaled RMB 10.404 billion, the amount of
undistributed profit of Sinopec Corp. for 2005 was RMB 20.591
billion. On the basis of the total number of 86,702,439,000 shares
at the end of 2005, the Board proposed a final dividend of RMB 0.09
per share (including tax) in cash for year 2005 (totaled RMB 7.803
billion), adding the distributed interim cash dividends of 0.04 per
share (totaled RMB 3.468 billion), the total cash dividends for 2005
shall be RMB 0.13 per share (RMB 11.271 billion in total). The
preliminary plan for profit appropriation will be subject to
consideration and approval at Annual General Meeting of Shareholders
for year 2005. The final dividends will be distributed on or before
30th June 2006 (Friday) to those shareholders whose names appear on
the register of members of Sinopec Corp. at the close of business on
16th June 2006 (Friday). The register of members of Sinopec Corp.'s
H shares will be closed from 12th June 2006 (Monday) to 16th June
2006 (Friday) (both dates are inclusive). In order to qualify for
the final dividend for H shares, the shareholders must lodge all
share certificates accompanied by the transfer documents with HKSCC
Nominees Limited, at Shops 1712 to 1716, 17th Floor, Hopewell
Centre, 183 Queen's Road East, Hong Kong before 4:00 p.m. on 9th
June 2006 (Friday) for registration.
ss.7. Report of the Supervisory Committee
Independent Opinion of the Supervisory Committee Regarding Operation of
the Company
During this reporting period, notification, convening and holding of the
general meetings of shareholders and the meetings of Board of Directors
were compliant with relevant laws, regulations and the Articles of
Association, and the Board of Directors diligently discharged its
obligations and exercised its rights under the Company Law of the PRC and
the Company's Articles of Association, fully implemented the resolutions
of the general meeting of shareholders and the meetings of Board of
Directors and made decisions in a timely manner over material affairs
including the capital operations, production and operating plans and
development goals. The Board fully implemented the internal control
system to further improve the Company's corporate governance structure.
The Directors and the senior management officers acted diligently and in
good faith, and operated in compliance with laws and regulations. No
violation or breach of laws, regulations or the Articles of Association
on the part of the aforementioned persons, nor any act to the detriment
of the Company's interest, was found during the reporting period.
ss.8. Significant events
8.1 Acquisition of assets
[ X ] Applicable [ ] Not applicable
Net profit
contributed
to the listed Whether
company in the Connected Whether the liabilities
period from transaction or ownership of the related
the date of not (If yes, of the assets has
Counterpart of acquisition to explain the related been
transaction and Date of Acquisition the end of principle of price assets has been transferred
the assets acquired acquisition price this year determination) transferred or not or not
Acquisition of 51% November 24, 2005 RMB98 million None No In progress Yes
equity held by China
Resources Petrochems
(Group) Co., Ltd. in
Dongguan Huarun
Acquisition of 95% June 21, 2005 RMB194,980,850 None No In progress Yes
equity held by Beijing
Yanhua Hi-tech Co., Ltd.
in Beijing Yauhua Hi-tech
Catalyst Co., Ltd.
8.2 Sales of assets
[ ] Applicable [ X ] Not applicable
The above do not have a significant impact on the continuity of
operation and the management stability of Sinopec Corp.
8.3 Material guarantees
[ X ] Applicable [ ] Not applicable
Guarantees provided by the Company (excluding the guarantees
provided for subsidiaries)
Date of
Occurrence Whether
(Date of Guaranteed Whether for a
Execution of amount Type of completed connected
Obligors the Agreement) (RMB millions) guarantee Term or not party (1)
Shanghai Secco 9 February 2002 2,857 Joint and 9 February 2002 No Yes
Petrochemical several liability -20 December 2021
Co, Ltd.
Shanghai Secco 9 February 2002 4,062 Joint and 9 February 2002 No Yes
Petrochemical several liability - 20 December 2013
Co, Ltd.
BASF-YPC Co., Ltd. 7 March 2003 4,680 Joint and 7 March 2003 No Yes
several liability - 31 December 2008
Yueyang Sinopec 10 December 2003 377 Joint and 10 December 2003 No Yes
Shell Coal several liability - 10 December 2017
Gasification
Co. Ltd.
Fujian Zhangzhao 21 January 2003 10 Joint and 21 January 2003 No Yes
Expressway Service several liability - 31 October 2007
Company Limited
Balance of Guarantee
by Shanghai
Petrochemical for
its associates and
joint ventures 38 No Yes
Total amount of guarantee provided during the reporting period (2) None
Total amount of guarantee outstanding at the end of the reporting
period (2) RMB 12,024 million
Guarantees for subsidiaries
Total amount of guarantee provided for subsidiaries during the reporting period RMB 27 million
Total amount of guarantee for subsidiaries outstanding at the end of the reporting period RMB 2,583 million
Total amount of guarantee (including those provided for subsidiaries)
Total amount of guarantee(3) RMB 14,607 million
Total amount of guarantee as a percentage of Sinopec Corp.'s net assets 6.7%
Guarantee provided for shareholders, effective controller and connected parties None
Amount of debt guarantee provided directly or indirectly for the companies with liabilities to assets
ratio of over 70% RMB 179 million
The amount of guarantee in excess of 50% of the net assets None
Total amount of the above three guarantee items(4) RMB 179 million
Note 1: As defined in the stock listing rules of Shanghai Stock
Exchange.
Note 2: The amount of guarantee provided during the reporting
period and the amount of guarantee outstanding at the end of
the reporting period include the guarantees provided by the
subsidiaries to external parties. The amount of the
guarantee provided by these subsidiaries is the guarantee
provided by the Company's subsidiaries multiplied by the
shareholdings held by Sinopec Corp. in such subsidiaries.
Note 3: Total amount of guarantee is the aggregate of the above
"total amount of guarantee outstanding at the end of the
reporting period (excluding the guarantee provided for
subsidiaries)"and "total amount of guarantee for
subsidiaries outstandingEat the end of the reporting
period".
Note 4: "Total guarantee amount of the above three guarantee
items" is the aggregate of "guarantee provided for
shareholders, effective controller and connected parties",
"amount of debt guarantee provided directly or indirectly
Efor the companies with liabilities to assets ratio of over
70%" and "the amount guarantee in excess of 50% of the net
assets". If the above three conditions are borne in one
guarantee item, they will be calculated only once in the
total amount.
Performing Material Guarantees
At the fourteenth meeting of the First Session of the Board of
Directors of Sinopec Corp., the Board approved Sinopec Corp. to
provide conditional guarantee in both domestic and foreign
currencies for the Shanghai Secco project loan, and the amount of
guarantee was equivalent to RMB 6.992 billion. For further details,
please refer to Sinopec Corp.'s results announcement for the year
2001 published in China Securities Journal, Shanghai Securities News
and Securities Times in Mainland China and South China Morning Post
and Hong Kong Economic Times in Hong Kong on 2 April 2002.
At the fourteenth meeting of the First session of the Board of
Directors of Sinopec Corp., the Board approved the proposal
regarding Sinopec Corp.'s provision of guarantee for completion of
construction of the BASF-YPC project. On 7 March 2003, Sinopec Corp.
entered into guarantee agreements for the completion of construction
of the BASF-YPC project with domestic and foreign banks, whereby it
guaranteed 40% of a domestic and foreign currencies denominated loan
equivalent to around RMB 11.7 billion provided by these banks to
BASF-YPC Co., Ltd. for completion of construction.
At the twenty-second meeting of the First Session of the Board of
Directors of Sinopec Corp., the Board approved the proposal
regarding Sinopec Corp.'s provision of an equity pledge for the
BASF-YPC project loan on the condition that BASF should provide an
equity pledge on the same terms.
At the twenty-second meeting of the First Session of the Board of
Directors of Sinopec Corp., the Board also approved the proposal
regarding Sinopec Corp.'s provision of guarantee for Yueyang Sinopec
Shell Coal Gasification Co., Ltd., in the amount of RMB 377 million.
At the thirteenth meeting of the Second Session of the Board of
Directors of Sinopec Corp, the Board approved Sinopec Corp. in
providing China International United Petroleum & Chemical Co., Ltd.
with a credit line guarantee equivalent to RMB 2.421 billion.
8.4 Material Connected Transactions
The aggregate amount of connected transactions actually occurred in
relation to the Company during the year was RMB 179.296 billion, of
which, incoming trade amounted to RMB 84.073 billion, and outgoing
trade amounted to RMB 95.223 billion (including, RMB 95.123 billion
of sales of products and services, RMB 52 million of interest
earned, RMB 48 million of income from agency fee). All of these
transactions satisfied the conditions of waiver granted by the Hong
Kong Stock Exchange. In 2005, the products and services provided by
Sinopec Group Company (procurement, storage, transportation,
exploration and production services, production-related services) to
the Company were RMB 75.486 billion, representing 9.86% of the
Company's operating expenses for year 2005, a decrease of 1.33
percentage points compared with those in 2004, which were within the
cap of 18% for waiver. The auxiliary and community services provided
by Sinopec Group Company to the Company were RMB 1.79 billion,
representing 0.23% of the operating expenses, with a slight decrease
compared with 0.31% in the preceding year, which were within the cap
of 2% for waiver. In 2005, the product sales from the Company to
Sinopec Group Company amounted to RMB 58.579 billion, representing
7.12% of the Company's operating revenue, which were within the cap
of 14% for waiver. With regard to the Leasing Agreement for Land Use
Rights, the amount of rent paid by the Company as of December 31,
2005 was approximately RMB 2.557 billion. With regard to the premium
payable under SPI Fund Document, the amount of fund paid by the
Company in 2005 shall not be less than the amount specified in the
SPI Fund Document.
8.4.1 Connected sales and purchases
[ X ] Applicable [ ] Not applicable
Unit: RMB million
Sales of goods and provision of Purchase of goods and
services to connected party services from connected party
Percentage of Percentage of
the total amount the total amount
Transaction of the type of Transaction of the type of
Connected party amount transaction amount transaction
Sinopec Group Company 58,579 7.3% 77,276 10.7%
Other connected parties 36,544 4.6% 2,581 0.4%
------------ ------------- ------------ ------------
Total 95,123 11.9% 79,857 11.1%
============ ============= ============ ============
8.4.2Connected obligatory rights and debts
[ X ] Applicable [ ] Not applicable
Unit: RMB million
Funds provided to Fund provided to the
connected party Company by connected party
Occurrence Occurrence
Connected party amount Balance amount Balance
Sinopec Group Company (3,647) 2,488 (4,261) (5,418)
Other connected parties 209 517 i-D i-D
------------ ------------- ------------ ------------
Total (3,438) 3,005 (4,261) (5,418)
============ ============= ============ ============
8.5 Entrusted Money Management
[ ] Applicable [ X ] Not applicable
8.6 Performance of commitments
[ X ] Applicable [ ] Not applicable
At the end of the reporting period, the major undertakings given by
Sinopec Group Company to the Company included:
i Complying with agreements regarding connected transactions;
ii Solving the issues arising from the land use rights
certificates and property ownership rights certificates within
a specified period of time;
iii Implementing the Reorganisation Agreement (as defined in the
Prospectus for the Issuance of H Shares);
iv Granting licenses for intellectual property rights;
v Refraining from involvement in competition within the industry;
and
vi Withdrawing from the business competition and conflict of
interests with Sinopec Corp.
Details of the above commitments are included in the Prospectus for
the Issuance of A Shares published by Sinopec Corp. in China
Securities Journal, Shanghai Securities News and Securities Times on
22 June 2001.
During this reporting period, Sinopec Corp. was not aware of any
breach of above commitments by the above principal shareholder.
8.7 Litigation and arbitration of significant importance
[ ] Applicable [ X ] Not applicable
8.8 Other significant events
8.8.1 Discovery of Large-scale Marine FACIES Gas Field -
Puguang gas Field
The Company discovered the largest and most abundant marine
facies natural gas field (Puguang Gas Field) in China, which is
located in northeast Sichuan Province. According to the
appraisal undertaken by the Mineral Resource Reserve Evaluation
Center under the Ministry of Land and Resources, reserve in
place in the Puguang Gas Field is estimated at 251.071 billion
cubic meters, with technical recoverable reserve of 188.304
billion cubic meters. Puguang Gas Field meets the conditions
for commercial development. Sinopec Corp. has prepared a Phase
I Development Plan, which plans to achieve commercial
production of more than 4 billion cubic meters per annum of gas
by 2008 and 8 billion cubic meters per annum by 2010. In
connection with the contemplated project, a natural gas
pipeline from northeast Sichuan Province to Jinan, Shandong
Province will be constructed. The government has approved
Sinopec Corp. to proceed with preparatory work for the project.
The discovery of Puguang Gas Field is attributable to the
innovations in marine facies exploration theory, exploration
methodology, exploration technology and management innovation,
representing a major breakthrough in marine facies exploration
theory and practices in China. The discovery expanded the
Company's exploration territory, thereby paving the way for
future growth in both reserve and production.
8.8.2 Issuance of Short-term Commercial paper
On September 19, 2005, Sinopec Corp. convened the first
Extraordinary General Meeting of Shareholders for 2005, at
which a resolution was passed for issuance of short term
commercial paper. For details, please refer to Sinopec Corp.'s
announcements published in China Securities Journal, Shanghai
Securities News, and Securities Times in Mainland China, and
Hong Kong Economic Times and South China Morning Post in Hong
Kong on September 20, 2005. The tranche of six-month 2.54%
commercial paper was issued on October 24, 2005 to
institutional investors in PRC inter-bank bond market
(excluding investors prohibited by relevant PRC laws and
regulations), raising a total of RMB 10 billion.
8.8.3 The transfer of state-owned shares from CBD and Cinda to
Sinopec Group Company
During the reporting period, China Development Bank ("CDB") and
China Cinda Asset Management Corporation ("Cinda"), both of
which are shareholders of Sinopec Corp., entered into a share
transfer agreement with Sinopec Group Company, pursuant to
which CDB and Cinda respectively transferred 2 billion (2.31%
of the total issued shares of Sinopec Corp.) and 871,763,776
(1.01% of the total issued shares of Sinopec Corp.) state-owned
shares to Sinopec Group Company. The respective total cash
considerations of RMB 4.2 billion and RMB 1.8307 billion were
paid to CDB and Cinda by Sinopec Group Company. The
above-mentioned share transfers were completed on December 29,
2005.
8.8.4 Major projects
(1) Tianjin one million tpa ethylene project
Sinopec Tianjin one million tpa ethylene and associated
facilities project was approved by the State Council in
December 2005. The project includes the ethylene project,
revamping of refinery and thermal power generation
facilities, with its total investment being about RMB 21
billion, and Sinopec Corp. is proceeding with preparatory
work for the project.
(2) ZRCC one million tpa ethylene project
ZRCC one million tpa ethylene and associated facilities
project was approved by the State Council in March 2006.
The project includes the ethylene project, expansion of
thermal power generation facilities, with its total
investment being about RMB 22 billion, and Sinopec Corp.
and ZRCC are proceeding with preparatory work for the
project.
8.8.5 Establishment of Sinopec Chemicals Sales Company
Sinopec Chemicals Sales Company was established on May 10, 2005
in Beijing. To meet the requirements posed by the new system
and mechanism, the Chemicals Sales Company will integrate the
Company's marketing strategy, branding strategy, market
development, logistics optimisation, resource allocation and
sales activities, so as to fully leverage the overall strength
of extensive operations and maximise overall profitability.
8.8.6 The transfer of state-owned legal person shares of China
phoenix held by Sinopec Corp.
On October 18, 2005, Sinopec Corp. and China Changjiang
National Shipping Group ("Changhang Group") entered into a
share transfer agreement, under which Sinopec Corp. agreed to
transfer to Changhang Group a total of 211,423,651 state-owned
legal person shares held by Sinopec Corp. in Sinopec Wuhan
Phoenix Company Limited ("China Phoenix") (representing 40.72%
of the total issued share capital of China Phoenix). For
further details, please refer to the "Report on Changes of
Shareholdings in Sinopec Wuhan Phoenix Company Limited" dated
October 20, 2005 published by Sinopec Corp. on the website of
the Shanghai Stock Exchange. The proposed asset restructuring
is pending approval by the China Securities Regulatory
Commission ("CSRC").
8.8.7 Acquisition of shares of Beijing Yanhua Hi-tech Catalyst
Co., Ltd. Held by Yanhua Hi-tech Corp.,
On June 21, 2005, Sinopec Corp. entered into an agreement with
Beijing Yanhua Hi-tech Co., Ltd., pursuant to which Sinopec
Corp. acquired 95% equity of Beijing Yanhua Hi-tech Catalyst
Co., Ltd., held by Yanhua Hi-tech Corp., at a consideration of
RMB 195 million.
8.8.8 Merger by Absorption of Zhenhai Refinery and Chemicals
According to the Agreement of Merger by Absorption between
Ningbo Yonglian Co., Ltd. ("Ningbo Yonglian"), a wholly owned
subsidiary of Sinopec Corp. established for the purpose of such
a merger, and Sinopec Zhenhai Refinery and Chemicals Co., Ltd.
("ZRCC") signed on November 12, 2005, Ningbo Yonglian will
purchase the listed H shares of ZRCC from its shareholders at
the price of HK$ 10.60 per share in cash, the total
consideration being HK$ 7.672 billion. For further details,
please refer to Sinopec Corp.'s announcement published in China
Securities Journal, Shanghai Securities News and Securities
Times in Mainland China and South China Morning Post and Hong
Kong Economic Times in Hong Kong on November 14, 2005. The
proposed merger was approved on January 12, 2006 at the general
meeting of shareholders and the general meeting of independent
shareholders of ZRCC and was approved by the shareholders of
Ningbo Yonglian, as well as by domestic and overseas securities
regulators.
8.8.9 Tender Offer by Sinopec Corp. to Four A-share Subsidiaries
On February 25, 2006, the 24th meeting of the Second Session of
the Board of Directors of Sinopec Corp. respectively approved
its voluntary tender offers to acquire all the tradable shares
of Sinopec Qilu Petrochemical Co., Ltd. at a price of RMB 10.18
per share, all the tradable shares of Sinopec Yangzi
Petrochemical Co., Ltd. at a price of RMB 13.95 per share, all
the tradable shares of Sinopec Zhongyuan Oil & Gas Hi-tech Co.,
Ltd. at a price of RMB 12.12 per share, all the tradable shares
of Sinopec Shengli Oil Field Dynamic (Group) Co., Ltd. at a
price of RMB 10.30 per share and all the non-tradable shares of
Sinopec Shengli Oil Field Dynamic (Group) Co., Ltd. held by
investors other than Sinopec Corp. at a price of RMB 5.60 per
share. For further details, please refer to relevant
announcements published in China Securities Journal, Shanghai
Securities News and Securities Times in Mainland China on
February 16 and March 6, 2006 (Sinopec Shengli Oil Field
Dynamic (Group) Co., Ltd.'s announcements were only published
in China Securities Journal and Securities Times).
8.8.10 De-registration of Sinopec Shengli Oil Field Co., Ltd.
Sinopec Corp. de-registered Sinopec Shengli Oil Field Co., Ltd.
and on January 16, 2006 established Shengli Oilfield branch.
Prior to the de-registration, Sinopec Shengli Oil Field Co.,
Ltd. was a wholly owned subsidiary of Sinopec Corp.
8.8.11 Receipt of one-off rebate from the central government
During the reporting period, international crude oil prices
fluctuated and climbed at a high level, and domestic prices of
refined oil products were tightly controlled. In December 2005,
Sinopec Group Company received a Circular, referenced as Cai Qi
[2005] No. 298, from the Ministry of Finance, pursuant to which
the central government provided a one-off rebate of RMB 10
billion to Sinopec Group Company. Sinopec Corp. received RMB
9.415 billion out of the RMB 10 billion, which has been
included as other income in the financial statements for 2005.
8.8.12 Reduction of employees
Sinopec Corp. plans to reduce the number of employees by
100,000 through retirement, voluntary resignation and/or
dismissal within 5 years, from 2001 to 2005, to improve its
efficiency and profitability In 2005, Sinopec Corp. assumed RMB
369 million in voluntary resignation compensation for
approximately 7,000 voluntarily resigned employees. By the end
of 2005, the aggregate net headcount reduction during the past
five years had amounted to 143,700 persons.
8.8.13 A share Reform on non-tradable shares
The Company is currently reorganising its internal management
systems to provide favorable conditions for such reform.
Sinopec Group Company has not formed definitive plans for such
reform with regard to Sinopec Corp.
8.9 Code on Corporate Governance Practice
Sinopec Corp. has complied with the Code provisions of the Code on
Corporate Governance Practice. The Corporate Goverance Report of
Sinopec Corp. will be contained in its 2005 Annual Report.
ss.9. Financial statements
9.1 Auditors' opinion
Financial Statements [ ] Unaudited [ X ] Audited
Auditor's opinion [ X ] Standard unqualified [ ] Not standard
opinion opinion
9.2 The Group's and the Company's balance sheets and income statement
and profit appropriation statements with comparatives, and cash flow
statements for the year
9.2.1 Financial statements prepared in accordance with the PRC Accounting
Rules and Regulations
(1) Balance Sheet
At 31 December 2005 At 31 December 2004
The Group The Company The Group The Company
RMB millions RMB millions RMB millions RMB millions
Current assets
Cash at bank and in hand 14,747 5,124 18,280 6,299
Bills receivable 7,143 1,334 7,812 1,597
Trade accounts receivable 14,532 8,826 9,756 8,245
Other receivables 11,487 9,604 12,462 19,625
Advance payments 5,051 4,118 4,828 4,358
Inventories 88,936 49,862 63,918 33,951
------------ ------------- ------------ ------------
Total current assets 141,896 78,868 117,056 74,075
------------ ------------- ------------ ------------
Long-term equity investments
(Including the Group's and the Company's
equity investment differences of
RMB 2,003 million and RMB 2,017 million
respectively (2004: RMB 383 million and
RMB 400 million)) 14,146 133,203 13,409 124,211
------------ ------------- ------------ ------------
Fixed assets
Fixed assets, at cost 572,465 294,206 519,462 271,120
Less: Accumulated depreciation 265,611 123,747 243,510 113,572
------------ ------------- ------------ ------------
Net book value of fixed assets
before impairment losses 306,854 170,459 275,952 157,548
Less: Provision for impairment
loss of fixed assets 6,234 4,191 5,816 4,038
------------ ------------- ------------ ------------
Net book value of fixed assets 300,620 166,268 270,136 153,510
Construction materials 555 555 430 93
Construction in progress 48,073 38,937 45,976 28,779
------------ ------------- ------------ ------------
Total fixed assets 349,248 205,760 316,542 182,382
------------ ------------- ------------ ------------
Intangible assets and other assets
Intangible assets 5,924 4,238 5,345 4,261
Long-term deferred expenses 3,657 2,656 3,563 2,530
------------ ------------- ------------ ------------
Total intangible assets and other assets 9,581 6,894 8,908 6,791
------------ ------------- ------------ ------------
Deferred taxation
Deferred tax assets 5,701 3,203 4,166 3,708
------------ ------------- ------------ ------------
Total assets 520,572 427,928 460,081 391,167
============ ============= ============ ============
At 31 December 2005 At 31 December 2004
The Group The Company The Group The Company
RMB millions RMB millions RMB millions RMB millions
Current liabilities
Short-term loans 16,124 6,940 26,723 16,254
Bills payable 23,243 19,077 30,797 21,589
Trade accounts payable 52,967 28,833 23,792 21,137
Receipts in advance 14,086 12,491 8,605 6,106
Wages payable 3,436 2,525 3,223 1,854
Staff welfare payable 1,052 514 1,101 498
Taxes payable 5,262 2,075 6,741 3,170
Other payables 1,830 527 1,519 442
Other creditors 24,161 22,914 26,459 34,156
Accrued expenses 512 173 652 430
Short-term debentures payable 9,921 9,921 - -
Current portion of long-term loans 15,198 12,144 14,298 11,506
------------ ------------- ------------ ------------
Total current liabilities 167,792 118,134 143,910 117,142
------------ ------------- ------------ ------------
At 31 December 2005 At 31 December 2004
The Group The Company The Group The Company
RMB millions RMB millions RMB millions RMB millions
Long-term liabilities
Long-term loans 103,492 89,113 94,087 82,332
Debentures payable 3,500 3,500 3,500 3,500
Other long-term liabilities 782 315 820 438
------------ ------------- ------------ ------------
Total long-term liabilities 107,774 92,928 98,407 86,270
------------ ------------- ------------ ------------
Deferred taxation
Deferred tax liabilities - - 198 16
------------ ------------- ------------ ------------
Total liabilities 275,566 211,062 242,515 203,428
------------ ------------- ------------ ------------
Minority interests 29,383 - 31,216 -
------------ ------------- ------------ ------------
Shareholders' funds
Share capital 86,702 86,702 86,702 86,702
Capital reserve 37,121 37,797 37,121 37,797
Surplus reserves
(Including statutory public
welfare fund of RMB 13,514 million
(2004: RMB 9,558 million)) 34,028 34,028 26,116 26,116
Unrecognised investment losses (594) - (713) -
Retained profits
(Including dividend proposed after
the balance sheet date in respect
of year 2005 of RMB 7,803 million
(2004: RMB 6,936 million)) 58,366 58,339 37,124 37,124
------------ ------------- ------------ ------------
Total shareholders' funds 215,623 216,866 186,350 187,739
------------ ------------- ------------ ------------
Total liabilities and shareholders' funds 520,572 427,928 460,081 391,167
============ ============= ============ ============
(2) Income statement and profit appropriation statement
For the year ended For the year ended
31 December 2005 31 December 2004
The Group The Company The Group The Company
RMB millions RMB millions RMB millions RMB millions
Income from principal operations 799,115 532,621 590,632 397,789
Less: Cost of sales 668,249 480,866 459,207 336,089
Sales taxes and surcharges 17,152 11,249 16,203 10,094
------------ ------------- ------------ ------------
Profit from principal operations 113,714 40,506 115,222 51,606
Add: Profit from other operations 839 512 1,102 108
Less: Selling expenses 22,690 14,672 19,477 13,055
Administrative expenses 23,330 14,573 23,167 15,523
Financial expenses 5,266 3,539 4,331 2,770
Exploration expenses,
including dry holes 6,411 5,052 6,396 4,951
------------ ------------- ------------ ------------
Operating profit 56,856 3,182 62,953 15,415
Add: Investment income 813 51,646 1,088 39,374
Subsidy income 9,415 6,584 - -
Non-operating income 367 224 665 377
Less: Non-operating expenses 5,969 3,967 11,171 7,879
------------ ------------- ------------ ------------
Profit before taxation 61,482 57,669 53,535 47,287
Less: Income tax 18,903 18,138 16,060 14,769
Minority interests 2,902 - 5,670 -
Add: (Reversal of) unrecognised
investment losses (119) - 470 -
------------ ------------- ------------ ------------
Net profit 39,558 39,531 32,275 32,518
Add: Retained profits at the
beginning of year 37,124 37,124 19,975 19,732
------------ ------------- ------------ ------------
Distributable profits 76,682 76,655 52,250 52,250
Less: Transfer to statutory surplus reserve 3,956 3,956 3,228 3,228
Transfer to statutory public
welfare fund 3,956 3,956 3,228 3,228
------------ ------------- ------------ ------------
Distributable profits to shareholders 68,770 68,743 45,794 45,794
Less: Distribution of ordinary shares'
final dividend 6,936 6,936 5,202 5,202
Distribution of ordinary shares'
interim dividend 3,468 3,468 3,468 3,468
------------ ------------- ------------ ------------
Retained profits at the end of the year
(Including dividend proposed after the
balance sheet date in respect of year
2005 of RMB 7,803 million
(2004: RMB 6,936 million)) 58,366 58,339 37,124 37,124
============ ============= ============ ============
(3) Cash Flow Statement
For the year ended
31 December 2005
The Group The Company
Note RMB millions RMB millions
Cash flows from operating activities
Cash received from sale of goods and
rendering of services 965,505 645,438
Rentals received 387 273
Government grants received 9,415 6,584
Other cash received relating to operating activities 3,572 2,929
-------------- --------------
Sub-total of cash inflows 978,879 655,224
Cash paid for goods and services (790,429) (568,978)
Cash paid for operating leases (5,629) (4,991)
Cash paid to and on behalf of employees (18,710) (9,946)
Value added tax paid (27,928) (13,623)
Income tax paid (20,998) (3,396)
Taxes paid other than value added tax and income tax (17,288) (11,372)
Other cash paid relating to operating activities (12,934) (16,231)
-------------- --------------
Sub-total of cash outflows (893,916) (628,537)
-------------- --------------
Net cash flow from operating activities (a) 84,963 26,687
-------------- --------------
Cash flows from investing activities
Cash received from sales of investments 417 102
Dividends received 668 36,700
Net cash received from sale of fixed assets and
intangible assets 510 169
Cash received on maturity of time deposits
with financial institutions 1,462 184
Other cash received relating to investing activities 386 123
-------------- --------------
Sub-total of cash inflows 3,443 37,278
-------------- --------------
Cash paid for acquisition of fixed assets
and intangible assets (65,031) (44,167)
Cash paid for acquisition of fixed assets
and intangible assets of jointly controlled entities (2,474) -
Cash paid for purchases of investments (3,605) (6,927)
Cash paid for purchase of time deposits with
financial institutions (565) (46)
Cash paid for acquisition of operating assets and
related liabilities from Sinopec Group Company (3,128) (3,128)
Cash paid for acquisition of subsidiaries (4,324) (4,324)
-------------- --------------
Sub-total of cash outflows (79,127) (58,592)
-------------- --------------
Net cash flow from investing activities (75,684) (21,314)
-------------- --------------
Cash flows from financing activities
Cash received from contribution from
minority shareholders 129 -
Cash received from issuance of corporate bonds,
net of issuing expenses 9,875 9,875
Cash received from borrowings 550,557 348,381
Cash received from borrowings of
jointly controlled entities 3,954 -
-------------- --------------
Sub-total of cash inflows 564,515 358,256
-------------- --------------
Cash repayments of borrowings (557,432) (349,794)
Cash paid for dividends,
profits distribution or interest expenses (17,365) (14,872)
Dividends paid to minority shareholders
by subsidiaries (1,611) -
-------------- --------------
Sub-total of cash outflows (576,408) (364,666)
-------------- --------------
Net cash flow from financing activities (11,893) (6,410)
-------------- --------------
Effects of changes in foreign exchange rate (22) -
-------------- --------------
Net decrease in cash and cash equivalents (b) (2,636) (1,037)
============== ==============
Note to the cash flow statement
For the year ended
31 December 2005
The Group The Company
RMB millions RMB millions
(a) Reconciliation of net profit to cash flows
from operating activities
Net profit 39,558 39,531
Add: Reversal of allowance for doubtful accounts (144) (448)
Provision for/(reversal of) diminution in value of inventories 82 (17)
Depreciation of fixed assets 30,845 15,186
Amortisation of intangible assets 986 755
Impairment losses on fixed assets 1,851 1,082
Impairment losses on long term investments 77 14
Net loss on disposal of fixed assets and intangible assets 2,202 1,681
Financial expenses 5,266 3,539
Dry hole costs 2,992 2,271
Investment income (890) (34,690)
Deferred tax liabilities (less: assets) (1,733) 489
Increase in inventories (25,078) (16,356)
Increase in operating receivables (2,256) 12,853
Increase in operating payables 28,303 797
Minority interests 2,902 -
-------------- --------------
Net cash flow from operating activities 84,963 26,687
============== ==============
(b) Net decrease in cash and cash equivalents
Cash and cash equivalents at the end of the year 13,745 5,014
Less: Cash and cash equivalents at the beginning of the year 16,381 6,051
-------------- --------------
Net decrease in cash and cash equivalents (2,636) (1,037)
============== ==============
9.2.2 Financial statements prepared in accordance with International
Financial Reporting Standards
Consolidated income statements
For the year ended For the year ended
31 December 2005 31 December 2004
RMB millions RMB millions
Turnover and other operating revenues
Turnover 799,115 597,197
Other operating revenues 24,002 22,586
------------- --------------
823,117 619,783
------------- --------------
Other income 9,415 i-D
------------- --------------
Operating expenses
Purchased crude oil, products and operating supplies and expenses (653,056) (443,590)
Selling, general and administrative expenses (33,709) (31,843)
Depreciation, depletion and amortisation (31,413) (32,342)
Exploration expenses, including dry holes (6,411) (6,396)
Personnel expenses (18,483) (18,634)
Employee reduction expenses (369) (919)
Taxes other than income tax (17,152) (16,324)
Other operating expenses, net (5,125) (6,666)
------------- --------------
Total operating expenses (765,718) (556,714)
------------- --------------
Operating profit 66,814 63,069
------------- --------------
Finance costs
Interest expense (5,920) (4,583)
Interest income 382 374
Foreign exchange losses (79) (223)
Foreign exchange gains 996 61
------------- --------------
Net finance costs (4,621) (4,371)
------------- --------------
Investment income 178 111
------------- --------------
Share of profits less losses from associates 857 797
------------- --------------
Profit before taxation 63,228 59,606
Taxation (19,388) (17,815)
------------- --------------
Profit for the year 43,840 41,791
============= ==============
Attributable to:
Equity shareholders of the Company 40,920 36,019
Minority interests 2,920 5,772
------------- --------------
Profit for the year 43,840 41,791
============= ==============
Dividends payable to equity shareholders of the Company attributable to the year:
Interim dividend declared during the year 3,468 3,468
Final dividend proposed after the balance sheet date 7,803 6,936
------------- --------------
11,271 10,404
============= ==============
Basic earnings per share (RMB) 0.47 0.42
============= ==============
Balance Sheet
At 31 December 2005 At 31 December 2004
The Group The Company The Group The Company
RMB millions RMB millions RMB millions RMB millions
Non-current assets
Property, plant and equipment 314,573 170,711 284,123 158,011
Construction in progress 48,267 39,086 46,185 28,948
Interest in subsidiaries - 75,579 - 66,930
Investments 2,926 1,037 2,538 158
Interests in associates 9,217 5,933 10,222 6,424
Interests in jointly controlled entities - 7,280 - 3,763
Deferred tax assets 6,072 3,220 4,558 3,724
Lease prepayments 1,908 - 750 -
Long-term prepayment and other assets 9,067 4,316 5,947 3,660
------------ ------------- ------------ ------------
Total non-current assets 392,030 307,162 354,323 271,618
------------ ------------- ------------ ------------
Current assets
Cash and cash equivalents 13,745 5,014 16,381 6,051
Time deposits with financial institutions 1,002 110 1,899 248
Trade accounts receivable 14,532 8,826 9,756 8,245
Bills receivable 7,143 1,334 7,812 1,597
Inventories 89,474 50,417 64,329 34,044
Prepaid expenses and other current assets 19,395 15,556 20,094 26,471
------------ ------------- ------------ ------------
Total current assets 145,291 81,257 120,271 76,656
------------ ------------- ------------ ------------
Current liabilities
Short-term debts 40,411 25,059 32,307 20,033
Loans from Sinopec Group Company and
fellow subsidiaries 832 3,946 8,714 7,727
Trade accounts payable 52,967 28,833 23,792 21,137
Bills payable 23,243 19,077 30,797 21,589
Accured expenses and other payables 48,167 40,559 45,276 45,565
Income tax payable 5,029 2,494 5,391 3,142
------------ ------------- ------------ ------------
Total current liabilities 170,649 119,968 146,277 119,193
------------ ------------- ------------ ------------
Net current liabilities (25,358) (38,711) (26,006) (42,537)
------------ ------------- ------------ ------------
Total assets less current liabilities 366,672 268,451 328,317 229,081
------------ ------------- ------------ ------------
Non-current liabilities
Long-term debts 67,059 53,401 60,822 49,515
Loans from Sinopec Group Company and
fellow subsidiaries 39,933 39,212 36,765 36,317
Deferred tax liabilities 5,902 2,216 5,636 2,025
Other liabilities 782 315 1,008 626
------------ ------------- ------------ ------------
Total non-current liabilities 113,676 95,144 104,231 88,483
------------ ------------- ------------ ------------
252,996 173,307 224,086 140,598
============ ============= ============ ============
Equity
Share capital 86,702 86,702 86,702 86,702
Reserves 136,854 86,605 106,338 53,896
------------ ------------- ------------ ------------
Total equity attributable to
equity shareholders of the Company 223,556 173,307 193,040 140,598
Minority interests 29,440 - 31,046 -
------------ ------------- ------------ ------------
Total equity 252,996 173,307 224,086 140,598
============ ============= ============ ============
Consolidated cash flow statement
For the year ended
31 December 2005
Note RMB millions
Net cash generated from operating activities (a) 76,497
--------------
Investing activities
Capital expenditure (63,135)
Capital expenditure of jointly controlled entities (2,474)
Purchase of investments and investments in associates (2,942)
Proceeds from disposal of investments and investments in associates 417
Proceeds from disposal of property, plant and equipment 510
Acquisition of minority interests in subsidiaries (4,324)
Purchase of time deposits with financial institutions (565)
Maturity of time deposits with financial institutions 1,462
--------------
Net cash used in investing activities (71,051)
--------------
Financing activities
Proceeds from bank and other loans 550,557
Proceeds from bank and other loans of jointly controlled entities 3,954
Proceeds from issuance of corporate bonds, net of issuing expenses 9,875
Repayments of bank and other loans (557,432)
Distributions to minority interests (1,611)
Contributions from minority interests 129
Dividend paid (10,404)
Cash and cash equivalent distributed to Sinopec Group Company (3,128)
--------------
Net cash used in financing activities (8,060)
--------------
Net decrease in cash and cash equivalents (2,614)
Effect of foreign exchange rate changes (22)
Cash and cash equivalents at 1 January 16,381
--------------
Cash and cash equivalents at 31 December 13,745
==============
(a) Reconciliation of profit before taxation to net cash generated
from operating activities
For the year ended
31 December 2005
RMB millions
Operating activities
Profit before taxation 63,228
Adjustments for:
Depreciation, depletion and amortisation 31,413
Dry hole costs 2,992
Share of profits less losses from associates (857)
Investment income (178)
Interest income (382)
Interest expense 5,920
Unrealised foreign exchange gains (852)
Loss on disposal of property, plant and equipment, net 2,095
Impairment losses on long-lived assets 1,851
--------------
Operating profit before changes in working capital 105,230
Increase in trade accounts receivable (4,773)
Decrease in bills receivable 669
Increase in inventories (24,998)
Decrease in prepaid expenses and other current assets 1,647
Increase in lease prepayments (715)
Increase in long-term prepayments and other assets (2,628)
Increase in trade accounts payable 28,799
Decrease in bills payable (7,554)
Increase in accrued expenses and other payables 7,952
Decrease in other liabilities (227)
--------------
Cash generated from operations 103,402
Interest received 386
Interest paid (6,961)
Investment and dividend income received 668
Income tax paid (20,998)
--------------
Net cash generated from operating activities 76,497
==============
9.2.3 Major differences between the financial statements prepared
under the PRC Accounting Rules and Regulations and IFRS
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 financial statements prepared under the PRC Accounting Rules
and Regulations and IFRS. The major differences are:
(1) Effects of major differences between the PRC Accounting Rules
and Regulations and IFRS on net profit are analysed as follows:
For the year ended For the year ended
31 December 2005 31 December 2004
RMB millions RMB millions
Net profit under the
PRCAccounting Rules and Regulations 39,558 32,275
Adjustments:
Depreciation of oil and gas properties 751 761
Capitalisation of general borrowing costs,
net of depreciation effect 507 480
Pre-operating expenditures 435 (288)
Equity investment differences 200 -
Unrecognised losses of subsidiaries 119 (531)
Acquisition of Sinopec National Star 117 117
Acquisitions of Tianjin Petrochemical,
Luoyang Petrochemical, Zhongyuan
Petrochemical and Catalyst Plants - 2,119
Reduced amortisation on revaluation of land use rights 24 19
Reduced depreciation on government grants 4 3
Impairment losses on revalued assets - 709
Disposal of oil and gas properties,
net of depreciation effect (310) 2,110
Effects of the above adjustments on taxation (485) (1,755)
Minority interests 2,920 5,772
-------------- --------------
Profit for the year under IFRS* 43,840 41,791
============= ==============
(2) Effects of major differences between shareholders' fund under
the PRC Accounting Rules and Regulations and the total equity
under IFRS are analysed as follows:
At 31 At 31
December 2005 December 2004
RMB millions RMB millions
Shareholders' funds under the
PRC Accounting Rules and Regulations 215,623 186,350
Adjustments:
Depreciation of oil and gas properties 12,233 11,482
Capitalisation of general borrowing costs 2,112 1,605
Pre-operating expenditures (22) (457)
Equity investment differences 200 i-D
Acquisition of Sinopec National Star (2,578) (2,695)
Revaluation of land use rights (953) (977)
Government grants (588) (592)
Disposal of oil and gas properties 3,060 3,370
Effects of the above adjustments on taxation (5,531) (5,046)
Minority interests 29,440 31,046
-------------- --------------
Total equity under IFRS* 252,996 224,086
============= ==============
* The above figure is extracted from the financial
statements prepared in accordance with IFRS which have
been audited by KPMG.
9.2.4 Supplemental information for North American Shareholders
The Group's accounting policies conform with IFRS which differ in
certain significant respects from accounting principles generally
accepted in the United States of America ("US GAAP"). See the text
of the Annual Report for details. The effect on profit attributable
to shareholders of significant differences between IFRS and US GAAP
is as follows:
For the years ended 31 December
2005 2005 2004
US$ millions RMB millions RMB millions
Profit attributable to equity shareholders
of the Company under IFRS 5,071 40,920 36,019
US GAAP adjustments:
Foreign exchange gains and losses 7 54 60
Capitalisation of property, plant and equipment - - 22
Depreciation on revalued property,
plant and equipment 498 4,016 4,301
Disposal of property, plant and equipment 228 1,838 2,099
Exchange of assets 3 23 23
Depreciation effect of reversal of
impairment of long-lived assets 9 76 29
Capitalised interest on investments in associates,
net of amortisation effect (5) (40) 205
Goodwill amortisation for the year - - 13
Deferred tax effect of US GAAP adjustments (221) (1,786) (2,277)
Minority interests (61) (489) (519)
------------ ------------ ------------
Profit attributable to equity shareholders
of the Company under US GAAP 5,529 44,612 39,975
============ ============ ============
Basic and diluted earnings per share
under US GAAP US$0.06 RMB0.51 RMB0.46
============ ============ ============
Basic and diluted earnings per ADS
under US GAAP* US$6.38 RMB51.45 RMB46.11
============ ============ ============
* Basic and diluted earnings per ADS is calculated on the basis that
one ADS is equivalent to 100 shares.
The effect on shareholders' funds of significant differences between
IFRS and US GAAP is as follows:
At 31 December
2005 2005 2004
US$ millions RMB millions RMB millions
Total equity attributable to equity shareholders
of the Company under IFRS 27,701 223,556 193,040
US GAAP adjustments:
Foreign exchange gains and losses (30) (241) (295)
Revaluation of property, plant and equipment (228) (1,838) (7,692)
Exchange of assets (63) (509) (532)
Reversal of impairment of long-lived assets (57) (456) (532)
Capitalised interest on investments in associates 60 486 526
Goodwill 5 43 43
Effect of US GAAP adjustments on deferred
tax assets 115 921 2,720
Effect of US GAAP adjustments on deferred
tax liabilities (17) (134) (147)
Minority interests 28 230 719
------------ ------------ ------------
Total equity attributable to equity shareholders
of the Company under US GAAP 27,514 222,058 187,850
============ ============ ============
Note: United States dollar equivalents
For the convenience of readers, amounts in Renminbi have been
translated into United States dollars at the rate of US$1.00 =
RMB 8.2765 being the noon buying rate in New York City on 31
December 2004 for cable transfers in Renminbi as certified for
customs purposes by the Federal Reserve Bank of New York. No
representation is made that the Renminbi amounts could have
been, or could be, converted into United States dollars at
that rate.
9.3 Change in accounting policy
The IASB has issued a number of new and revised IFRS that are
effective for accounting periods beginning on or after 1 January
2005.
The accounting policies of the Group after the adoption of these new
and revised IFRS have been summarised in Note 2 of financial
statements prepared under IFRS. The following sets out information
on the significant changes in accounting policies for the current
and prior accounting periods reflected in these financial
statements.
(a) Minority interests (IAS 1 "Presentation of financial
statements" and IAS 27 "Consolidated and separate financial
statements")
In prior years, minority interests at the balance sheet date
were presented in the consolidated balance sheet separately
from liabilities and as deduction from net assets. Minority
interests in the results of the Group for the year were also
separately presented in the consolidated statement of income as
a deduction before arriving at the profit attributable to
shareholders.
With effect from 1 January 2005, in order to comply with IAS 1
and IAS 27, the Group has changed its accounting policy
relating to presentation of minority interests. Under the new
accounting policy, minority interests are presented in the
consolidated balance sheet within equity, separately from the
equity attributable to equity shareholders of the Company, and
minority interests in the results of the Group for the year to
be presented on the face of the consolidated income statement
as an allocation of the total profit or loss for the year
between the minority interests and equity shareholders of the
Company. The presentations of minority interests in the
consolidated balance sheet, consolidated income statement and
consolidated statement of changes in equity for the comparative
period have been restated accordingly.
(b) Accounting for investments in subsidiaries, associates and
jointly controlled entities (IAS 27 "Consolidated and separate
financial statements", IAS 28 "Investments in associates" and
IAS 31 "Interests in joint ventures")
In prior years, in the balance sheet of the Company investments
in subsidiaries, associates and jointly controlled entities are
accounted for using the equity method.
With effect from 1 January 2005, in order to comply with IAS
27, IAS 28 and IAS 31, investments in subsidiaries, associates
and jointly controlled entities are accounted for using the
cost method. Investments in subsidiaries, interest in
associates, interest in jointly controlled entities and
reserves balance in the balance sheet of the Company for the
comparative period has been restated accordingly. There was no
impact to the Group's consolidated financial statements.
The following table discloses the adjustments that have been
made in accordance with IAS 27, IAS 28 and IAS 31 to each of
the line items in the balance sheet of the Company as
previously reported as at 31 December 2004.
Effect
on new
accounting
policies
2004 (increase/
(as previously (decrease) 2004
reported) in net assets) (as restated)
RMB millions RMB millions RMB millions
Investments in subsidiaries 118,451 (51,521) 66,930
Interest in associates 7,540 (1,116) 6,424
Interest in jointly controlled entities 3,568 195 3,763
Reserves 106,338 (52,442) 53,896
(c) Related party disclosures (IAS 24 "Related party disclosures")
The definition of related parties under IAS 24 as disclosed in
Note 35 of financial statements prepared under IFRS has been
expanded to clarify that related parties include entities that
are under the significant influence of a related party that is
an individual (i.e. key management personnel, significant
shareholders and/or their close family members) 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.
With effect from 1 January 2005, in order to comply with IAS
24, the Group has made further disclosure of key management
personnel compensation and contributions to post-retirement
benefit plans.
(d) Property, Plant and Equipment (IAS 16 "Property, Plant and
Equipment")
With effect from 1 January 2005, IAS 16 requires an entity to
determine cost, useful life and depreciation charge separately
for each significant part of an item of property, plant and
equipment, and derecognise the carrying amount of a part of an
item of property, plant and equipment if that part has been
replaced. IAS 16 also requires an entity to include the costs
of dismantlement, removal or restoration, the obligation for
which an entity incurs as a consequence of installing the item
in the cost of that item of property, plant and equipment. The
change in accounting policy relating to these new requirements
of IAS 16 did not have a material impact on the Group's
financial statements.
9.4 Notes on the financial statements prepared under IFRS
9.4.1 Turnover
Turnover represents revenue from the sales of crude oil, natural
gas, petroleum and chemical products, net of value-added tax.
9.4.2 Taxation
Taxation in the consolidated income statement represents:
For the years ended 31 December
2005 2004
RMB millions RMB millions
Current tax
- Provision for the year 20,159 18,441
- Under-provision in prior years 477 94
Deferred taxation (1,248) (720)
------------- --------------
19,388 17,815
============= ==============
A reconciliation between actual tax expense and accounting profit at
applicable tax rates is as follows:
For the years ended 31 December
2005 2004
RMB millions RMB millions
Profit before taxation 63,228 59,606
------------- --------------
Expected PRC income tax expense at a statutory tax rate of 33% 20,865 19,670
Tax effect of non-deductible expenses 450 812
Tax effect of non-taxable income (567) (216)
Tax effect of differential tax rate on subsidiaries' income (Note) (2,010) (2,408)
Tax effect of tax losses not recognised for deferred tax 381 409
Under-provision in prior years 477 94
Tax credit for domestic equipment purchases (208) (546)
------------- --------------
Actual tax expense 19,388 17,815
============= ==============
Substantially all income before income tax and related tax expense
is from PRC sources.
Note:
The provision for PRC current income tax is based on a statutory
rate of 33% 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 subsidiaries of the Company which are taxed
at a preferential rate of 15%.
9.4.3 Basic earnings per share
The calculation of basic earnings per share for the year ended 31
December 2005 is based on the profit attributable to equity
shareholders of the Company of RMB 40,920 million (2004: RMB 36,019
million) and the weighted average number of shares of 86,702,439,000
(2004: 86,702,439,000) during the year.
The amount of diluted earnings per share is not presented as there
were no dilutive potential ordinary shares in existence during the
years presented.
9.4.4 Dividends
Dividends payable to equity shareholders of the Company attributable
to the year represent:
For the years ended 31 December
2005 2004
RMB millions RMB millions
Dividends declared and paid during the year of
RMB 0.04 per share (2004: RMB 0.04 per share) 3,468 3,468
Dividends declared after the balance sheet date of
RMB 0.09 per share (2004: RMB 0.08 per share) 7,803 6,936
------------- --------------
11,271 10,404
============= ==============
Pursuant to the Company's Articles of Association and a resolution
passed at the Directors' meeting on 26 August 2005, the directors
authorised to declare an interim dividends for the year ended 31
December 2005 of RMB 0.04 (2004: RMB 0.04) per share totalling RMB
3,468 million (2004: RMB 3,468 million), which was paid on 30
September 2005 (2004: 30 September 2004).
Pursuant to a resolution passed at the Directors' meeting on 31
March 2006, a final dividend in respect of the year ended 31
December 2005 of RMB 0.09 (2004: RMB 0.08) per share totalling RMB
7,803 million (2004: RMB 6,936 million) was proposed for
shareholders' approval at the Annual General Meeting. Final dividend
of RMB 7,803 million (2004: RMB 6,936 million) proposed after the
balance sheet date has not been recognised as a liability at the
balance sheet date.
Dividends payable to equity shareholders of the Company attributable
to the previous financial year, approved and paid during the year
represent:
For the years ended 31 December
2005 2004
RMB millions RMB millions
Final dividends in respect of the previous financial year,
approved and paid during the year of
RMB 0.08 per share (2004: RMB 0.06 per share) 6,936 5,202
============= ==============
Pursuant to the shareholders' approval at the Annual General Meeting
on 18 May 2005, a final dividend of RMB 0.08 per share totalling RMB
6,936 million in respect of the year ended 31 December 2004 was
declared and paid on 27 June 2005.
Pursuant to the shareholders' approval at the Annual General Meeting
on 18 May 2004, a final dividend of RMB 0.06 per share totalling RMB
5,202 million in respect of the year ended 31 December 2003 was
declared and paid on 28 June 2004.
9.4.5 Segmental reporting
Reportable information on the Group's business segments is as
follows:
For the years ended 31 December
2005 2004
RMB millions RMB millions
Turnover
Exploration and production
External sales 19,862 15,970
Inter-segment sales 84,423 60,053
------------- --------------
104,285 76,023
------------- --------------
Refining
External sales 82,810 63,388
Inter-segment sales 386,456 289,699
------------- --------------
469,266 353,087
------------- --------------
Marketing and distribution
External sales 459,292 342,840
Inter-segment sales 3,172 2,831
------------- --------------
462,464 345,671
------------- --------------
Chemicals
External sales 160,783 126,013
Inter-segment sales 12,199 12,510
------------- --------------
172,982 138,523
------------- --------------
Corporate and others
External sales 76,368 48,986
Inter-segment sales 44,897 32,046
------------- --------------
121,265 81,032
------------- --------------
Elimination of inter-segment sales (531,147) (397,139)
------------- --------------
Turnover 799,115 597,197
------------- --------------
Other operating revenues
Exploration and production 10,745 9,283
Refining 5,421 5,186
Marketing and distribution 1,358 755
Chemicals 5,841 6,170
Corporate and others 637 1,192
Corporate and others 637 1,192
------------- --------------
Other operating revenues 24,002 22,586
------------- --------------
Other income
Refining 9,415 -
------------- --------------
Total other income 9,415 -
------------- --------------
832,532 619,783
============= ==============
For the years ended 31 December
2005 2004
RMB millions RMB millions
Result
Operating profit
By segment
- Exploration and production 46,871 25,614
- Refining (3,505) 5,943
- Marketing and distribution 10,350 14,716
- Chemicals 14,296 18,721
- Corporate and others (1,198) (1,925)
------------- --------------
Total operating profit 66,814 63,069
------------- --------------
Share of profits less losses from associates
- Exploration and production 326 447
- Refining 23 58
- Marketing and distribution 241 302
- Chemicals 1 (164)
- Corporate and others 266 154
------------- --------------
Aggregate share of profits less losses from associates 857 797
------------- --------------
Finance costs
Interest expense (5,920) (4,583)
Interest income 382 374
Foreign exchange losses (79) (223)
Foreign exchange gains 996 61
------------- --------------
Net finance costs (4,621) (4,371)
------------- --------------
Investment income 178 111
------------- --------------
Profit before taxation 63,228 59,606
Taxation (19,388) (17,815)
------------- --------------
Profit for the year 43,840 41,791
============= ==============
Assets and liabilities dedicated to a particular segment's
operations are included in that segment's total assets and
liabilities. Assets which benefit more than one segment or are
considered to be corporate assets are not allocated. OOUnallocated
assets" consists primarily of cash and cash equivalents, time
deposits with financial institutions, investments and deferred tax
assets. Unallocated liabilities" consists primarily of short-term
and long-term debts, loans from Sinopec Group Company and fellow
subsidiaries, income tax payable, deferred tax liabilities and other
liabilities.
As 31 December
2005 2004
RMB millions RMB millions
Assets
Segment assets
- Exploration and production 123,631 110,509
- Refining 135,731 111,878
- Marketing and distribution 102,935 93,722
- Chemicals 115,942 105,032
- Corporate and others 20,570 17,574
------------- --------------
Total segment assets 498,809 438,715
------------- --------------
Interests in associates
- Exploration and production 1,494 1,396
- Refining 521 314
- Marketing and distribution 4,298 2,410
- Chemicals 1,092 4,315
- Corporate and others 1,812 1,787
------------- --------------
Aggregate interests in associates 9,217 10,222
------------- --------------
Unallocated assets 29,295 25,657
------------- --------------
------------- --------------
Total assets 537,321 474,594
============= ==============
Liabilities
Segment liabilities
- Exploration and production 18,882 16,241
- Refining 26,486 28,130
- Marketing and distribution 23,713 23,419
- Chemicals 19,442 16,528
- Corporate and others 35,855 15,547
------------- --------------
Total segment liabilities 124,378 99,865
------------- --------------
Unallocated liabilities 159,947 150,643
------------- --------------
Total liabilities 284,325 250,508
============= ==============
9.5 As compared to the last annual report, there are no changes in the
scope of consolidation.
[ ] Applicable [ X ] Not applicable
ss.10. Repurchase, Sales and Redemption of Shares
[ ] Applicable [ X ] Not applicable
ss.11. Compliance with the Code of Best Practice
The Board of Directors believes that, during this reporting period,
Sinopec Corp. complied with the Code of Best Practice as set out in
Appendix 14 of the Listing Rules of the Hong Kong Stock Exchange.
ss.12. Application of the Model Code
During this reporting period, none of the directors had breached the
requirements set out in the Model Code for Securities Transactions by
Directors of Listed Issuers, Appendix 10 to the Listing Rules stipulated
by the Hong Kong Stock Exchange.
ss.13. A detailed results announcement containing all the information required
by Paragraphs 45 (1) to (3) of Appendix 16 to the Listing Rules of the
Stock Exchange will be published on the website of the Hong Kong Stock
Exchange in due course.
This announcement is published in both English and Chinese languages. The
Chinese version shall prevail.
By order of the Board
Chen Tonghai
Chairman
Beijing, China, 31 March 2006
As at the date of this announcement, the directors of Sinopec Corp. are
Messrs. Chen Tonghai, Wang Jiming, Mou Shuling, Zhang Jiaren, Cao Xianghong,
Liu Genyuan, Gao Jian and Fan Yifei; the independent non-executive directors
of the Company are Messrs. Chen Qingtai, Ho Tsu Kwok Charles, Shi Wanpeng and
Zhang Youcai; and the employee representative director of the Company is Mr.
Cao Yaofeng.