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 August, 2004
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:
1) an announcement of resolutions passed at the tenth meeting of the
second session of the board of directors, and 2) an announcement on 2004
interim results, made on August 27, 2004, in English of China Petroleum &
Chemical Corporation (the "Registrant").
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: August 27, 2004
[GRAPHIC OMITTED]
CHINA PETROLEUM & CHEMICAL CORPORATION
(a joint stock limited company incorporated in the People's
Republic of China with limited liability)
(Stock code: 386)
Announcement of Resolutions Passed
at the Tenth Meeting of
the Second Session of the Board of Directors
-------------------------------------------------------------------------------
China Petroleum & Chemical Corporation ("Sinopec Corp.") and all members of
its board of directors warrant the authenticity, accuracy and completeness of
the information contained in this announcement, and severally and jointly
accept full responsibility for any misrepresentations, misleading statements
or material omissions contained in this announcement.
-------------------------------------------------------------------------------
The Tenth Meeting of the Second Session of the Board of Directors of Sinopec
Corp. was held at the Conference Room at the 20th Floor of Sinopec Corp.'s
offices on 27 August 2004 and was attended by 7 directors out of 13 directors.
Mr Chen Tonghai, Chairman, Mr Wang Jiming, Vice Chairman, Messrs. Zhang
Jiaren, Cao Xianghong, Liu Genyuan, Chen Qingtai and Cao Yaofeng, directors,
attended the meeting. Messrs. Mou Shuling, Gao Jian, Fan Yifei, Ho Tsu Kwok
Charles, Shi Wanpeng and Zhang Youcai, directors, were unable to attend the
meeting due to business engagement. Mr. Mou Shuling appointed and authorised
Mr. Cao Xianghong to attend and vote on his behalf. Mr. Gao Jian appointed and
authorised Mr. Chen Tonghai, Chairman, to attend and vote on his behalf. Mr.
Fan Yifei appointed and authorised Mr. Wang Jiming, Vice Chairman, to attend
and vote on his behalf. Messrs. Ho Tsu Kwok Charles, Shi Wanpeng and Zhang
Youcai appointed and authorised Mr. Chen Qingtai to attend and vote on their
behalf at the meeting. A quorum as set out in the provisions of the Articles
of Association was present. The meeting was convened and chaired by Mr Chen
Tonghai and, after careful consideration by the directors at the meeting, the
following resolutions were passed:
1. The Report on the Performance Review for the First Half of Year 2004 and
Work Arrangements for the Second Half of Year 2004 was approved.
2. The Dividend Distribution plan for the First Half of Year 2004 was
approved.
According to the financial statements for the first half of year 2004
prepared in accordance with the PRC Accounting Rules and Regulations and
International Financial Reporting Standards, the audited net profits were
RMB15.039 billion and RMB16.151 billion, respectively. In accordance with
the provisions of the Articles of Association of Sinopec Corp., profits
available for distribution to shareholders shall be the lower of the
amount as determined in accordance with the PRC Accounting Rules and
Regulations and International Financial Reporting Standards. Based on the
amount of RMB15.039 billion, 10% of the net profit (RMB1.504 billion) was
transferred to the statutory surplus reserve and another 10% (RMB1.504
billion) was transferred to the statutory public welfare fund, and no
transfer to the discretionary surplus reserve was made for the first half
of the year. Taking into account the undistributed profits carried
forward of RMB19.975 billion, after deducting the final dividend of year
2003 of RMB5.202 billion, profits available for distribution to the
shareholders was RMB26.804 billion. On the basis of the total number of
issued shares of 86,702,439,000 shares as at 30 June 2004, cash dividend
per share declared is RMB0.04 (including tax). The total amount of cash
dividend is RMB3.468 billion.
The interim dividend will be distributed on or before Thursday, 30
September 2004 to the shareholders whose names appear on the register of
members of Sinopec Corp. on Monday, 20 September 2004.
3. The financial statements for the first half of year 2004 audited by KPMG
Huazhen and KPMG were approved.
4. The interim report for the first half of year 2004 was approved.
5. The proposal of adjusting investment plan for year 2004 was approved.
Sinopec Corp. determines to seize the current opportunity by enhancing
investment and speeding up construction progress in key projects.
Accordingly, Sinopec Corp. plans to increase its capital expenditure by
RMB6.12 billion from RMB50.2 billion to RMB56.32 billion in 2004 (please
refer to Sinopec Corp.'s 2004 Interim Report for further details).
By Order of the Board
Chen Ge
Secretary to the Board of Directors
Beijing, PRC, 27 August 2004
As at the date of this announcement, the directors of the Company are: Messrs.
Chen Tonghai, Wang Jiming, Mou Shuling, Zhang Jiaren, Cao Xianghong, Liu
Genyuan, Gao Jian and Fan Yifei; the independent directors are: Messrs. Chen
Qingtai, Ho Tsu Kwok Charles, Shi Wanpeng and Zhang Youcai; and the employee
representative director is: Mr Cao Yaofeng.
[GRAPHIC OMITTED]
CHINA PETROLEUM & CHEMICAL CORPORATION
(a joint stock limited company incorporated in the People's
Republic of China with limited liability)
(Stock code: 386)
Announcement of the 2004 Interim Results
Section 1 Important Notice
1.1 The Board of Directors of China Petroleum & Chemical
Corporation ("Sinopec Corp.") and the Directors warrant that
there are no material omissions from, or misrepresentations
or misleading statements contained in this announcement and
severally and jointly accept full responsibility for the
authenticity, accuracy and completeness of the information
contained in this announcement.
This announcement is a summary of the interim report. The
entire report is also contained in the website of the
Shanghai Stock Exchange (www.sse.com.cn) and Sinopec Corp.
(www.sinopec.com). The investors should read the interim
report for more details.
1.2 No Director has any doubt as to, or the inability to
warrant, the truthfulness, accuracy and completeness of the
interim report.
1.3 Messrs. Mou Shuling, Gao Jian, Fan Yifei, Ho Tsu Kwok
Charles, Shi Wanpeng and Zhang Youcai, Directors of Sinopec
Corp., could not attend the tenth meeting of the second
session of the Board for reasons of official duties. Mr. Mou
Shuling, Director of Sinopec Corp., authorised Mr. Cao
Xianghong, Mr. Gao Jian, Director of Sinopec Corp.,
authorised Mr. Chen Tonghai, Chairman, Mr. Fan Yifei,
Director of Sinopec Corp., authorised Mr. Wang Jiming, Vice
Chairman and Messrs. Ho Tsu Kwok Charles, Shi Wanpeng and
Zhang Youcai, Directors of Sinopec Corp., authorised Mr.
Chen Qingtai, respectively, to vote on their behalf in
respect of the resolutions put forward in the tenth meeting
of the second session of the Board.
1.4 The financial statements for the six-month period ended 30
June 2004 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 standard
unqualified opinions on the financial statements.
1.5 Mr. Chen Tonghai (Chairman of the Board), Mr. Wang Jiming
(Vice Chairman and President), Mr. Zhang Jiaren (Director,
Senior Vice President and Chief Financial Officer) and Mr.
Liu Yun (Head of the Accounting Department) warrant the
authenticity and completeness of the financial statements
contained in this announcement.
Section 2 Basic Information of Sinopec Corp.
2.1 Basic Information of Sinopec Corp.
SINOPEC SINOPEC SINOPEC
Stock name CORP CORP CORP [Graphic omitted]
Stock code 0386 SNP SNP 600028
Place of listing Hong Kong New York Stock London Stock Shanghai Stock
Stock Exchange Exchange Exchange Exchange
Secretary to the Representative
Authorized Representatives Board of on Securities
Directors Matters
Name Mr. Wang Mr. Chen Ge Mr. Chen Ge Mr. Huang
Jiming Wensheng
Address 6A Huixindong Street, Chaoyang District, Beijing, PRC
Tel 86-10-64990060
Fax 86-10-64990022
E-mail ir@sinopec.com.cn/media@sinopec.com.cn
2.2 Principal accounting data and financial indicators
2.2.1 Principal accounting data and financial indicators for the
first half of 2004 prepared in accordance with the PRC
Accounting Rules and Regulations
2.2.1.1 Principal accounting data and financial indicators
At 30 June At 31 December
Item 2004 2003 Changes
RMB millions RMB million (%)
Current assets 117,062 96,918 20.78
Current liabilities 136,314 120,792 12.85
Total assets 422,925 390,213 8.38
Shareholders' funds
(excluding minority interests) 172,276 162,946 5.73
Net assets per share (RMB/share)
(Fully diluted) 1.987 1.879 5.73
Adjusted net assets per share (RMB/share) 1.961 1.850 6.00
Six-month periods ended 30 June
Item 2004 2003 Changes
RMB millions RMB millions (%)
Net profit 15,039 9,765 54.01
Net profit before non-operating
profits/losses 16,332 10,221 59.79
Return on net assets (%)
(Fully diluted) 8.73 6.25 2.48 percentage
points
Return on net assets (%)
(Weighted average) 8.82 6.24 2.58 percentage
points
Earnings per share (RMB/share)
(Fully diluted) 0.173 0.113 53.10
Earnings per share (RMB/share)
(weighted average) 0.173 0.113 53.10
Net cash flow from operating activities 21,694 29,982 (27.64)
2.2.1.2 Items under non-operating profits and losses
|x| applicable |_| inapplicable
Six-month period
Items under non-operating profits/losses: ended 30 June 2004
RMB millions
Loss on disposal of long-term equity investments 2
Written back of provisions for impairment losses in previous years (80)
Non-operating expenses:
(excluding normal provisions on assets provided in accordance
with the Accounting Regulations for Business Enterprises) 2,189
Of which: Loss on disposal of fixed assets 1,405
Employee reduction expenses 412
Donations 49
Non-operating income (181)
Tax effect (637)
Total 1,293
2.2.2 Principal accounting data and financial indicators of the
Company for the first half of 2004 prepared in accordance
with IFRS
Six-month periods ended 30 June
Item 2004 2003 Changes
RMB millions RMB millions (%)
Operating profit 27,339 18,569 47.23
Net profit 16,151 10,727 50.56
Return on capital employed (%)* 6.17 4.47 1.70 percentage
points
Earnings per share (RMB/share) 0.186 0.124 50.56
Net cash flow from operating activities 19,291 28,649 (32.66)
* Return on capital employed = operating profit x (1 - income tax
rate)/capital employed
At 30 June At 31 December
Item 2004 2003 Changes
RMB millions RMB millions (%)
Current assets 120,102 99,328 20.91
Current liabilities 137,713 122,005 12.87
Total assets 434,937 400,818 8.51
Shareholders' funds (excluding minority interests) 178,409 167,899 6.26
Net assets per share (RMB/share) 2.058 1.937 6.26
Adjusted net assets per share (RMB/share) 2.033 1.908 6.55
2.2.3 Major differences between the PRC Accounting Rules and
Regulations and IFRS on net profit and shareholders' funds
for the first half of 2004
|x| applicable |_| inapplicable
2.2.3.1 Analysis of the effects of major differences between the PRC
Accounting Rules and Regulations and IFRS on net profit:
Six-month periods ended 30 June
Item 2004 2003
RMB millions RMB millions
Net profit under the PRC Accounting Rules and Regulations 15,039 9,765
Adjustments:
Disposal of oil and gas properties (net of depreciation effect) 879 -
Impairment losses on revaluated assets 439 -
Depreciation of oil and gas properties 370 1,270
Capitalization of general borrowing costs 247 203
Acquisition of Sinopec National Star 58 58
Acquisition of Sinopec Maoming, Xi'an Petrochemical and
Tahe Petrochemical - 26
Revaluation of land use rights 9 9
Unrecognized losses of subsidiaries (236) -
Pre-operating expenditures (95) (100)
Impairment losses on long-lived assets - (5)
Effects of the above adjustments on taxation (559) (499)
Net profit under IFRS 16,151 10,727
2.2.3.2 Analysis of the effects of major differences between the PRC
Accounting Rules and Regulations and IFRS on shareholders'
funds:
At 30 June At 31 December
2004 2003
RMB millions RMB millions
Shareholders' funds under the PRC Accounting Rules and
Regulations 172,276 162,946
Adjustments:
Disposal of oil and gas properties 2,139 1,260
Depreciation of oil and gas properties 11,255 10,885
Capitalization of general borrowing costs 1,372 1,125
Acquisition of Sinopec National Star (2,754) (2,812)
Revaluation of land use rights (861) (870)
Effect of minority interests on unrecognized losses
of subsidiaries 332 61
Pre-operating expenditures (264) (169)
Impairment losses on long-lived assets (113) (113)
Government grants (326) (326)
Effects of the above adjustments on taxation (4,647) (4,088)
Shareholders' funds under IFRS 178,409 167,899
Section 3 Changes in share capital and shareholdings of the principal
shareholders
3.1 Statement of changes in share capital
|_| applicable |x| inapplicable
3.2 Top ten shareholders and holders of tradable shares
Total number of shareholders Total number of shareholders: 302,856
at the end of the reporting (of which: domestic holders of A
period shares: 291,585, overseas holders of
H shares: 11,271)
Top ten shareholders as at 30 June 2004
Percentage at the end
of the reporting period
Increase/decrease Nature of
during the Number of Among total pledges lock-
reporting period shares held share- Nature of Type of ups or trusts
Name of shareholders (1,000 shares) (1,000 shares) holdings % Shareholders Shares held (1,000 shares)
China Petrochemical
Corporation 0 47,742,561 55.06 State-owned shares Non tradable 0
("Sinopec Group Company")
HKSCC (Nominees) Limited 5,036,626 16,676,244 19.23 H shares Tradable Unknown
China Development Bank 0 8,775,570 10.12 State-owned shares Non tradable 0
China Cinda Asset Management
Corp. 0 8,720,650 10.06 State-owned shares Non tradable 0
China Orient Asset Management
Corp. 0 1,296,410 1.50 State-owned shares Non tradable 0
Guo Tai Jun An Corp. (10,428)* 586,760 0.68 State-owned shares Non tradable 293,380
(pledged)
Qingdao Port Authority 0 60,000 0.07 A Shares Tradable 0
EFUND 50 Securities Investment
Fund 51,906 51,906 0.06 A Shares Tradable 0
Xinghua Securities Investment
Fund 33,190 48,190 0.06 A Shares Tradable 0
Xinghe Securities Investment
Fund (15,799) 46,149 0.05 A Shares Tradable 0
CITIC Securities Co.,Ltd. 40,985 44,485 0.05 A Shares Tradable 0
Top ten shareholders with tradable shares as at 30 June 2004
Number of
shares held Nature of
Name of shareholders (1,000 shares) Shareholders
HKSCC (Nominees) Limited 16,676,244 H shares
Qingdao Port Authority 60,000 A shares
EFUND 50 Securities Investment Fund 51,906 A shares
Xinghua Securities Investment Fund 48,190 A shares
Xinghe Securities Investment Fund 46,149 A shares
CITIC Securities Co.,Ltd. 44,485 A shares
China Southern Principal Protected Fund 40,144 A shares
China Southern Sustaining Growth Fund 39,153 A shares
Harvest Service Sector Fund 39,087 A shares
Tian Yuan Securities Investment Fund 37,030 A shares
Explanation for the relationships Except for Xinghua Securities Investment Fund and
among the above shareholders Xinghe Securities Investment Fund both of which belong
or activities in concert: to Huaxia Fund Management Co.,Ltd. and China Southern
Principal Protected Fund, China Southern Sustaining
Growth Fund and Tian Yuan Securities Investment Fund
which belong to China Southern Fund Management Co., Ltd.,
Sinopec Corp. is not aware of any connections among other
corporate shareholders. Sinopec Corp. is not aware of any
connections or activities in concert between other
holders of shares in circulation and is not aware of any
pledges, lock-ups or trust of shareholdings of holders of
H Shares.
* The shares sold by Guo Tai Jun An Corp. were A shares previously
purchased on the stock exchanges by Guo Tai Jun An Corp.
Name of
shareholders Lock-up period
Lock-up periods on strategic investors or
legal person subscribers of placement of new shares - -
3.3 Changes of the controlling shareholders and the actual
controllers in the reporting period
|_| applicable |x| inapplicable
Section 4. Information about the directors, supervisors and senior management
4.1 Information about the terms of office of the directors,
supervisors and senior management
Since Mr. Liu Kegu, the previous director of Sinopec Corp.,
resigned from the Board of Directors of Sinopec Corp., the
China Development Bank, which held 10.12% of Sinopec Corp.'s
total share capital, nominated Mr. Gao Jian as the candidate
of Sinopec Corp.'s director on 29 April 2004. At the Annual
General Meeting for the Year 2003 held on 18 May 2004, Mr.
Gao Jian was elected as the member of the Second Session of
the Board of Directors of Sinopec Corp.
4.2 Information about the changes in the shares held by the
directors, supervisors and senior management
|_| applicable |x| inapplicable
As at 30 June 2004, none of the directors, supervisors or
senior management of Sinopec Corp. had any interest in any
shares of Sinopec Corp.
As at 30 June 2004, none of the directors, supervisors and
senior management of Sinopec Corp. had any interests or short
positions in the shares, underlying shares of the Sinopec
Corp. or any associated corporations (as defined in Part XV
of the Securities and Futures Ordinance) which was recorded
in the register required to be kept under section 352 of the
SFO or otherwise notified to Sinopec Corp. and the Stock
Exchange pursuant to the Model Code for Securities
Transactions by Directors of Listed Companies.
Section 5. Business Review and Prospects and Management's Discussion and
Analysis
5.1 Business Review
In the first half of 2004, the Chinese government adopted a
series of macro-economic control measures, and achieved good
results. The national economy maintained an upward momentum
of steady growth and GDP rose by 9.7%. Demands for petroleum
and petrochemical products continued to grow accordingly.
According to the Company's statistics, the apparent domestic
consumption of refined oil products (gasoline, diesel and
kerosene including jet fuel) in the first half of this year
increased by 24.6% over the same period last year whilst the
apparent consumption of petrochemical products (in term of
ethylene) increased by 15.59%.
In the first half of 2004, prices of international crude oil
fluctuated at a high level. Refining margin was improved and
the chemical industries were in the rising trend of a new
cycle. The Company closely monitored the changes in the
domestic and overseas market of crude oil and petrochemical
products, and responsively adopted effective operation
measures, actively explored the market, optimised resources,
rationalised structures, and maximised operation volume. As a
result, the oil and gas production increased steadily, oil
refining and petrochemical facilities operated at a high
utilisation rate, the sales of refined oil products increased
significantly and marketing structures were further
optimised. At the same time, the Company further enhanced the
internal reform, streamlised the assets portfolio and
reinforced internal control. As a result of the joint efforts
made by all the employees together with the Company, the
Company achieved remarkable operating results.
According to the PRC Accounting Rules and Regulations, the
Company's income from principal operations was RMB
265.71billion, up by 36.4% over the first half of 2003. The
Company's net profit was RMB 15.04 billion, up by 54.0% over
the first half of 2003. Based on the number of shares
outstanding at the end of the reporting period, earnings per
share were RMB 0.17. According to the International Financial
Reporting Standards, turnover and other operating revenues
amounted to RMB 275.44 billion, up by 34.1% over the first
half of 2003. Profit attributable to shareholders was RMB
16.15 billion, up by 50.6% over the first half of 2003. Based
on the number of shares outstanding at the end of the
reporting period, earnings per share were RMB 0.19.
The Board of Directors has decided to distribute an interim
dividend of RMB 0.04 per share for the first half of 2004,
which is equivalent to RMB 4.00 per ADS.
5.1.1 Production and Operation
(1) Exploration and production segment
In the first half of 2004, the average international crude
oil price increased significantly compared with the same
period last year. The Platt's global Brent spot price
averaged USD 33.65 per barrel, up by 16.9% over the first
half of 2003. Domestic prices of crude oil generally followed
the trend in the international market. However, as there is a
one-month time lag of domestic crude oil prices behind the
international crude oil prices and the increase in
international benchmarked prices for the Company's
self-produced oil was not significant, the average crude
price realised by the Company during the first half of 2004
was USD 29.62 per barrel, up by 2.5% over the same period
last year.
In the first half of 2004, the Company achieved good results
in exploration, development and production of crude oil and
natural gas.
In exploration, the Company optimised exploration plan and
profile of oil and gas reserves by taking the zone
exploration as the main objective and the discovery of
qualified proven reserves as the primary goal. New blocks in
Tahe oilfield and deep layers in Jiyang trough demonstrated
good indications of oil and gas reserves, and sound results
were achieved in exploration in mature fields in eastern
China. Important progress was achieved in the natural gas
exploration blocks such as in northeastern Sichuan.
Exploration wells in 6 key blocks in Ordos, Shengli,
Zhongyuan, etc. obtained commercial oil and gas flow. In
addition, oil and gas were discovered in a number of major
exploration wells in the new blocks in western China. In the
first half of 2004, the newly added proved geological
reserves of crude oil amounted to approximately 133 million
tonnes, whilst the newly added geological reserves of natural
gas was approximately 62.3 billion cubic meters.
In development, the Company aimed to optimise its development
plans and improve the quality of production capacity
build-up. In the first half of 2004, newly developed
production capacity of crude oil and natural gas reached 2.29
million tonnes per year and 415 million cubic meters per
year, respectively.
In production, the Company seized the opportunity of high
crude oil prices and carefully arranged oil and gas
production. The Company exercised comprehensive management
over its existing oilfields and consolidated its foundation
for stable output, and the production of oil and gas
increased steadily.
Summary of Operations of Exploration and Production Segment
Six-month periods
ended 30 June Changes
2004 2003 (%)
Crude oil production (million barrels) 135.85 133.72 1.59
Natural gas production (billion cubic feet) 100.06 90.71 10.31
Newly added proved oil reserves (million barrels) 124.40 115.80 7.43
Newly added proved gas reserves (billion cubic feet) 872.74 276.80 215.30
Proved oil reserves at the end of the reporting
period (million barrels) 3,245.73 3,302.00 (1.70)
Proved gas reserves at the end of the reporting
period (billion cubic feet) 3,660.30 3,515.00 4.13
Note: Crude oil production is converted at 1 tonne = 7.1
barrels, and natural gas production is converted at 1
cubic meter = 35.31 cubic feet.
(2) Refining segment
In the first half of 2004, in response to the significant
growth of demand in the domestic market, the Company made
careful arrangement so as to ensure a safe, stable,
sustained, optimal and full load operation of its facilities.
The Company also made serious effects in increasing the
processing volume of crude oil. In addition, the Company
optimised the allocation of crude oil resources, further
increased the processing volume of sour crude, optimised
logistics and reduced production costs. The Company also
optimised product mix, increased production of diesel and
high value-added products and improved profitability.
Furthermore, the Company enhanced its management over the
operation of production facilities, and further improved
major economic and technical indicators for oil refining,
such as light product yield and refining yield.
Summary of Operations of Refining Segment
Six-month periods
ended 30 June Changes
2004 2003 (%)
Crude processing volume (million tonnes) 64.98 54.70 18.79
Of which: Sour crude processing volume
(million tonnes) 13.39 10.64 25.85
Refinery utilisation (%) 91.57 83.30 8.27 percentage
points
Gasoline, diesel oil and kerosene
(including jet fuel) production (million tonnes) 39.17 32.59 20.19
Of which: Gasoline (million tonnes) 11.42 10.25 11.41
Diesel oil (million tonnes) 24.72 19.89 24.28
Kerosene (including jet fuel)
(million tonnes) 3.03 2.45 23.67
Chemical feedstock (million tonnes) 8.92 8.23 8.38
Light product yield (%) 74.06 73.97 0.09 percentage
point
Refining yield (%) 93.10 93.07 0.03 percentage
point
Notes:
1. The data of the first half of 2003 and the first half of 2004
in this table includes that of Xi'an Petrochemical and Tahe
Petrochemical
2. Crude processing volume is converted at 1 tonne = 7.35 barrels.
(3) Marketing and distribution segment
In the first half of 2004, the Company closely monitored the
changes of the market, optimised logistics and marketing
structure. Sales volume of refined oil products increased
significantly together with a steady expansion of market
share. The Company actively expanded and optimised the
marketing network of refined oil products, and rationalised
network layout and product logistics. In the first half of
2004, the Company's total domestic sales volume of refined
oil products was up by 29.09% over the same period last year,
and the volumes of retail and direct sales were up by 40.89%
and 38.15%, respectively, over the same period last year.
Retail and direct sales volume, as a percentage of the
Company's total domestic sales volume of refined oil products
increased to 76.2% from 70.2% in the same period last year.
In order to meet the domestic demand for refined oil products
and to maintain a balance in product mix, the Company reduced
the export volume of its refined oil products. In the first
half of 2004, total export volume of refined oil products was
1.85 million tonnes, representing a decrease of 43.5% from
the first half of 2003.
Summary of Operations of Marketing and Distribution Segment
Six-month periods
ended 30 June Changes
2004 2003 (%)
Total domestic sales of refined oil products
(million tonnes) 45.49 35.24 29.09
Of which: Retail volume (million tonnes) 25.12 17.83 40.89
Direct sales volume (million tonnes) 9.56 6.92 38.15
Wholesale volume (million tonnes) 10.81 10.49 3.05
Average annual throughput per petrol station
(tonne/station) 1,986 1,612 23.20
Total number of petrol stations 30,682 29,425 4.27
Of which: Number of self-operated petrol
stations 25,306 24,128 4.88
Number of franchised petrol stations 5,376 5,297 1.49
In March 2004, Sinopec won the exclusive entitlement of
Sinopec Formula 1 Grand Prix China, which is another
initiative of the Company's international branding strategy.
The Company will make the best use of the cooperation with
Formula 1 to promote the overall value of Sinopec's branding.
(4) Chemicals segment
In the first half of 2004, the global chemicals sector was in
a new round of an upturn cycle. Prices of chemical products
increased significantly, and demand in the domestic chemical
market continued to grow. The Company's average price of
synthetic resin, synthetic rubber, synthetic fiber, and
monomers and polymers for synthetic fiber increased by 27.7%,
15.9%, 16.2% and 21.3% respectively over the first half of
2003. The Company seized the favorable opportunities and
maintained operation of its chemical facilities at full load.
As a result, production of major chemical products increased
significantly, among which, production of synthetic resin,
synthetic fiber, and synthetic rubber were up by 10.95%,
7.19%, and 13.79% respectively over the first half of 2003.
In addition, the chemical product mix was improved and the
portion of high value-added products such as performance
compound of synthetic resin and differential fiber was
further increased. The marketing model of the newly
established Acrylic Fibre Sales Company achieved good
results.
Production of Major Petrochemical Products
Unit: thousand tonnes
Six-month periods
ended 30 June Changes
2004 2003 (%)
Ethylene 1,863 1,724 8.06
Synthetic resin 2,806 2,529 10.95
Of which: Performance compound resins 1,478 1,246 18.62
Synthetic fiber 641 598 7.19
Of which: Differential fiber 289 241 19.92
Synthetic fiber monomers and polymers 2,443 2,133 14.53
Synthetic rubber 297 261 13.79
Urea 1,322 1,154 14.56
Note: The production of chemical products in the first half of
2003 and the first half of 2004 includes that of Maoming
Ethylene.
5.1.2 Cost-reduction
In the first half of 2004, the Company adopted a series of
measures to reduce costs: optimising the allocation of
resources and logistics to reduce transportation costs,
increasing the processing volume of sour crude to reduce
procurement costs of crude oil, and further optimising the
operation of facilities to cut down material and energy
consumption. In the first half of 2004, the Company reduced
its costs by a total of RMB 1.43 billion. The breakdown is as
follows: RMB 250 million from the Exploration and Production
Segment, RMB 380 million from the Refining Segment, RMB 400
million from the Marketing and Distribution Segment and RMB
400 million from the Chemicals Segment. In addition, the
Company further carried out measures aiming at improving
efficiencies through staff reduction during the first half of
this year, and a total of about 8,000 employees were
voluntarily terminated.
5.1.3 Capital expenditure
In the first half of 2004, the Company's total capital
expenditure was RMB 25.82 billion. The capital expenditure in
the Exploration and Production Segment totaled RMB 10.07
billion. The layout of the addition of oil and gas reserves
and production and the profile of oil and gas has been
adjusted, and the sequence structure of the three class
reserves of crude oil and gas was improved. The newly added
production capacity of crude oil was 2.29 million tonnes per
year, while the newly added production capacity of natural
gas reached 415 million cubic meters per year. The capital
expenditure in the Refining Segment was RMB 4.10 billion. A
number of major projects were ahead of schedule:
Ningbo-Shanghai-Nanjing crude oil pipeline and
Tianjin-Yanshan crude oil pipeline were put into operation,
revamping projects in Gaoqiao Petrochemical, Jinling
Petrochemical, Yangzi Petrochemical, Xi'an Petrochemical and
Tahe Petrochemical proceeded smoothly. The capital
expenditure for the Chemicals Segment was RMB 2.94 billion,
the second round of ethylene facility revamping project in
Qilu Petrochemical will be commissioned in the second half of
this year. The capital expenditure for the Marketing and
Distribution Segment was RMB 8.61 billion, the construction
of refined oil product pipeline in southwest China is
progressing smoothly, the construction and acquisition of
petrol stations in key areas achieved remarkable results,
which consolidated the Company's marketing and distribution
network. The capital expenditure for Corporate and Others
amounted to RMB 94 million.
In addition, the joint venture projects such as Shanghai
Secco proceeded smoothly and the total capital expenditure
incurred by the Company for these joint ventures was RMB 3.37
billion.
5.2 Principal Operations categorized by business segments and the
status of the connected transactions
The following table shows the principal operations
categorized by business segments and the details of the
connected transactions, including income from principal
operations and cost of principal operations for each business
segment which are extracted from Sinopec Corp.'s financial
statements prepared under the PRC Accounting Rules and
Regulations:
Increase/ Increase/
decrease of decrease of Increase/
income from cost of decrease
principal principal of gross profit
operations operations ratio compared
compared compared to the same
Income from Cost of Gross to the same to the same period of
Categorised by principal principal profit period of period of preceding year
business segments operations operations ratio* preceding preceding (percentage
RMB millions RMB millions (%) year (%) year (%) point)
Exploration and production 33,692 15,574 47.96 5.08 (1.31) 0.09
Refining 158,890 145,154 8.52 24.52 23.05 1.03
Chemicals 55,740 45,398 18.55 42.40 27.76 9.33
Marketing and distribution 157,873 138,640 12.18 41.13 41.39 (0.16)
Others 35,108 34,763 0.98 23.34 23.08 0.21
Elimination of
inter-segment sales (175,594) (173,431) N/A N/A N/A N/A
Total 265,709 206,098 22.43 36.37 35.32 0.60
Of which: connected transactions 22,001 19,525 11.25 71.77 80.83 (4.45)
Pricing policy for (1) Government-prescribed prices and government-guided prices are adopted
connected transactions for products or 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 reasonable cost incurred plus sales taxes and
reasonable profit. Reasonable cost means the average production cost
of products by the same type of enterprises within regions with
proximity using the same kind of raw materials. Reasonable profit
means profit margin of not more than 6% of the cost incurred based
on the current interest rate level set by the government.
Of which: during the reporting period, the total amount of
connected transactions of the principal products sold
from the Company to Sinopec Group Company was RMB
12.878 billion.
* Gross profit ratio = profit from principal operations/income from
principal operations
5.3 Principal operations in different regions
|_| applicable |x| inapplicable
5.4 Other operating activities with major influences on net profit
|_| applicable |x| inapplicable
5.5 Operations of equity subsidiaries (applicable to
circumstances when the return on investment is more than 10%
of the listed company's net profit)
|_| applicable |x| inapplicable
5.6 Reasons of material changes in the principal operations and
their structure
|_| applicable |x| inapplicable
5.7 Reasons of material changes in the principal operations'
earning power (gross profit ratio) as compared to the
preceding year
|x| applicable |_| inapplicable
Please refer to section 5.8.
5.8 Reasons of changes in profit composition as compared to that
in the preceding year
|x| applicable |_| inapplicable
The financial information presented in this section are
derived from the Company's audited financial statements that
have been prepared in accordance with IFRS.
In the first half of 2004, the Company's turnover and other
operating revenues were RMB 275.4 billion and operating
profit was RMB 27.3 billion, respectively, representing an
increase of 34.1% and 47.2%, respectively, over those in the
first half of 2003. These changes are largely attributable
to the fact that the Company timely took the opportunities
of the rapid growth of domestic GDP and high prices of
petrochemical products, further expanded resources and
market, increased processing volume of crude oil and
production of ethylene, reinforced management, deepened
corporate reforms, rationalised asset portfolio, and
realised satisfactory results.
5.8.1 Turnover and other operating revenues
In the first half of 2004, the Company's turnover and other
operating revenues were RMB 275.4 billion. Of which,
turnover was RMB 265.7 billion, up by 34.5% from that in the
first half of 2003. This was mainly due to the fact that in
the first half of 2004, prices of crude oil, petroleum
products and chemical products all increased in the global
market, and the Company seized the market opportunity to
increase its refining throughput and sales volume of its
refined products. As a result, the Company's sales volume of
major petrochemical products increased significantly. The
Company's other operating revenues was RMB 9.7 billion, up
by 26.1% from that in the first half of 2003. This was
mainly due to the increase of sales revenue from its sale of
raw and auxiliary materials and other products and services
to China Petrochemical Corporation and its subsidiaries
(excluding the Company) ("Sinopec Group") and to third
parties.
The following table lists the Company's principal external
sales volume and average realised prices, and changes
between the first half of 2004 and the first half of 2003:
Sales Volume Averaged Realised Prices
(thousand tonnes) (RMB/tonne, RMB/thousand cubic meters)
Six-month periods Six-month periods
ended 30 June Changes ended 30 June Changes
2004 2003 (%) 2004 2003 (%)
Crude oil 3,019 3,304 (8.6) 1,679 1,559 7.7
Natural gas (million cubic meters) 1,767 1,617 9.3 601 596 0.8
Gasoline 13,266 10,779 23.1 3,580 3,318 7.9
Diesel 29,096 22,025 32.1 3,044 2,823 7.8
Kerosene 2,633 2,118 24.3 2,710 2,495 8.6
Synthetic fiber monomer and polymer 1,203 1,038 15.9 7,489 6,172 21.3
Synthetic resin 2,376 2,238 6.2 7,360 5,764 27.7
Synthetic fiber 679 629 7.9 10,728 9,231 16.2
Synthetic rubber 299 261 14.6 9,301 8,024 15.9
Chemical fertilizer 1,287 1,040 23.8 1,327 1,185 12.0
Most of crude oil and a small portion of natural gas
produced by the Company were internally used for its
refining and chemical production. The remaining was sold to
the refineries owned by Sinopec Group and other customers.
In the first half of 2004, external sales revenues of crude
oil and natural gas amounted to RMB 7.4 billion, up by 4.1%
over the first half of 2003, accounting for 2.7% of the
Company's turnover and other operating revenues.
The Company's Refining Segment and Marketing and
Distribution Segment sell petroleum products (mainly
consisting of refined oil products and other refined
petroleum products) to third parties. In the first half of
2004, the aggregate external sales revenues of petroleum
products by these two segments were RMB 188.5 billion, up by
38.1% over in the first half of 2003 and accounting for
68.4% of the Company's turnover and other operating
revenues. The sales revenues of gasoline and diesel
increased by 39.0% from that in the first half of 2003 to
RMB 136.1 billion, accounting for 72.2% of the total sales
revenues of petroleum products.
In the first half of 2004, the Company's external sales
revenues of chemical products were RMB 50.9 billion, up by
33.6% over the first half of 2003, accounting for 18.4% of
its turnover and other operating revenues.
5.8.2 Operating expenses
In the first half of 2004, the Company's operating expenses
were RMB 248.1 billion, up by 32.8% over the first half of
2003. The operating expenses mainly consisted of the
following:
Purchased crude oil, products, and operating supplies and
expenses
The Company's purchase of crude oil, products and operating
supplies and expenses were RMB 197.1 billion, up by 36.5%
over the first half of 2003, accounting for 79.5% of the
operating expenses, of which:
Purchase of crude oil was RMB 102.8 billion, up by 35.1%
over the first half of 2003, accounting for 41.5% of the
total operating expenses.
To meet the increasing demands resulting from the rapid
growth of the Chinese economy, the Company increased its
refining throughput. In the first half of 2004, the
Company's refining throughput was 63.26 million tonnes
(excluding amounts processed for third parties),
representing an increase of 15.67%, compared with that in
the first half of 2003. The Company's average cost for crude
oil was RMB 2,098 per tonne, representing an increase of
10.8% compared with that in the first half of 2003.
In the first half of 2004, the Company's other purchasing
expenses were RMB 94.3 billion, up by 38.1% over the first
half of 2003, accounting for 38.0% of the total operating
expenses. This increase was mainly due to the increased
costs of outsourced refined oil products and chemical
feedstock.
Selling, general and administrative expenses
In the first half of 2004, the Company's selling, general
and administrative expenses were RMB 14.2 billion, up by
24.4% over the first half of 2003. This increase was mainly
due to:
o Sales expenses, such as the costs of
transportation, and other service charges,
supporting units etc. increased by RMB 1.2 billion,
as a result of the increase in the sales volume of
refined oil products and the increased proportion
of retail and direct sales in total sales volume of
refined oil products.
o Expenses in maintenance increased by RMB 400
million.
o Operating lease rentals increased by (inclusive
land lease expenses) RMB 400 million.
o Expenses in advertising increased by RMB 300
million.
o Expenses in research and development increased by
RMB 200 million.
Depreciation, depletion and amortization
In the first half of 2004, the Company's depreciation,
depletion and amortization were RMB 14.8 billion, up by
14.1% over the first half of 2003. The increase was mainly
due to the addition of property, plant and equipment as a
result of capital expenditure.
Exploration expenses
In the first half of 2004, the Company's exploration
expenses were RMB 2.5 billion, representing a decrease of
11.1% compared with that in the first half of 2003.
Personnel expenses
In the first half of 2004, the Company's personnel expenses
were RMB 8.3 billion, which was flat with that in the first
half of 2003
Employee reduction expenses
The Company incurred approximately RMB 412 million of staff
reduction expenses for approximately 8,000 employees who
voluntarily left the Company in the first half of 2004.
Taxes other than income tax
In the first half of 2004, the Company's taxes other than
income tax were RMB 7.8 billion, up by 25.6% over the first
half of 2003. The increase was mainly attributable to the
increase of consumption tax and surcharges as a result of
the increase in sales volume of gasoline and diesel of the
Company.
Other operating expenses, net
In the first half of 2004, the Company's other operating
expenses (net) were RMB 3.0 billion, up by RMB 2.3 billion
over the first half of 2003. The increase was mainly due to
the fact that in order to allocate its internal resources
more efficiently, the Company adjusted the production and
operation plans for certain less efficient facilities in
Chemicals and Marketing and Distribution segments, and
accordingly made a provision for impairment of long-lived
assets of RMB 2.3 billion representing the difference
between the expected recoverable value and the net book
value of these assets, up by RMB 2.1 billion over that in
the first half of 2003.
Personnel expenses
In the first half of 2004, the Company's personnel expenses
were RMB 8.3 billion, which was flat with that in the first
half of 2003.
Employee reduction expenses
The Company incurred approximately RMB 412 million of staff
reduction expenses for approximately 8,000 employees who
voluntarily left the Company in the first half of 2004.
Taxes other than income tax
In the first half of 2004, the Company's taxes other than
income tax were RMB 7.8 billion, up by 25.6% over the first
half of 2003. The increase was mainly attributable to the
increase of consumption tax and surcharges as a result of
the increase in sales volume of gasoline and diesel of the
Company.
Other operating expenses, net
In the first half of 2004, the Company's other operating
expenses (net) were RMB 3.0 billion, up by RMB 2.3 billion
over the first half of 2003. The increase was mainly due to
the fact that in order to allocate its internal resources
more efficiently, the Company adjusted the production and
operation plans for certain less efficient facilities in
Chemicals and Marketing and Distribution segments, and
accordingly made a provision for impairment of long-lived
assets of RMB 2.3 billion representing the difference
between the expected recoverable value and the net book
value of these assets, up by RMB 2.1 billion over the first
half of 2003.
5.8.3 Operating profit
In the first half of 2004, the Company's operating profit
was RMB 27.3 billion, up by 47.2% over the first half of
2003.
5.8.4 Net finance costs
In the first half of 2004, the Company's net finance costs
were RMB 1.8 billion, down by 13.1% compared with that in
the first half of 2003.
5.8.5 Profit from ordinary activities before taxation
In the first half of 2004, the Company's profit from
ordinary activities before taxation was RMB 26.0 billion, up
by 55.2% over the first half of 2003.
5.8.6 Taxation
In the first half of 2004, the Company's income tax was RMB
7.7 billion, up by 46.5% over the first half of 2003.
5.8.7 Minority interests
In the first half of 2004, the Company's minority interests
were RMB 2.2 billion, up by 178.2% over the first half of
2003, mainly due to the significant increase in the profits
from the Company's subsidiaries.
5.8.8 Profit attributable to shareholders
In the first half of 2004, the Company's profit attributable
to shareholders was RMB 16.2 billion, up by 50.6% over the
first half of 2003.
5.9 During this reporting period, there was no significant
difference in terms of cash flow, source of funds and
capital structure compared with the same period last year.
5.10 Use of the proceeds from share issue
5.10.1 Use of the proceeds from share issue
|x| applicable |_| inapplicable
5.10.1.1 Use of the proceeds from the issue of A share
Unit: RMB100 millions
Total proceeds from share issue 116.48
Total amount of proceeds used in this reporting period 1.9
Total amount of proceeds already used 101.66
During the reporting period
Whether the
planned
Amount of progress and
Proposed Actual generated expected return
Projects under commitment investment Any change investment revenue are satisfied
southwest refined oil
products pipeline project 1.9 No 1.9 -- Yes
Total 1.9 1.9
* Reasons of inability to Through optimization and adjustment for southwest refined oil
satisfy the planned products pipeline project, the State Council has approved the
progress and expected return feasibility study report on 27 May 2003. The total investment
is RMB3.54 billion. The pipeline is 1,691 km long and it is
expected to be completed and put into operation in 2005.
Reasons of changes and No
reasons of changes
of procedures
5.10.1.2 Change of projects
|_| applicable |x| inapplicable
5.11 Business prospects and operating plan for the second half of
2004
|x| applicable |_| inapplicable
Looking into the second half of 2004 for the international
market, the global economy continues to maintain a good
momentum of recovery. Asia will maintain its position as the
most robust economy in the world, and its economy will keep
growing at a high rate. The Company expects that global
demand for crude oil will continue to grow in the second
half of this year, with crude oil prices fluctuating at a
relatively high level. Refining business will remain in a
good shape and chemical industries will remain in a new
round of upturn cycle. In the domestic market, as the
Chinese government takes measures to adjust and optimise
economic structure, the national economy will continue to
grow rapidly driving the growth of the demand for petroleum
and petrochemical products.
At the same time, according to the undertakings made by the
Chinese government for entering the World Trade
Organization, the retail market of refined oil products will
open to foreign players by the end of this year, and the
domestic competition in the marketing of refined oil
products may be more severe.
By following the changes in the market, the Company will
take a proactive approach, in production and management and
minimize operational risks. In addition, the Company will
capture the opportunities in the market and invest in and
expedite the construction of major projects. Additionally,
the Company will deepen reform, reinforce internal
management, expand resources and market, improve
efficiencies through staff reduction and ensure sustainable
and effective growth.
In Exploration and Production Segment, the Company intends
to implement its resources strategy to accelerate the
exploration and development, to seek for the addition of oil
reserves in mature blocks in eastern China, breakthrough in
new exploration blocks in western China and discoveries in
marine phase blocks in southern China, as well as to speed
up the construction of oil and gas production capacity
through developing newly found reserve in the existing
mature blocks and building auxilary facilities for
production capacity in the new blocks while reinforcing the
production and operation management to reduce the production
costs of oil and gas. In the second half of 2004, the
Company plans to produce 138.2 million barrels of crude oil
and 104.9 billion cubic feet of natural gas.
In Refining Segment, the Company will closely monitor the
changes of international oil market, continue to optimise
allocation of crude oil resources, increase the processing
volume of sour crude to reduce the purchasing costs of crude
oil. The Company intends to fully leverage the
Ningbo-Shanghai-Nanjing crude oil pipeline, optimise the
allocation of crude oil to reduce transportation costs. The
Company will timely adjust product mix in accordance with
the market demand, reinforce operation management and ensure
safe, stable, sustainable, optimal and full-load operations.
In addition, the Company will proactively implement reform
of marketing system of refined oil products other than
gasoline, diesel and jet fuel. The Company plans to process
67.46 million tonnes of crude oil in the second half of this
year.
In Marketing and Distribution Segment, the Company intends
to enhance the distribution network of refined oil products
by accelerating the construction of refined oil product
pipeline, optimising and adjusting the layout of oil depots,
as well as expanding the retail network. Following the
principle of achieving regional and professional management
and flattening of the management hierarchy, the Company
intends to further carry out reform of its marketing system
of refined oil products. The Company will further improve
service quality and its corporate image. In the second half
of 2004, the Company will target its total domestic sales
volume of refined oil products at 45.5 million tonnes,
including a retail volume of 25.37 million tonnes and a
direct sales volume of 9.5 million tonnes.
In Chemicals Segment, the Company will focus on the full
load operation of major chemical facilities and revamping of
some facilities as well as optimisation of feedstock and
resources allocation to reduce the material and energy
consumption and increase product yield. The Company will
rationalise its product mix and increase the output of high
value-added products. The Company will continue to carry out
the reform of marketing system of chemical products. The
Company plans to produce 1.7 million tonnes of ethylene in
the second half of this year.
In respect of capital expenditure, the original planned
capital expenditure for 2004 was RMB 50.2 billion. According
to the current market supply-demand situation and the
projected market analysis in the future, the Company decided
to seize the opportunities, increase investment and
accelerate the construction progress of key projects. The
Company intends to increase the capital expenditure by RMB
6.12 billion to RMB 56.32 billion. The breakdown of
increases by segments is as follows: the expenditure for
Exploration and Production Segment is RMB 1.24 billion,
Refining Segment RMB 1.68 billion, Chemicals Segment RMB
1.15 billion, Marketing and Distribution Segment RMB 1.95
billion. The expenditure will be mainly used for the
construction of natural gas and crude oil pipelines and the
speeding up of the refining renovation in Guangzhou
Petrochemical, Yanshan Petrochemical, Shanghai
Petrochemical, chemical renovation of PTA in Yangzi
Petrochemical, polyester project in Yizheng Chemical Fiber,
and the construction and acquisition of petrol stations,
etc.
In the second half of 2004, by following the operating
guidelines featuring "reform, rationalisation, innovation
and development", the Company will actively adopt flexible
operating tactics, realise the production and operation
objectives for 2004, and continue to maintain sound
operation results.
5.12 Caution and explanation as to the anticipated loss of
accumulated net profits from the beginning of the year to
the end of the next reporting period or significant changes
over the same period of last year
|_| applicable |x| inapplicable
5.13 Explanation of the management about the auditors'
"non-standard opinion" for the reporting period
|_| applicable |x| inapplicable
5.14 Explanation of the management about the subsequent changes
and the follow up actions of the matters in connection with
the auditors' "non-standard opinion" in the last financial
year
|_| applicable |x| inapplicable
Section 6 Significant events
6.1 Acquisition, sale of assets and assets reorganisation
6.1.1 Acquisition and purchase of assets
|x| applicable |_| inapplicable
Acquisition of shares of Jinzhi Company
Net profits
contributed
The other to the Company Whether it
party to the during the period constituted to
transaction from the purchase connected transaction
and its assets Date of Transaction day to the end of (if yes, explain
acquired or invested purchase price the reporting day the pricing principle)
100% of the shares of 30 June 2004 RMB 230 million Nil Yes.
Tianjian Lubricant & Principle of Pricing:
Grease Company Limited The consideration of
held by Sinopec Group the acquisition was
Company determined bynegotiations
between the two parties
according to the valuation
of the Target Shares,
the market conditions,
profitability and
development potential,
and the valuation methods
commonly used internationally.
At the seventh meeting of the Second Session of the Board of
Directors of Sinopec Corp. held on 26 March 2004, the Board
reviewed and approved to acquire 100% of the shares of
Yanhua Group Tianjin Lubricant & Grease Company Limited
(Jinzhi Company) (which was owned by Sinpec Group Beijing
Yanshan Petrochemical Company Limited which is, in turn, a
wholly-owned subsidiary of China Petrochemical Corp.) at a
consideration for RMB 230 million in cash. The two parties
signed the acquisition agreement. For details, please refer
to Sinopec Corp.'s relevant announcement published in China
Securities, Shanghai Securities and Securities Times in
China and South China Morning Post and Hong Kong Economic
Times in Hong Kong on 29 March 2004. The acquisition was
completed on 30 June 2004.
6.1.2 Acquisition and purchase of assets
|_| applicable |x| inapplicable
6.1.3 Progress and impact on financial positon and operating
results of the relevant event after the issue of asset
reorgansation report or announcement of acquition and sale
of assets
|_| applicable |x| inapplicable
6.2 Guarartees
|x| applicable |_| inapplicable
Date of
occurrence Whether
(date of Whether for a
execution of completed connected
Obligors agreement) Amount Type Term or not party
RMB millions
Shanghai Secco
Petrochemical Co., Ltd. 9.2.2002 2,930 Joint and several liability 9.2.2002-20.12.2021 No Yes
Shanghai Secco Petro-
chemical Co., Ltd. 9.2.2002 4,062 Joint and several liability 9.2.2002-20.12.2013 No Yes
BASF-YPC Co., Ltd. 7.3.2003 4,680 Joint and several liability 7.3.2003-31.12.2008 No Yes
Yueyang Sinopec Shell Coal 10.12.2003 377 Joint and several liability 10.12.2003-10.12.2017 No Yes
Gasification Co., Ltd.
Others N/A 315 Joint and several liability N/A No Yes
Total amount of guarantee provided during the reporting period Nil
Total amount of guarantee outstanding* RMB 12,191 million
Of which: total outstanding amount of guarantee provided to connected parties RMB 12,191 million
Total amount of guarantee provided by Sinopec Corp. for its controlling subsidiaries RMB 173 million
Total amount of guarantee provided by Sinopec Corp. not in compliance with the
requirements of (Zheng Jian Fa [2003] No.56)** RMB 184 million
Total amount of guarantee as a percentage of the Company's net assets 7.18%
* Pursuant to "Notice on the Preparation of Interim Report of
2004 of the Listed Company" issued by Shanghai Stock Exchange,
"the total amount of guarantee outstanding" and "the total
outstanding amount of guarantee provided to connected parties"
do not include the guarantee provided by Sinopec Corp. to its
controlling subsidiaries.
** These guarantees were granted to subsidiaries and associates of
Sinopec Corp. and were formally approved by the Board of
Directors according to relative procedures. Pursuant to "Notice
on Certain Issues Relating to Regulating Fund Transfers between
a Listed Company and Connected Parties and External Guarantees
of List Company" (Zheng Jian Fa [2003] No.56) promulgated by
the China Securities Regulatory Commission (CSRC) and the
State-owned Assets Supervision and Administration Commission of
the State Council (SASAC) published on 28 March 2003, as the
total liabilities to total assets ratios of this subsidiary and
associate were over 70%, the provision of these guarantees is
subject to restrictions.
6.3 Provision of fund to and fund provided by connected party
|x| applicable |_| inapplicable
Unit: RMB millions
Funds provided by
Connected party Provision of funds to connected party to
connected party the Company
Net occurrence Balance Net occurrence Balance
Sinopec Group Company and
other principal connected parties (2,063) 7,162 (3,723) 10,792
Total (2,063) 7,162 (3,723) 10,792
Of which: during the reporting period, the net occurrence of
the fund provided by the Company for Sinopec Group Company
amounted to a negative amount of RMB 2.026 billion, and the
balance was RMB 6.868 billion.
6.4 Material litigation and arbitration
|_| applicable |x| inapplicable
6.5 Explanations of other significant events, their impact and
proposed solutions
|x| applicable |_| inapplicable
6.5.1 Transfer of State-owned Legal Person Shares in China Phoenix
Held by Sinopec Corp.
At the ninth meeting of the Second Session of the Board of
Directors of Sinopec Corp. held on 6 July 2004, the Board
reviewed and approved to transfer 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)
to Hubei Qingjiang Water Power Investment Limited
("Qingjiang Investment") and China Guodian (Group)
Corporation ("Guodian Group") . The total consideration
payable was RMB 620,954,100. The Board also approved the
Share Transfer Agreement and its related documents to be
entered into between Sinopec Corp., Qingjiang Investment and
Guodian Group. On 6 July 2004, Sinopec Corp. signed the
Share Transfer Agreement with Qiangjiang Investment and
Guodian Group. Meanwhile, the Board reviewed and approved
the proposed acquisition by Sinopec Corp. from Qingjiang
Investment and Guodian Group of petrochemical assets
(including production facilities, inventories and
corresponding accounts receivables) which they had obtained
by way of assets swap from China Phoenix (the Petrochemical
Assets). The total consideration payable in respect of the
acquisition was RMB 548,040,500 in cash. The Board of
Directors authorized the Chairman, Mr. Chen Tonghai, to sign
the Asset Acquisition Agreement and related documents on
behalf of Sinopec Corp. after SASAC approved the share
transfer and CSRC approved the Petrochemical Assets swap.
For relevant details, please refer to Sinopec Corp.'s
announcement published in China Securities, Shanghai
Securities, and Securities Times in Mainland China, and
South China Morning Post and Hong Kong Economic Times in
Hong Kong on 6 July 2004.
6.5.2 The Payment of Interest, Redemption and Delist of Mao Lian
Convertible Bonds for 2004
Approved by CSRC (refer to Zheng Jian Fa [1999] No.90),
Sinopec Mao Ming Refining and Chemical Company Limited
(Maoming Oil Refinery) issued RMB 1.5 billion convertible
bonds ("Mao Lian Convertible Bonds") with 5-year term
through Shenzhen Stock Exchange on 28 July 1999 and listed
on Shenzhen Stock Exchange on 17 August 1999. In accordance
with Provisional Rules on the Management of Convertible
Corporate Bonds, Convertible Corporate Bonds Prospectus
prepared by Maoming Oil Refinery, the resolution of its
Board of Directors on 7 July 2003 and the resolution of its
General Meeting of Shareholders on 23 March 2004, trading of
Mao Lian Convertible Bonds had been terminated on 28 July
2004, and on the same day they were delisted. For those
convertible bonds which were not yet sold to Maoming Oil
Refinery, they were redeemed with the redemption price of
RMB 118.5/piece (tax exempted).
6.5.3 Qingdao Refining Project
On 22 July 2004, the Report of Feasibility study on Qingdao
Refining Project was approved by National Development and
Reform Commission ("NDRC"). The capacity of the refinery is
expected to be 10 million tonnes per year. Total investment
of the project is estimated to be RMB 9.7 million.
Construction of the project is expected to be completed at
the beginning of 2007.
6.5.4 The Establishment of Sinopec-Shell (Jiang Su) Petroleum
Sales Ltd.
On 13 July 2004, Ministry of Commerce approved the
establishment of Sinpec-Shell (Jiangsu) Petroleum Sales Co.
Ltd. jointly invested by Sinopec Corp., Royal Dutch/Shell
(China) Holding BV and Shell (China) Ltd. and granted the
joint venture contract and the Articles of Association
signed by each party on 11 May 2004. The total investment
amounts to RMB 1.55154 billion and the registered capital
amounts to RMB 0.83 billion. The investment proportion is
60%, 30% and 10% by Sinopec Corp., Royal Dutch/Shell (China)
Holding BV and Shell (China) Ltd. respectively.
6.5.5 Issuance of Corporate Bonds
At Sinopec Corp.'s second Extraordinary General Meeting of
Shareholders for Year 2003 held on 15 Oct. 2003, the
shareholders considered and approved "the Proposal
Concerning the Issuance of Domestic Corporate Bonds
Amounting to RMB 3.5 billion". On 16 January 2004, Sinopec
Corp. obtained the approval from the NDRC to issue 10-year
term domestic corporate bonds of RMB 3.5 billion. On 23
February 2004, the sixth meeting of Sinopec Corp.'s Second
Session of the Board of Directors and the NDRC determined
the coupon rate of the corporate bonds to be 4.61%. As of
the date of 8 March 2004, the corporate bonds of Sinopec
Corp. have been issued mainland successfully. For relevant
details, please refer to Sinopec Corp.'s announcement
published in China Securities, Shanghai Securities, and
Securities Times in Mainland China, and South China Morning
Post and Hong Kong Economic Times in Hong Kong, respectively
on 25 August 2003, 16 October 2003, 30 January 2004, 9
February 2004, and 24 February 2004.
6.6 Dividend Distribution for the year ended 31 December 2003
As approved at the Annual General Meeting for the Year 2003
of Sinopec Corp., a final cash dividend of RMB 0.06
(inclusive of tax) per share for the year ended 31 December
2003 was distributed, with a total amount of RMB 5.202
billion. Shareholders whose names appeared on the register
of members of Sinopec Corp. on 4 June 2004 had already
received the final dividend on 28 June 2004.
For the year of 2003, the annual cash dividend of RMB 0.09
(inclusive of tax) per share was distributed and the total
cash dividend amounted to RMB 7.803 billion
6.7 Interim Dividend Distribution Plan for the six-month period
ended 30 June 2004
According to the provision of the Articles of Association of
Sinopec Corp., the Board approved the Interim Dividend
Distribution Plan for the period ended 30 June 2004 at the
tenth meeting of the Second Session of the Board of
Directors. An interim cash dividend of RMB 0.04 (inclusive
of tax) per share is to be distributed, based on the total
number of shares of 86,702.439 million as at 30 June 2004,
which amounts to a total cash dividend of approximately RMB
3.468 billion.
The interim dividend will be distributed on or before 30
September 2004 (Thursday) to the shareholders whose names
appear on the register of members of Sinopec Corp. on
Monday, 20 September 2004.
Section 7 Financial Statements
7.1 Auditors' opinion
Financial statements |_| Unaudited |x| Audited
Auditors' opinion |x| Standard unqualified opinion |_| Not Standard opinion
7.2 The Group's and the Company's financial statements with
comparatives
7.2.1 Financial statements prepared in accordance with the PRC
Accounting Rules and Regulations
The Group's and the Company's balance sheets
At 30 June 2004 At 31 December 2003
The Group The Company The Group The Company
RMB millions RMB millions RMB millions RMB millions
Current assets
Cash at bank and in hand 17,028 7,328 17,405 6,581
Bills receivable 8,009 2,070 5,953 1,282
Trade accounts receivable 13,621 9,678 9,284 7,080
Other receivables 12,166 19,418 15,457 24,861
Advance payments 7,248 5,486 3,904 2,990
Inventories 58,990 31,864 44,915 22,793
Total current assets 117,062 75,844 96,918 65,587
Long-term equity investments
(Including the Group's and the
Company's equity investment
differences of RMB 425 million
and RMB 415 million respectively
(2003: RMB 400 million and 395
million)) 12,106 106,673 11,150 98,334
Fixed assets
Fixed assets, at cost 466,212 226,100 461,128 223,015
Less: Accumulated depreciation 222,732 95,673 213,804 94,138
243,480 130,427 247,324 128,877
Less: Provision for impairment losses
on fixed assets 4,094 2,505 1,331 764
Net book value of fixed assets 239,386 127,922 245,993 128,113
Construction materials 1,659 603 1,226 263
Construction in progress 44,498 27,124 28,513 19,858
Total fixed assets 285,543 155,649 275,732 148,234
Intangible assets and other assets
Intangible assets 4,526 3,701 4,564 3,712
Long-term deferred expenses 573 154 97 --
Total intangible assets and other assets 5,099 3,855 4,661 3,712
Deferred taxation:
Deferred tax assets 3,115 2,391 1,752 1,510
Total assets 422,925 344,412 390,213 317,377
Current liabilities:
Short-term loans 26,445 14,277 20,904 9,787
Bills payable 28,531 21,630 23,958 18,006
Trade accounts payable 26,277 21,656 22,704 18,117
Receipts in advance 5,610 4,275 5,908 4,077
Wages payable 2,463 920 1,850 643
Staff welfare payable 1,093 442 1,230 583
Taxes payable 6,025 1,482 6,986 2,975
Other payables 1,490 470 1,237 380
Other creditors 25,334 24,080 27,537 26,102
Accrued expenses 2,151 850 303 133
Current portion of long-term liabilities 10,895 6,268 8,175 4,428
Total current liabilities 136,314 96,350 120,792 85,231
Long-term liabilities
Long-term loans 82,038 71,300 79,221 68,723
Bonds payable 3,500 3,500 -- --
Other long-term payables 649 220 888 461
Total long-term liabilities 86,187 75,020 80,109 69,184
Deferred taxation:
Deferred tax liabilities 238 16 289 16
Total liabilities 222,739 171,386 201,190 154,431
Minority interests 27,910 -- 26,077 --
Shareholders' funds
Share capital 86,702 86,702 86,702 86,702
Capital reserve 36,852 36,852 36,852 36,852
Surplus reserves (Including statutory
public welfare fund of RMB 7,834
million (2003: RMB 6,330 million)) 22,668 22,668 19,660 19,660
Unrecognised investment losses (750) -- (243) --
Undistributed profits (Including
dividend declared after the
balance sheet date of
RMB 3,468 million
(2003: RMB 2,601 million)) 26,804 26,804 19,975 19,732
Total shareholders' funds 172,276 173,026 162,946 162,946
Total liabilities and shareholders'
funds 422,925 344,412 390,213 317,377
The Group's and the Company's income statements and profit
appropriation statements
Six-month periods Six-month periods
ended 30 June 2004 ended 30 June 2003
The Group The Company The Group The Company
RMB millions RMB millions RMB millions RMB millions
Income from principal operations 265,709 183,836 194,842 132,267
Less: Cost of sales 206,098 154,678 152,303 111,788
Sales taxes and surcharges 7,776 4,661 6,141 3,855
Profit from principal operations 51,835 24,497 36,398 16,624
Add: Profit from other operations 616 29 583 77
Less: Selling expenses 8,664 5,590 6,692 4,448
Administrative expenses 10,865 7,204 9,646 6,173
Financial expenses 2,094 1,287 2,234 1,200
Exploration expenses,
including dry holes 2,475 1,831 2,784 1,966
Operating profit 28,353 8,614 15,625 2,914
Add: Investment income 516 16,640 341 11,949
Non-operating income 181 112 88 29
Less: Non-operating expenses 4,952 3,552 768 568
Profit before taxation 24,098 21,814 15,286 14,324
Less: Taxation 7,154 6,532 4,762 4,559
Minority interests 2,412 -- 759 --
Add: Unrecognised investment losses 507 -- -- --
Net profit 15,039 15,282 9,765 9,765
Add: Undistributed profits at the
beginning of the period 19,975 19,732 12,569 12,569
Distributable profits 35,014 35,014 22,334 22,334
Less: Transfer to statutory surplus reserve 1,504 1,504 977 977
Transfer to statutory public welfare fund 1,504 1,504 977 977
Distributable profits to shareholders 32,006 32,006 20,380 20,380
Less: Distribution of ordinary shares'
dividends 5,202 5,202 5,202 5,202
Undistributed profits (Including dividend
declared after the balance
sheet date of RMB 3,468 million
(2003: RMB 2,601 million)) 26,804 26,804 15,178 15,178
7.2.2 Financial statements prepared in accordance with IFRS
Consolidated income statement
Six-month periods
ended 30 June
2004 2003
RMB millions RMB millions
Turnover and other operating revenues
Turnover 265,709 197,614
Other operating revenues 9,733 7,721
275,442 205,335
Operating expenses
Purchased crude oil, products and
operating supplies and expenses (197,123) (144,365)
Selling, general and administrative expenses (14,212) (11,428)
Depreciation, depletion and amortisation (14,773) (12,947)
Exploration expenses, including dry holes (2,475) (2,784)
Personnel expenses (8,346) (8,338)
Employee reduction expenses (412) --
Taxes other than income tax (7,776) (6,190)
Other operating expenses, net (2,986) (714)
Total operating expenses (248,103) (186,766)
Operating profit 27,339 18,569
Finance costs
Interest expense (1,986) (2,194)
Interest income 169 145
Foreign exchange losses (29) (39)
Foreign exchange gains 43 14
Net finance costs (1,803) (2,074)
Investment income/(losses) 30 (2)
Share of profits less losses from associates 451 272
Profit from ordinary activities before taxation 26,017 16,765
Taxation (7,713) (5,264)
Profit from ordinary activities after taxation 18,304 11,501
Minority interests (2,153) (774)
Profit attributable to shareholders 16,151 10,727
Basic earnings per share 0.19 0.12
Dividends attributable for the period:
Interim dividend declared after the balance sheet date 3,468 2,601
Consolidated balance sheet
At 30 June At 31 December
2004 2003
RMB millions RMB millions
Non-current assets
Property, plant and equipment 251,704 256,748
Construction in progress 44,659 28,973
Investments 2,711 2,582
Interests in associates 8,849 8,081
Deferred tax assets 3,506 2,144
Lease prepayments 794 810
Other assets 2,612 2,152
Total non-current assets 314,835 301,490
Current assets
Cash and cash equivalents 14,273 15,221
Time deposits with financial institutions 2,755 2,184
Trade accounts receivable 13,621 9,284
Bills receivable 8,009 5,953
Inventories 60,631 46,112
Prepaid expenses and other current assets 20,813 20,574
Total current assets 120,102 99,328
Current liabilities
Short-term debts 31,187 25,158
Loans from Sinopec Group Company and fellow subsidiaries 6,153 3,921
Trade accounts payable 26,277 22,704
Bills payable 28,531 23,958
Accrued expenses and other payables 41,419 42,187
Income tax payable 4,146 4,077
Total current liabilities 137,713 122,005
Net current liabilities (17,611) (22,677)
Total assets less current liabilities 297,224 278,813
Non-current liabilities
Long-term debts 49,078 41,450
Loans from Sinopec Group Company and fellow subsidiaries 36,460 37,771
Deferred tax liabilities 5,106 4,599
Other liabilities 731 1,228
Total non-current liabilities 91,375 85,048
Minority interests 27,440 25,866
Net assets 178,409 167,899
Shareholders' funds
Share capital 86,702 86,702
Reserves 91,707 81,197
Total shareholder's funds 178,409 167,899
7.3 Notes to the financial statements
7.3.1 Segmental reporting prepared in accordance with IFRS
Information on the Group's business segments is as follows:
Six-month periods
ended 30 June
2004 2003
RMB millions RMB millions
Turnover
Exploration and production
External sales 7,376 7,083
Inter-segment sales 26,316 24,980
33,692 32,063
Refining
External sales 31,986 26,287
Inter-segment sales 126,904 102,765
158,890 129,052
Marketing and distribution
External sales 156,539 110,231
Inter-segment sales 1,334 1,630
157,873 111,861
Chemicals
External sales 50,946 38,133
Inter-segment sales 4,794 3,923
55,740 42,056
Corporate and others
External sales 18,862 15,880
Inter-segment sales 16,246 13,419
35,108 29,299
Elimination of inter-segment sales (175,594) (146,717)
Turnover 265,709 197,614
Other operating revenues
Exploration and production 3,544 2,952
Refining 2,367 2,033
Marketing and distribution 362 202
Chemicals 2,645 2,013
Corporate and others 815 521
Other operating revenues 9,733 7,721
Turnover and other operating revenues 275,442 205,335
Six-month periods
ended 30 June
2004 2003
RMB millions RMB millions
Result
Operating profit
By segment
- Exploration and production 10,520 10,298
- Refining 4,251 2,644
- Marketing and distribution 8,569 5,461
- Chemicals 4,924 858
- Corporate and others (925) (692)
Total operating profit 27,339 18,569
Share of profits less losses from associates
- Exploration and production 223 181
- Refining 29 4
- Marketing and distribution 177 40
- Chemicals (37) (26)
- Corporate and others 59 73
Aggregate share of profits less losses from associates 451 272
Finance costs
Interest expense (1,986) (2,194)
Interest income 169 145
Foreign exchange losses (29) (39)
Foreign exchange gains 43 14
Net finance costs (1,803) (2,074)
Investment income/(losses) 30 (2)
Profit from ordinary activities before taxation 26,017 16,765
Taxation (7,713) (5,264)
Profit from ordinary activities after taxation 18,304 11,501
Minority interests (2,153) (774)
Profit attributable to shareholders 16,151 10,727
7.3.2 Taxation
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%.
7.3.3 Cost of inventories
The cost of inventories recognised as an expense in the
consolidated income statement prepared in accordance with
IFRS amounted to RMB 211,548 million for the six-month
period ended 30 June 2004 (2003: RMB 157,853 million).
7.3.4 During the reporting period, there are no changes in the
scope of consolidation of the financial statements prepared
under the PRC Accounting Rules and Regulations and IFRS.
Section 8 Repurchase, Sales and Redemption of shares
During this reporting period, the Company did not repurchase, sell
or redeem any securities of Sinopec Corp.
Section 9 Compliance with the Code of Best Practice
The Board of Directors of Sinopec Corp. is not aware of any
information which reasonably indicates that Sinopec Corp.
fails/has failed to, currently or at any time within the six-month
period ended 30 June 2004, comply with those requirements as set
out under the Code of Best Practice in Appendix 14 to the Listing
Rules stipulated by Hong Kong Stock Exchange.
Section 10 Application of the Model Code
In this reporting period, no director has infringed the
requirements set out under the Model Code for Securities
Transactions by Directors of Listed Issuers, Appendix 10 to the
Listing Rules stipulated by Hong Kong Stock Exchange.
Section 11 A detailed results announcement containing all the information
required by paragraphs 46(1) to (6) 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, the PRC, 27 August 2004
As at the date of this announcement, the directors of the Company are: Messrs.
Chen Tonghai, Wang Jiming, Mou Shuling, Zhang Jiaren, Cao Xianghong, Liu
Genyuan, Gao Jian and Fan Yifei; the independent directors are: Messrs. Chen
Qingtai, Ho Tsu Kwok Charles, Shi Wanpeng and Zhang Youcai; and the employee
representative director is: Mr Cao Yaofeng.