SEG Announces 2019 Interim Results

HONG KONG, Aug. 19, 2019 /PRNewswire/ -- SINOPEC Engineering (Group) Co., Ltd. ("SEG" or the "Company", together with its subsidiaries collectively known as the "Group") (stock code: 2386) today announces its interim results for the six months ended 30 June 2019 (the "Reporting Period").

In the first half of 2019, facing the complicated and ever-changing marco situation at home and abroad, the Group has obtained good operation performance by making energetic efforts to develop domestic and overseas markets, strengthening its management and control of projects and improving the level of elaborate management. During the Reporting Period, the Group recognized a revenue of RMB22.682 billion, representing an increase of 23.7% on a period-on-period basis. The Group's gross profit margin was 10.5%, which remained stable as compared with that as at 30 June 2018. The Company's profits attributable to equity holders was RMB1.199 billion, representing an increase of 8.2% on a period-on-period basis. After due consideration of the Company's earnings, return to shareholders and the needs for future sustainable development as a whole, the Board recommended an interim dividend of RMB0.108 per share, representing an increase of 8% on a period-on-period basis and a dividend payout ratio of 40%.

Steady growth in newly signed contracts by proactively seizing market opportunities: As the successive commencement of construction of certain projects in relation to the "seven major national petrochemical industry bases" and "Sinopec's world-class refining and chemical bases" in China, the Company seized  market opportunities and exerted its competitive advantages to maintain its market share. The Company has newly inked contracts with clients such as Oman DUQM, Saudi Aramco and BASF. Meanwhile, the Company also closely tracked market opportunities in countries along the Belt & Road, so as to lay foundation for overseas market developing. During the Reporting Period, the total value of newly signed contracts amounted to RMB33.22 billion.

Strengthening project process management to ensure projects were implemented steadily: During the Reporting Period, to ensure projects were implemented at a higher efficiency, steadily and safely, the Company optimized allocation of resources and worked hard to control the cost of subcontracting and procurement, ensuring that ongoing projects are carried out smoothly and safety, quality, progress are fully controlled. As at the end of the Reporting Period, the backlog of the Group amounted to RMB105.473 billion, representing an increase of 11.1% as compared with that as at 30 June 2018, and 2.2 times of the total revenue in 2018.

Continuous promotion of innovation and technological advancement. The Company continued to achieve fruitful results in technological innovation: During the Reporting Period, the Company worked hard to successfully organize the collaboration of major technologies and the implementation of technological innovation projects, made full use of the distinctive advantages of the R&D center in the development of engineering technology, continuously strengthened the collaboration with famous licensors in the world and created new accomplishments. During the Reporting Period, the Group received a total of 41 scientific advancement awards in scientific innovation and engineering construction fields at the provincial and above level. Among these awards, there was 1 national science and technology advancement award; 1 national excellent design award; 3 national high-quality projects awards.

Chairman of SEG, Mr. YU Baocai, said, "In the first half of 2019, in the face of the complicated and ever-changing marco situation at home and abroad, the Company seized opportunities, strengthened management and improved steadily. The management of the Company led all employees to expand market, control cost, push forward optimization and improvement, and thus achieved optimal business performance and stable development trend with its major economic indicators all realizing significant growth. In 2019, the Company will actively ride the reform waves, follow development requirements, improve development quality, accelerate new market exploration and new business development, and spare no efforts to promote quality reform, efficiency reform and drive reform. Also the Company will stride towards comprehensively sustainable development and high quality development, and thus make contributions to the society, to shareholders and to employees by our exceptional performance."

Business Review and Highlights

Significant results in market development

During the Reporting Period, the new contracts value was RMB33.220 billion, accounting for approximately 60.4% of the annual target; among them, the value of newly signed domestic contracts amounted to RMB31.043 billion, and the value of newly signed overseas contracts amounted to approximately RMB2.177 billion

In the PRC markets, during the Reporting Period, the Group entered into new contracts for a number of large projects, such as Fujian Gulei Refining and Petrochemical Integrated Project with a total contract value of approximately RMB12.513 billion; Sinopec Tianjin Oil Products Upgrading Project with a total contract value of approximately RMB2.601 billion; Sinochem Quanzhou Refinery Revamping and Expansion Project with a total contract value of approximately RMB1.913 billion; and Shaanxi Yanchang Coal and Oil Resources Comprehensive Utilisation Project with a total contract value of approximately RMB1.570 billion. In overseas markets, during the Reporting Period, the Group entered into new contracts for a number of projects, such as Oman DUQM Refinery P2 Construction Project with a total contract value of approximately RMB376 million; Saudi Aramco Overhaul and Renovation Project with a total contract value of approximately RMB376 million; and BASF USA Pipeline Prefabrication Project with a total contract value of approximately RMB826 million.

In addition to the above projects, the Group has also kept track of some oil refining, petrochemical engineering, new coal chemical, environmental protection and energy saving projects, which are expected to be signed in the future.

Successful Implementation of Major Projects

• One of Sinopec Group's "four world-class refining and chemical bases": Zhongke Refining and Chemical Complex Project was at the final detailed design phase. Civil construction, equipment acquisition and steel structure installation were fully implemented. The overall progress has exceeded 60%;
• The largest petrochemical industry cooperation project on both sides of the Taiwan Straits: Fujian Gulei Refining and Petrochemical Integrated Project was at startup phase. The overall progress is approximately 10%;
• Eastern China 's largest coal-based methanol to olefins project: the main equipments of Zhong'An Joint Coalification Complex Project was at the mechanical-completion stage;
• Sinopec - Saudi Basic Industry Corporation Strategic Cooperation Project: Sinopec-SABIC Project was in the detailed design stage. At the site, the workers were working on pile foundation and underground pipeline. The overall progress is more than 20%;
• Building a world-class portside petrochemical base: the Sinochem Quanzhou 1 million tons / year ethylene and oil refining expansion project was in the implementation stage and the overall progress is more than 60%;
• The Company's largest project by contract value in the Gulf region: the overall progress of the Kuwait Oil Refining Project has exceeded 90%. On the aspect of overall progress, maintained No.1 among contractors. HSE, quality, progress, expense and other items are under control;
• The Company's largest project in Southeast Asia: Malaysia RAPID Oil Refining Project had been completed and delivered to the owner;
• The overall progress of Saudi Arabia SABIC GAS Phase-9 Air Separation Project is approximately 40%, among them, the design progress exceeded 80%, the procurement progress exceeded 60%, and the construction progress was approximately 20%. The overall progress, cost, quality and safety are under control.

Continuous enhancement of project assurance capability

Leveraging the organisational support, the Company has established a number of coordination groups for key projects based on their respective characteristics and construction needs. The Company gave a full play to the overall synergy and collectivization advantages, established a project grading management mechanism, published a list of key projects of the Group on a regular basis, comprehensively monitored the progress of key projects, ensured advanced planning and overall coordination of the key projects, implemented process assurance, and integrated and optimised internal resources, so as to warrant the quality and safety of the projects. The Company tightened its project monitoring system and established a triple warning mechanism to promote project efficiency and progress, which corrected errors in a timely manner and guaranteed smooth projects execution.

The Company has set up and put into use a subcontracting management information platform, which improved the level of informationisation on subcontracting management. The Group has introduced the management rules and regulations for strategic subcontractors, intensified the cultivation of strategic subcontractors, further optimised subcontractor resources, maintained the long-term cooperation enthusiasm and viscosity of high-quality subcontractors; meanwhile, the Group deepened the subcontracting management, strengthened supervision, and ensured the implementation of the subcontracting management system, so as to ensure smooth projects execution.

The Company closely monitored and analysed the implementation of settlement plans, thoroughly analysed issues in project settlement and inventory management, carried out corresponding actions and measures to strengthen process management during the execution, and timely confirm the progress and contractual adjustments.

All engineering technology R&D activities have been steadily advanced

The Company carried out various research and development activities focusing its main businesses. Technological innovation work was closely centered on the demand of petrochemical engineering market needs, and a number of technological research and development activities that around the market product demand were steadily advanced: equipment with the second generation of highly efficient environmental friendly aromatic hydrocarbon technology has been constructed and interim handed over, and was currently at the production preparation stage; the development of low-cost ethane cracking gas to styrene technology progressed smoothly, and was expected to complete the basic engineering design of the plant in the second half of the year; process package preparation work of the key technologies for hydrogenation of crude oil to produce low-carbon olefins and BTX has been completed.

A number of energy saving and emission reduction technologies have entered the stage of project implementation: zero-discharge treatment technology for high-salt wastewater of the coal chemical project has completed design and been at the stage of construction; integration and development of catalytic cracking technology for heavy oil with high residue and low emission has completed design and been at the stage of construction; and the technology development of VOC removal process for gas-phase polypropylene products was expected to complete all design work by the end of this year. The development of energy saving and emission reduction technology fully reflects the long-term- and future-oriented vision of the Company.

Significant technological breakthroughs have been made in the treatment of coal chemical wastewater by large-scale biological fluidised beds. The construction and operation of the industrial sewage treatment plant applying such technology overturned the traditional sewage biochemical treatment model and revolutionised the sewage treatment plant and closed treatment. Compared with the traditional technology, this technology has the characteristics of less floor area, lower operation costs and less investment demand. It can reduce the discharge of waste gas by 80% and the excess sludge by over 40%, which is at the advanced level internationally.

Luoyang Technological Research and Development Center of the Group continuously exerted its own advantages, promoted key technological innovations and efficiency, and constantly strengthened the cooperation with other engineering companies. Leveraging the strength of the Group's subsidiaries in the field of sewage treatment engineering, Luoyang Technological Research and Development Center made collaborative innovation and key breakthroughs, successfully industrialised the large-scale biological fluidised bed sewage treatment technology in Hubei Province, and passed the technical appraisal organised by authoritative organizations. The successful industrialisation of this environmental protection technology marked a historic breakthrough in achieving the high efficiency, installation, sealing and intelligence of sewage treatment in China.

Continued to achieve numerous fruitful results in technological innovation：During the Reporting Period, the Group received a total of 41 scientific advancement awards in scientific innovation and engineering construction fields at the provincial and above level. Among these awards, there was 1 national science and technology advancement award; 25 provincial and ministerial scientific advancement awards; 1 provincial and ministerial invention award; 1 national excellent design award, 3 high quality projects awards; and 10 provincial and ministerial high-quality projects awards.

Preliminary achievement in digital engineering application

During the Reporting Period, the Group continued to steadily promote the construction of digital factories, furthered the application of engineering design and production line in overseas projects, such as Kuwait Oil Refining Project. The Group promoted the intelligent P&ID application for key projects, such as Zhongke Refining and Chemical Complex Project and Sinopec-SABIC Project. It also improved the digital delivery platform, the independent innovation in professional 3D design for equipment and structures, the integrated application of standardised design, electronic archiving, digitalised publishing and reform in the modes of digitalised, networked and intelligent engineering design, all of which promoted the engineering service capability and provided powerful support for the construction of intelligent factories.

Industry and Business Prospects

Looking forward to the second half of 2019, it is expected that the global industrial production will slow down and trade tensions will persist, and there are still uncertain factors affecting the recovery of the world economy. The external environment of Chinese economic operation is still complex, uncertain factors are increasing, and the economy is under greater downward pressure. International oil price is still full of change. The global industrial investment will continue to grow, and certain project from the "Seven Major National Petrochemical Industry Bases" and Sinopec Group's "Four World-class Refining Bases" continue to advance. It is also expected that the production and operation of Chinese refining, chemical engineering industry will be constantly improved, while resource competition will be more intense, and engineering companies will still face great cost control pressure. In the second half of 2019, the Group will actively seize the opportunity, exert the advantages of collectivisation, integration and large scale, persistently enhance core competition advantage, propel sustainable and healthy development, optimise the overall management and the resources allocation.

Summary of Financial Data and Indicators Prepared in Accordance with International Financial Reporting Standards ("IFRS")

Unit: RMB'000

Unit: RMB'000

This press release is issued by PRChina Limited on behalf of SINOPEC Engineering (Group) Co., Ltd.

About SINOPEC Engineering (Group) Co., Ltd.

The Group is a leading Chinese energy and chemical engineering company with strong international competitiveness. The Group can provide domestic and overseas clients with overall solutions for petrol refining, chemical engineering, aromatics, coal chemicals, inorganic chemicals, pharmaceutical chemicals, clean energy, storage and transportation facilities, environmental protection and energy saving and other sectors, including engineering consulting, technology licensing, project management contractor, financing assistance, EPC contracting, as well as design, procurement, construction and installation, lifting and transportation of large equipment, pre-commissioning, start-up and other industrial chain services.

After more than 60 years of continuous development, the Group currently has an academician of the Chinese Academy of Sciences, two academicians of the Chinese Academy of Engineering and nearly 10,000 high-quality professionals with extensive project management and implementation experience, and owns and cooperatively owns advanced patents and know-how in core business areas. The Group has delivered on schedule hundreds of modern factories with enormous investment, advanced technology, complicated process and high quality to clients in more than 20 countries and regions around the world, established long-term and steady cooperative relationships with large energy and chemical enterprises at home and abroad, established an extensive and stable client base, and enjoys remarkable industrial influence and social reputation.

In the future, the Group will continue to focus on the development strategies of "energy and petrochemical-oriented, innovation-driven, globalization-targeted and value-focused", enhance exploration and development in the fields of hydrogen energy, renewable energy and new materials, and create a new momentum in achieving the vision of "building a world-class engineering company".

Disclaimer

This press release includes "forward-looking statements". All statements, other than statements of historical facts that address activities, events or developments that the Group expects or anticipates will or may occur in the future (including but not limited to projections, targets, other estimates and business plans) are forward-looking statements. The Group's actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to the price fluctuation, possible changes in actual demand, foreign exchange rate, market shares, competition, environmental risks, possible changes to laws, finance and regulations, conditions of the global economy and financial markets, political risks, possible delay of projects, government approval of projects, cost estimates and other factors beyond the Group's control. In addition, the Group makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements.