Shanghai Petrochemical 1H 2018 Turnover Up 21.08% to RMB52.16 Billion

Promotes Technological Innovation, Environmental and Safety Operations  

HONG KONG, Aug. 22, 2018 /PRNewswire/ -- Sinopec Shanghai Petrochemical Company Limited ("Shanghai Petrochemical" or the "Company", HKEx: 00338; SSE: 600688; NYSE: SHI) today announced the unaudited operating results of the Company and its subsidiaries (the "Group"), prepared under International Financial Reporting Standards ("IFRS"), for the six months ended 30 June, 2018 (the "Period").

According to IFRS, turnover for the Group for the Period reached RMB52,161.5 million, representing an increase of 21.08% year-on-year. The Group recorded a profit after income tax and non-controlling shareholder interests of RMB3,551.3 million, representing an increase of RMB952.8 million from the same period last year. Basic earnings per share amounted to RMB0.328 (2017 interim: basic earnings per share of RMB0.241). The Board of Directors did not recommend the distribution of a 2018 interim dividend (2017 interim: Nil).

Mr. Wu Haijun, Chairman of Shanghai Petrochemical, said: "In the first half of 2018, the world economy continued to grow, making the major developed economies relatively strong. Among them, the economic growth of the U.S. was the strongest, with its growth rate outperforming that of last year. The emerging economies maintained a medium-to-high growth rate. Driven by policies such as the supply-side structural reform, China's economy continued to grow steadily. Its economic structure was once again optimized, and its quality and efficiency continued to improve. The trade friction between China and the U.S. became a major uncertainty affecting the stable operation of the domestic economy. With the deleveraging and strict supervision, the scale of domestic financing dropped significantly, and growth of domestic infrastructure investment slowed down sharply. In the first half of the year, gross domestic product (GDP) increased by 6.8% year-on-year, and economic growth continued to remain stable. The economy of China's petrochemical industry continued to improve steadily, with the supply and demand of domestic refined oil and major chemicals basically balanced. The efficiency of the industry further improved. However, the growth of market demand for chemicals was still weak, with weak investment. The Group made substantial efforts in maintaining stable operations of its units, optimizing production and operations, reducing costs and expenses, boosting environmental governance, reform and development, etc., with the Company experiencing relatively good safety and environmental protection work."

In the first half of 2018, net sales of the Group amounted to RMB46,047.1 million, representing an increase of 24.20% over the same period last year. Of these, net sales of synthetic fibers, resins and plastics, intermediate petrochemical products, petroleum products and trading of petrochemical products increased by 8.87%, 9.39%, 29.57%, 44.66% and 5.88%, respectively. The increase in net sales of products was mainly due to a general increase in the unit prices of products during the Period compared with the same period last year.

The Group made substantial efforts in maintaining stable operations of its units, optimizing production and operations, reducing costs and expenses, environmental governance, reform and development, etc. The total production volume of the Group reached 7,396,800 tons, representing a year-on-year increase of 21.35%. The Group processed 7,343,900 tons of crude oil (including 386,900 tons of crude oil processed on a sub-contract basis), representing a year-on-year increase of 7.93%. The production volume of refined oil products in total reached 4,317,700 tons, representing a year-on-year increase of 6.23%. Among these, the output of gasoline was 1,630,900 tons, representing a year-on-year increase of 7.54%; the diesel output was 1,947,300 tons, representing a year-on-year increase of 7.82%; and the jet fuel output was 739,500 tons, representing a year-on-year decrease of 0.32%. The Group produced 402,500 tons of ethylene and 329,900 tons of paraxylene, representing a year-on-year increase of 13.25% and 15.84%, respectively. The Group produced 484,000 tons of synthetic resins and plastic (excluding polyesters and polyvinyl alcohol), representing a year-on-year increase of 4.09%; 334,000 tons of synthetic fiber monomers, representing a year-on-year increase of 3.86%; 201,900 tons of synthetic fiber polymers, representing a year-on-year decrease of 0.25%; and 86,700 tons of synthetic fibers, representing a year-on-year decrease of 9.40%. For the first half of the year, the sales to output ratio and debt recovery ratio of the Group were 99.77% and 100%, respectively.

In the first half of 2018, international crude oil prices rose amid continued production cuts in major oil-producing countries, strong global demand and escalating geopolitical factors in the Middle East. The average unit cost of crude oil processed by the Group (for its own account) was RMB3,067.71/ton, representing a year-on-year increase of 15.60%. In the first half of 2018, the Group's cost of crude oil accounted for 50.68%of the total cost of sales.

The Company continued to promote project construction and technological innovation. In the first half of the year, the Company's "13th Five-Year Plan" industrial development was further improved. The Company completed the project to transform the cogeneration unit to be in compliance with emission reduction. The oil product clean-up project also made progress. The Company started projects such as No. 2 safe and eco-friendly closed decoking, transportation and waste gas treatment of delay coking facility, third circuit incoming power lines with a supply capacity of 220KV, second stage construction of carbon fiber, etc. The Company's research and development ("R&D") focused on the development of new industries of high-performance materials, high value-added synthetic materials and new refining products, new fine chemical engineering, and applications of new technologies and materials for refining. Market development of colored high-end acrylic fiber products was stepped up and the newly developed modified PVA products and scratch-resistant pipe materials were put into industrial production. With the focus on strengthening the research of carbon fiber technology and expanding the scope of application, the R&D of 48K was a success and passed the appraisal. The carbon fiber pultruded sheet was first used in tunnel reinforcement engineering.

Mr. Wu Haijun said: "Looking forward to the second half of 2018, the world economy will be exposed to more risks. With many multilateral rules and institutions formed after the Second World War facing major challenges, especially in global trade, and market turmoil brought about by the spillover effects of the return of normalization of monetary policies of major powers increasing, the uncertainty of world economic development will increase. The financial risks of China regarding financing difficulties and credit defaults will increase as the downward pressure of the economy increases; however, under the effect of supply-side structural reform, innovative entrepreneurship and steady growth policies, and relatively strong resilience, potential and stability of China's economic growth, it is expected that the domestic economy will only moderately decline in the second half of the year. The launch of a series of new environmental protection policies for China's petrochemical industry will increase the costs incurred and pressures on the development of the entire industry. Sizable private refining projects with scale and technological advantage will gradually enter the production period, and market competition will become more intense. In the second half of the year, the Group will further focus on improving development quality and efficiency, and solidly promote environmental protection, system optimization, reform and development, and accomplish the full-year goals and tasks."

Shanghai Petrochemical is one of the largest petrochemical companies in China in terms of sales revenue, and was one of the first Chinese companies to complete a global securities offering. Located in the Jinshan District in southwest Shanghai, the Group is a highly-integrated petrochemicals enterprise which processes crude oil into a broad range of products such as synthetic fibers, resins and plastics, intermediate petrochemicals and petroleum products.

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This press release contains statements of a forward-looking nature. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will", "expects", "anticipates", "future", "intends", "plans", "believes", "estimates" and similar statements. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks such as the risk that the PRC economy may not grow at the same rate in future periods as it has in the last several years, or at all, due to the PRC government's implementation of macro-economic control measures to curb over-heating of the PRC economy; uncertainty as to global economic growth in future periods; the risk that prices of the Company's raw materials, particularly crude oil, will continue to increase, the Company may not be able to raise the prices of its products as appropriate, thus adversely affecting the Company's profitability; the risk that new marketing and sales strategies may not be effective; the risk that fluctuations in demand for the Company's products may cause the Company to either over-invest or under-invest in production capacity in one or more of its four major product categories; the risk that investments in new technologies and development cycles may not produce the benefits anticipated by the management; the risk that the trading price of the Company's shares may decrease for a variety of reasons, some of which may be beyond the control of the management; the risk of competition in the Company's existing and potential markets; and other risks outlined in the Company's filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update this forward-looking information, except as required under applicable laws.

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Encl: Condensed Consolidated Income Statement (Unaudited)