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Shanghai Petrochemical Announces 2008 Annual Results

2009-03-27 22:49 824

Turnover Achieves a Record High; But Operating Results Decline Due to Difficult Operating Environment

HONG KONG, March 29 /PRNewswire-Asia/ -- Sinopec Shanghai Petrochemical Company Limited ("Shanghai Petrochemical" or the "Company") (HKEx:338; SSE: 600688; NYSE: SHI) announced today the audited operating results of the Company and its subsidiaries (the "Group") prepared under International Financial Reporting Standards ( "IFRS") for the year ended December 31, 2008 (the "Year").

According to IFRS, turnover of the Group for the Year amounted to a record high of RMB60,226.9 million, representing an increase of 8.85% as compared to the previous year. Loss before taxation was RMB8,014.0 million, while loss after taxation attributable to equity shareholders of the Company amounted to RMB6,238.4 million. Basic loss per share was RMB0.87 (basic earnings per share for 2007: RMB0.23). The board of directors did not recommend the payment of a final dividend for 2008 (2007: RMB0.09).

Mr. Rong Guangdao, Chairman of Shanghai Petrochemical, said, "In 2008, China's petroleum and petrochemical industries were faced with a difficult operating environment amid the hit of the global economic recession: the sharp rise and fall in international crude oil prices, the long time severely inverted prices of domestic refined oil products with those of crude oil, the sudden decrease in demand for petroleum and petrochemical products, the sharp fall in the prices of petrochemical products and so forth, which resulted in a remarkable slowdown in petroleum and petrochemical production growth and a substantial decrease in corporate profitability. Confronted with such tough situations, the Group continued to fully implement its cost leadership strategy, improve production operation, optimize resource allocation and push forward the execution of its reforms and adjustments. Consequently, it was able to maintain steady production operations as well as make substantial progress in project construction, scientific research and development and internal management. With unremitting efforts, the Group broke through RMB60,000 million in turnover and achieved a record high again. Nevertheless, the Group experienced a substantial decrease in economic efficiency as compared to the previous year due to the impact of the deteriorated external operating environment and policy-related factors."

In 2008, the Group's total net sales increased by 9.35% to RMB59,329.8 million, as compared to RMB54,254.7 million in 2007, of which net sales derived from petroleum products and intermediate petrochemical products increased by 30.98% and 9.59%, respectively, while net sales of resins and plastics as well as synthetic fibres reported decreases of 6.48% and 15.40%, respectively.

The Group strived to maintain stable production operations on an ongoing basis. It processed 9,238,300 tons of crude oil, up 3.36% over the previous year. Production outputs of gasoline, diesel and jet fuel increased by 13.01% over the previous year. Outputs of gasoline and diesel were 772,900 tons and 3,418,700 tons, respectively, up 19.66% and 16.72% over the previous year, respectively; and output of jet fuel was 634,700 tons, representing a decrease of 8.77% over the previous year. The Group produced 885,600 tons of ethylene and 487,300 tons of propylene, up 1.86% and 6.89% over the previous year, respectively. The Group also produced 998,600 tons of synthetic resins and copolymers, representing a decrease of 2% over the previous year; 461,900 tons of synthetic fibre monomers, 585,500 tons of synthetic fibre polymers and 270,000 tons of synthetic fibres, representing decreases of 13.24%, 7.34% and 12.31% over the previous year, respectively. Meanwhile, the quality of the Group's products was consistently maintained at a premium level. The Group's output-to-sales ratio and receivable recovery ratio were 100.44% and 100.17%, respectively.

In 2008, the Group's crude oil costs amounted to RMB48,997.0 million, representing an increase of RMB14,540.7 million over the previous year and accounting for 71.47% of the Group's annual cost of sales. The average cost of crude oil processed was RMB5,303.68 per ton, representing a substantial increase of 37.19% over the previous year.

During the Year, the Group continued to commit adequate resources to the construction of projects relating to the structural adjustment program, which proceeded steadily and on schedule: simultaneous works commenced on the civil engineering and installation of a 600,000 ton/year PX aromatics complex, a 150,000 ton/year C5 separation unit, as well as a flue gas desulphurization project for the coal-fired power generating plants No. 3 and No. 4. A renovation project for the 220,000-volt substation are being finalized and scheduled for operation. In addition, the aforesaid projects are scheduled for basic completion or operation during the first half of 2009.

Looking forward, Mr. Rong Guangdao said, "In 2009, domestic petrochemical companies are likely to face operational pressure: a contracting market demand; a switch of the domestic petroleum products market from a seller's market to a buyer's market; capacity surplus due to concurrent commencements of operations of new plants, resulting in a structured oversupply in the petrochemical sector; and the ever-intensifying market competition. But at the same time, we have seen hopes of gradual improvements: the prices of international crude oil and raw materials will remain lower than those in 2008, thereby potentially leading to a substantial decrease in corporate costs; the implementation of an array of initiatives for "ensuring growth and expanding domestic demand" and the introduction of revitalization program will effectively drive end-user consumption of petrochemical products and improve the unfavorable situation in the domestic petrochemical sector; upon implementation of a reform program for the petroleum product tax regime, the prices of domestic petroleum products will be indirectly aligned with international crude oil prices in a controlled manner, which will generally offset losses on production by oil refining enterprises caused by various unfavorable policy factors. The Group will turn pressure into motivation and seize the opportunities; further reinforce basic management; ensure safe, stable and fine production operations; enhance the standards of energy conservation and consumption reductions with every effort; reinforce internal control and management; and continue its efforts on the structural adjustment projects, thereby striving to return to profit in 2009."

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

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, the risk that the PRC government's implementation of macro-economic control measures to curb over-heating of the PRC economy may adversely affect the company; 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 risk of not being able to raise the prices of the Company's products as is 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 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 management; 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 law.

Please refer to the hyperlink below for the Company's Consolidated Income Statement (Audited):

http://www.prnasia.com:80/sa/attachment/2009/03/20090327-849451.pdf

For further information, please contact:

Ms. Leona Zeng/ Ms. Christy Lai

Rikes Hill & Knowlton Limited

Tel: +852-2520-2201

Fax: +852-2520-2241

SOURCE Sinopec Shanghai Petrochemical Company Limited

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Keywords: Oil/Energy
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