One of China's largest petrochemical companies,
Sinopec Shanghai Petrochemical Company Limited
) announced first half 2012 net loss of RMB 1.1 billion or RMB
0.160 per diluted share, compared to net profit of RMB 1.4 billion
or RMB 0.198 per diluted share a year earlier.
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The negative comparisons can be primarily attributable to higher
costs and lower revenues.
Crude Costs Rise
In the first six months of 2012, Shanghai's crude oil costs
amounted to RMB 28.9 billion - an increase of 5.48% year over year
- representing 64.58% of its total cost of sales for the period.
The average unit cost of crude oil processed was RMB 5,465.53 per
ton, up 10.69% over the first half of 2011.
Lower Selling Prices Pull Down Revenues
In the first six months of 2012, Shanghai's net sales were down
5.91% year over year to RMB 43.6 billion, reflecting 9.42%, 12.00%,
25.63% and 11.89% decline in net sales derived from intermediate
petrochemicals, resins and plastics, synthetic fibers and trading
of petroleum products, respectively. This was partially offset by a
2.94% improvement in petroleum products net sales.
The decrease in sales was primarily driven by lower selling prices.
For the half-yearly period, the average prices of the company's
synthetic fibers, resins and plastics, and intermediate
petrochemical products were down 22.88%, 12.14%, and 1.41%,
respectively, from the first half of 2011. Only petroleum products
managed to buck the trend, whose average price climbed 7.30% year
over year during the period under review.
Shanghai's output-to-sales ratio and receivables recovery ratio
were 100.14% and 99.96%, respectively. Shanghai processed 5,518,100
tons of crude oil, down 2.82% from the corresponding period last
year. Output of refined oil products decreased 3.45% from the
year-ago period to 2,866,000 tons.
About the Company
Established in 1993, Sinopec Shanghai is one of the major
petrochemical enterprises in China. The company's principal
activity involves the processing of crude oil into petrochemical
products for sale.
Sinopec Shanghai's highly integrated petrochemical complex
processes crude oil into a wide range of synthetic fibers, resins
and plastics, intermediate petrochemicals and petroleum products. A
significant portion of its products is sold in the Chinese domestic
China Petroleum and Chemical Corporation
), a state-owned entity, currently holds a majority stake in
We are maintaining our long-term Neutral recommendation on the
Sinopec Shanghai is poised to benefit from the country's continuous
demand growth and its strategic positioning in a fast-growing
economy. We also like Sinopec Shanghai's unique
vertically-integrated business model, whereby the company can use
its intermediate petrochemicals in manufacturing downstream
However, a downstream-centric assets portfolio and government caps
on refined product prices remain the causes of concern. In
particular, the bearish refining margin outlook has become a major
liability, in our view.