The net profit of Sinopec Shanghai Petrochemical Co Ltd, an arm of top Asian
oil refiner Sinopec Corp, dropped by 53.4 per cent to 1.85 billion yuan by the
end of 2005, the company said yesterday.
The company's net profit plunged especially in the second-half of 2005, down
by 96 per cent to 87 million yuan compared with a net profit of 2.45 billion
yuan in the last year.
Despite the huge loss in its yearly earnings, the company's turnover for 2005
amounted to 45.96 billion yuan, an increase of 16.63 per cent from one year
earlier.
Its total production output also for the first time reached from 8 million
tons to 8.65 million tons, with its processed crude oil reaching 9.49 million
tons.
Rong Guangdao, chairman of the Shanghai-based refiner and chemicals
processor, said that the distorted correlation between a historically high price
for international crude oil and a low domestic price for the company's petroleum
products led to the big loss in its net profit.
Andes Cheng, associate director of South China Research, agreed with Rong's
explanation, adding that the central government's policy had a strong influence
on the company's balance sheet.
Beijing still imposes a price cap on diesel, petroleum and other petroleum
products.
As such, the company had to suffer a considerable refining loss of 1.5
billion yuan in 2005 as crude oil price surged by 40 per cent, even after
Beijing gave the company a subsidy of 630 million yuan.
Last weekend China's National Development and Reform Commission, the
mainland's top economic planner, raised retail prices for diesel and gasoline to
200 yuan per ton and 300 yuan per ton respectively, the first move of its kind
by the government in eight months.
Rong thought that it was a good start but added that the company would not be
able to break even until the increase was up from 500 to 700 yuan to about 1,000
yuan per ton.
He hoped that petroleum product prices could be finally linked to
international oil prices, while admitting that government must make special
efforts to reach the goal.
The company, the largest ethylene producer on the mainland, hoped to see its
ethylene production capacity reach about 1.4 million tons a year if it got the
government's approval to build a new ethylene production base, Rong told
reporters.
The company production capacity for ethylene surged to about 0.96 million
tons in 2005, thanks to its investment on Shanghai Secco ethylene project.
Asked about the company's privatization plan, Chairman Rong said there was no
plan for such a move.
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