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Sinopec Shanghai to suffer loss for 2008

By Zhou Yan (chinadaily.com.cn)
Updated: 2008-12-24 14:47

Sinopec Shanghai Petrochemical Co Ltd, the country's largest ethylene producer, expects to suffer a major loss for 2008 due to a hefty fall in product prices arising from the shrinking demand.

Related readings:  Reserves, losses piling up for Sinopec  Sinopec's net profit drops 63.7 pct in first Q3  Report: Sinopec offers $130m for Urals Energy  Sinopec switches on oil transfer price

Prices of its major products have declined more than 60 percent this year as the deteriorating financial markets have dampened foreign and domestic demands for petrochemical products, the company said in a statement to the Hong Kong Stock Exchange on Dec 24.

The Shanghai-based company noted that its "losses in the fourth quarter will be bigger than in the third quarter."

The company posted a net loss of 2.32 billion yuan ($339 million) in the third quarter, from a loss of 94.07 million yuan a year earlier.

To make matters worse, Sinopec Shanghai will not receive refining subsidies from the government in the fourth quarter.

The high-priced crude oil it purchased in the third quarter will be reflected in its fourth-quarter report, although the company has made an adjustment on its production plan, including suspension or reduction at some of its plants in phases, Sinopec Shanghai said.

It also slashed its production load of ethylene to approximately 70 percent of its usual level.

The positive impact of the recent sharp fall of crude will not be shown until two months later when the effect ripples down from processing orders and crude delivery, the company said.

Sinopec Shanghai produces over 60 different types of products, including a range of synthetic fibers, resins and plastics, intermediate petrochemical products, and petroleum products.

A-shares of Sinopec Shanghai shed 3.21 percent to close at 5.43 during the morning session in Shanghai Stock Exchange. Its H-shares sank 6 percent to HK$1.88 at the opening Hong Kong Stock Exchange session, after the substantial loss statement was announced.