1 march 31, 2004 hong kong china petroleum & chemical corporation results for the year ended...
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March 31, 2004Hong Kong
China Petroleum & Chemical Corporation Results for the Year Ended December 31, 2003
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Forward Looking Statement
This presentation and the presentation materials distributed herewith include forward-
looking statements. All statements, other than statements of historical facts, that address
activities, events or developments that Sinopec Corp. expects or anticipates will or may occur
in the future (including but not limited to projections, targets, estimates and business plans)
are forward-looking statements. Sinopec Corp.'s actual results or developments may differ
materially from those indicated by these forward-looking statements as a result of various
factors and uncertainties, including but not limited to price fluctuations, actual demand,
exchange rate fluctuations, exploration and development outcomes, estimates of proved
reserves, market shares, competition, environmental risks, changes in legal, financial and
regulatory frameworks, international economic and financial market conditions, political risks,
project delay, project approval, cost estimates and other risks and factors beyond our control.
In addition, Sinopec Corp. makes the forward-looking statements referred to herein as of today
and undertakes no obligation to update these statements.
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Agenda
• 2003 Performance Highlights and Achievements
from Continued Reform and Development
• 2003 Operating Results
• 2004 Outlook
4
2003 Performance Highlights and Achievements from Continued
Reform and Development
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28.68
37.27
4.781.01
4.57
3.23 0.892.22
0.881.01
Significant Profit Growth through Continued Reform and Restructuring
EBIT Analysis
2002
RefiningProfit Growth
ChemicalsProfit Growth
Impairment Losses of
Fixed Assets
E&PProfit Growth
MarketingProfit Growth
Asset Disposal
SeveranceCost
2003
Headquarters& Others
Profit Growth in business segments = EBIT of 2003 before deducting asset disposal, impairment losses of fixed assets and severance cost – EBIT of 2002
Unit: RMB billion
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Solid Financial Performance
(RMB in billion)
Revenue
EBITDA
EBIT
Net Profit
Short-term Debt
Long-term Debt
Shareholders’ Equity
Cash & Cash Equivalent -
Ending Balance
Cash from Operating Activities
EPS (RMB)
DPS (RMB)
41.6
2002
0.19
329.1
54.0
28.7
16.3
35.6
163.8
18.2
55.0
0.08
2003
0.25
424.3
64.0
37.3
21.6
29.1
43.6
167.9
15.2
60.6
0.09
32.5
28.9
18.5
30.0
32.5
-18.3
4.8
2.5
-16.5
10.1
12.5
2002/2003yoy (%)
-5
0
5
10
15
20
25
30
35
40
45
2001 2002 2003
E&P Refining Marketing
Chemicals Others
Segmental EBIT Performance
RMB bn
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Higher Investment Return andImproved Capital Structure
Note: Data of 2002 and onwards include Maoming Ethylene, Xi’an Petrochemical and Tahe Petrochemical
6.96 7.08
9.04
0
1
2
3
4
5
6
7
8
9
10
2001 2002 2003
ROCE %
ROCE
24.0825.68
28.06
17.20
12.90
10.60
15
20
25
30
35
2001 2002 2003
0
2
4
6
8
10
12
14
16
18
20
Debt / Total Capital
EBITDA Interest Coverage
Debt / Total Capital %
EBITDA Interest Coverage
Debt / Total Capital and EBITDA Interest Coverage
8
Improved Corporate Governance
• Elected the second session of Board of Directors and Supervisory Committee
• Revised Articles of Association and other documents to meet regulatory requirements of the four listing venues and reflect our commitment to strong corporate responsibility and credibility
• Streamlined decision making process and fully leveraged the roles of the independent directors and the three committees (Strategic, Audit and Compensation) under the Board of Directors
• Further enhanced internal control procedures
• Improved transparency through timely, accurate and complete disclosure
– Awarded Best Corporate Governance and Best IR Awards, by Euromoney and FinanceAsia, etc.
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Continued in-depth Corporate Reform and Restructuring
• Further reform in compensation system
– Introduced market-rate-based practice
– Improved efficiency through further headcount reduction of 21,000 in 2003
• Specialized marketing system reform
– Established acrylic fiber sales company
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Optimized Asset Structure
• Continued restructuring to strengthen core business
– Acquisition of Maoming Ethylene
– Acquisition of Xi’an Petrochemical and Tahe Petrochemical to streamline integrated value chain
• Disposal of underperforming assets
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Stable Dividend Payout
21.59
16.3216.03
19.58
9.0
8.08.08.0
10
20
30
2000 2001 2002 2003
0
5
10
Net Profit Dividend
RMB in bn RMB cents / Share
Note: Data of 2002 and onwards include Maoming Ethylene, Xi’an Petrochemical and Tahe Petrochemical
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2003 Operating Results
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2003 Market Environment
• Robust economic growth in China with GDP growth rate of 9.1%
– Domestic consumption of refined products increased by 7.22%
– Domestic consumption of chemicals increased by 9.65%
• International crude oil price fluctuated at a relatively high level
• Domestic demands for refined products and chemicals soared after a depression early in the year due to SARS
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E&P — Continued Growth in Oil & Gas Production
2001 2002 20032003/2002
Change (%)
Crude Oil Production (mm bbls) 269.2 269.8 270.96 0.43
Natural Gas Production (bcf) 162.8 178.8 187.7 4.98
Newly Added Proved Reserves of Crude
Oil (mm bbls)
316.0 375.0 208.0 -44.53
Newly Added Proved Reserves of Natura
l Gas (bcf)
309.0 20.2 -254.3 -1,358.9
Year End Proved Oil & Gas Reserves (m
m boe)
3,796.0 3,875.0 3,738.0 -3.5
Lifting Cost (USD/bbl) 6.15 6.12 6.47 5.7
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E&P – Segment Performance
19,160
14,787
23,185
0
5,000
10,000
15,000
20,000
25,000
2001 2002 2003
USD/bbl
International Crude Oil Price EBIT of E&P Segment
27.6
23.822.4
2.031.95 1.96
10
14
18
22
26
30
2001 2002 2003
1.2
1.4
1.6
1.8
2.0
2.2
Crude oil Natural gas
USD/bbl USD/mcf
Crude Oil and Natural Gas Realized Price
RMB mm
152025303540
1/4/
2002
3/1/
2002
5/1/
2002
7/1/
2002
9/2/
2002
11/2
/200
2
1/2/
2003
3/2/
2003
5/2/
2003
7/2/
2003
9/1/
2003
11/1
/200
3
1/1/
2004
WTI-NYMEX Brent-IPE Cinta
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Refining – Strong Demand Growth and Improved Product Mix
Refining Yield (%)
Light Stream Yield (%)
Kerosene Production (mm tonnes)
Chemical Feedstock Production (mm tonnes)
Diesel Production (mm tonnes)
Gasoline Production (mm tonnes)
Sour Crude Oil Processed (mm tonnes)
Refining Utilization Rate (%)
Crude Oil Processed (mm tonnes)
79.3
92.50
73.22
5.06
15.04
37.74
19.62
20.00
105.01
2002
92.23
72.33
4.47
12.36
37.93
18.74
19.25
77.9
101.42
2001 2003
92.60
73.80
5.31
16.46
41.67
21.74
23.77
87.8
116.26
2003/2002 C
hange (%)
850bps
10bps
58bps
4.9
9.44
10.4
10.8
18.85
10.71
Note: Above figures exclude Xi’an Petrochemical and Tahe Petrochemical
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Refining — Segment Performance
3.57
3.964.09
2.002.022.07
1
2
3
4
5
2001 2002 2003
1.5
2.0
2.5
Refining Margin Cash Operating Costs
2,106
5,996 6,006
0
2,000
4,000
6,000
8,000
2001 2002 2003
Note: Data of 2002 and onwards include Xi’an Petrochemical and Tahe Petrochemical
Refining Margin / Cash Operating Cost Refining Segment EBIT
USD/bbl RMB MM
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Marketing — Optimized Marketing Network, Expanded Retail and Distribution
Annual Average Throughput Per Station (tonne/station)
Franchised Gas Stations
Owned or Operated Gas Stations
Total Number of Gas Stations (Unit)
Distribution (mm tonnes)
Retail (mm tonnes)
Domestic Sales of Refined
Products (mm tonnes)
1,473
4,184
24,062
28,246
11.64
30.43
67.74
2001
1,560
4,127
24,000
28,127
12.63
34.73
70.09
2002 2003
1,686
5,736
24,506
30,242
15.33
38.85
75.92
2003/2002 C
hanges (%)
8.1
39.0
2.1
7.5
21.4
11.9
8.3
19
2,000
3,000
4,000
Jan. Mar. May. Jul. Sep. Nov.
2002 2003 2004
2,000
3,000
4,000
Jan. Mar. May. Jul. Sep. Nov.
2002 2003 2004
Marketing – Segment Performance
2,443
8,401
11,943
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2001 2002 2003
RMB/Tonne 2001 2002 2003
Marketing Cash Operating Cost
163 166 175
Marketing Segment EBIT
RMB MM
RON 90# Gasoline Guidance Price
RMB/Tonne
0# Diesel Guidance Price RMB/Tonne
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Urea
Incl. Differential Fiber
Incl. Performance Compound
Synthetic Fibers
Monomers & Polymers for Synthetic Fibers
Synthetic Rubbers
Synthetic Resins
Ethylene
Unit: 1,000 tonnes
402
1,847
1,153
3,834
458
4,005
2,716
2002
2,666
2003
1,280
4,418
502
4,691
3,169
2,305
477
2,028
2003/2002 Ch
anges (%)
11.01
15.23
9.6
17.1
16.7
24.8
18.66
-23.93
Chemicals — Full Capacity to Meet Market Demand
Note: The above figures exclude Maoming Ethylene
326
1,332
1,028
3,598
398
3,204
2,153
2001
2,342
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Chemicals – Segment Performance
USD/tonne
Note: Data of 2002 and onwards include acquisition of Maoming Ethylene
Chemicals Segment EBIT(RMB MM)
Chemicals Price Spread (1990 ~ Feb.2004)
USD/tonne
142.63149.24
160.06
100
120
140
160
180
2001 2002 2003
Cash operating costs (incl: Maoming Ethylene)
Ethylene Cash Operating Costs
300
450
600
750
900
1,050
1,200
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
LDPE-Naphtha PP-Naphtha
2,159
-758
596
-1,000
-500
0
500
1,000
1,500
2,000
2,500
3,000
2001 2002 2003
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Cost Reduction
Cost Reduction in 2003 was RMB 2.722 bn
(RMB mm)
2,281
2,722
2,5002,525
2,000
2,100
2,200
2,300
2,400
2,500
2,600
2,700
2,800
2001A 2002A 2003 Plan 2003A
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Optimized Investment Focus and Asset Structure
• E&P – RMB20.63 bn to increase production and rationalize reserve profile
• Refining – RMB9.73 bn to complete a number of upgrading and expansion projects and increase clean fuel capacity. Ningbo-Shanghai-Nanjing crude oil pipeline will commence operation soon
• Marketing – RMB6.82 bn to acquire, construct and revamp gas stations and storage and transport facilities; construction of southwest refined oil pipeline in progress
• Chemicals – RMB7.35 bn to upgrade existing ethylene and urea feedstock coal gasification projects
• Corporate and others – RMB520 mm for information system, etc
2003 Capex: RMB45.05 bn
0
10
20
30
40
50
60
70
2001A 2002A 2003A
E&P Refining MarketingChemicals Others
(RMB bn)
Additional RMB4.2 bn invested in Secco and other JV projects
Capex in the Past 3 Years
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Achievements in R&D and Information System
• Successfully developed upstream exploration and development technologies such as exploration of hidden oil and gas reserves
• Developed a number of key refining and chemical technologies, including the 2nd generation loop type polypropylene packaged technologies
• Gasoline products fully complied with new specifications through application of self developed technologies
• Major breakthrough in ERP deployment
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Smooth Progress in JV Projects
• East China Sea natural gas project with CNOOC, Shell and Unocal officially launched
• Ethylene projects with BASF in Nanjing and with BP in Shanghai are under construction, expected completion in 1H 2005
• Coal gasification project with Shell in Hunan is under construction, expected completion in 2005
• Feasibility study of Fujian integrated petrochemical project with Exxonmobil and Aramco was approved
• Feasibility study of refined products retail JV with Shell in Jiangsu was approved
• Feasibility study of retail cooperation project was submitted for approval
• Biyang (Ningbo) LPG Co., Ltd. (a JV between ZRCC and BP) established
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2004 Outlook
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2004 Market Analysis
• Opportunities
– Chinese economy is expected to maintain sustainable growth with GDP growth rate of around 7%; consumption of refined products and chemicals is expected to grow by more than 5% and 8.6%, respectively
– Crude oil price is expected to maintain at relatively high level
– Refining margin continues to stay healthy
– Chemical business is entering an up-cycle
• Challenges
– Increasing competition as interim protective policies are being phased out after China’s accession to the WTO
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2004 Production Plan
2003 2004E
2004E/2003
Changes (%)
Crude Oil Production (mmbls) 270.96 274.06 1.14
Natural Gas Production (bcf) 187.70 204.83 9.13
Refined Oil Processed (mm tonnes) 116.26 120.30 3.47
Domestic Sales of Refined oil (mm tonnes) 75.92 80.00 5.37
Retail (mm tonnes) 38.85 42.00 8.11
Ethylene Production (1,000 tonnes) 3,169 3,560 12.34
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2004 Capex Plan
20.0
11.8
8.0
9.5
1.0
E&P Refining Marketing
Chemical Others
Meanwhile, accelerate the construction of JV projects such as BASF-Yangzi and Secco
• Adjust oil and gas reserve profile, increase reserves and production, and improve reserve profile among different categories
• Accelerate upgrading and expansion of refineries in the coastal regions, improve product mix and leverage synergies between refining and chemicals
• Construct and acquire gas stations in strategic locations in city centers and along new expressways
• Focus on core business and accelerate structural adjustment and technical upgrade
• Establish a modern logistics system
2004 Capex Plan: RMB50.2 bn
Unit: RMB bn
30
2004 Cost Reduction Plan
Total: RMB 2.5 bn
600
600
600
700
E&P Refining Marketing Chemical
RMB mm
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Conclusion
• Healthy and stable economic growth in China provides a favorable environment for Sinopec’s development
• Integrated business operations mitigate risks associated with industry cycles
• Continue to strengthen our leading position in domestic refined product market
• Refining & chemical businesses entering an up-cycle
• Continue to restructure and reform, rationalize operation structure, improve management and asset efficiency
• Maintain sound corporate governance and stable dividend payout
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