2002 first half of year results presentation (2003-01-01)
TRANSCRIPT
August 19, 2002Hong Kong
China Petroleum & Chemical Corporation2002 First Half Results Announcement
3August 19, 2002
Agenda
• Market Overview and Performance Highlights
• Review of Operations
• 2H 2002 Outlook
Market Overview and Performance Highlights
5August 19, 2002
Market Overview I
Robust economic growth in China, GDP growth of 7.8%
Domestic consumption of refined products increased by 2.72%
Significant growth in domestic chemicals demand, consumption increased by 14.5%
Crude oil, refined product and chemical prices have been bottomed out in January and February; recovery began in March
WTO: crude oil tariff decreased from 16 RMB/ton to zero, gasoline tariff decreased from 9% to 5%, major chemicals tariff decreased by 3.7% on average
6August 19, 2002
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2,750
3,000
2001.01 2001.04 2001.07 2001.10 2002.01 2002.04
90# Gasoline
0# Diesel
SE Asia Chemical Product Prices
(US$ / tonne)
Gasoline #90, Diesel #0 - Ex-Refinery Prices
(RMB / tonne)
Market Overview II
International Crude Oil Prices(US$ / bbl)
15
17
19
21
23
25
27
29
31
2001.01 2001.04 2001.07 2001.10 2002.01 2002.04
Brent WTI
Cinta Duri
300
350
400
450
500
550
600
650
700
750
2001.01 2001.04 2001.102001.07 2002.01 2001.04
PTALDPE Film GradePP Fibre GradePET Fibre Grade
7August 19, 2002
0.674.54
0.963.75
1.400.88
1.551.26
0.10
EBIT Analysis (RMB Bn)
1H2001 1H2002
Decline in Crude Price Compressed
Refining Margin
Decline in Chemical
Price
10.71
16.46
Tariff reduction
Q2
Q2
Q1
Q1
Increase in DD&A, Social Welfare, etc
1.3
0.47
Operating Performance — Maintain StrongProfitability Amid Adverse Market Environment
CostReduction
Expansionin Retail
and Direct Sale
Others
Improved Market
Environment
Increasein High Value-
added Products
No Employee Reduction Expenses
8August 19, 2002
Operating Performance — Grow Volume
Refining Utilization Rate (%) 80.4 -100bps
1,146 8.7
14.23 18.5
33.67 1.2
Crude Oil Processed (MM tonnes) 51.94 -1.9
1H 02 Change (%)1H 01
79.4
1,245
16.86
34.07
50.94
74.5
583
7.94
17.34
23.94
Q2 02Q1 02
82.9
662
8.92
16.73
27.00
Crude Oil Production (MM bbls)
Natural Gas Production (bcf)
131.73
71.1
132.43
87.8
0.53
23.5
65.91
41.8
66.56
46.0
Ethylene Production (1,000 tonnes)
Including: Retail (MM tonnes)
Domestic Sales of Refined Products
(MM tonnes)
9August 19, 2002
Operating Performance — Financial Highlights
(RMB Bn)
Revenue
EBITDA
EBIT
Net Profits
165.82
26.90
16.46
9.98
146.20
22.05
10.71
5.43
EPS (RMB) 0.119 0.063
DPS (RMB) NA 0.02
1H 02 Change (%)1H 01
-11.8
-18.0
-35.0
-45.6
-47.1
NA
66.00
7.52
1.61
0.54
80.20
14.53
9.10
4.89
0.006 0.057
Q2 02Q1 02
NA NA
10August 19, 2002
Operating Performance — Capitalization and Cashflow
Short-term Debts
Long-term Debts
Shareholders’ Equity
45.35
30.88
147.67
37.45
33.24
145.57
Net Cash & Cash Equivalents - Ending Balance 29.04 19.14**
-17.4
7.6
-1.4
-34
Debt-to-Capital Ratio (%) 28.06 27.25 -81bps
(RMB Bn)
6.58 18.50 181.27
1H 021H 01
Net Cash used in Investing Activities -12.46 -16.31 30.93
Net Cash from Financing Activities 15.31 -4.08 -126.62
Notes: *1H 2001 **Decreased by 8.9% from 2001 year-end
Change (%)
Net Cash from Operating Activities
9.1* 9.7 0.6xEBITDA / Interest Coverage (x)
1H 02FY 01 Change (%)
Review of Operations
12August 19, 2002
E&P — Continued Production Growth in Oil & Gas
Crude Oil Production (MM bbls) 131.73
Natural Gas Production (bcf)
New Proved Oil & Gas Reserves (MM boe)
71.10
217.23
132.43
87.80
213.57
Cash Operating Cost (US$ / bbl) 6.19 6.00 -3.07
0.53
23.50
Period End Proved Oil & Gas Reserves (MM boe) 3,844 3,877 0.86
-1.68
New Crude Oil Production Capacity (MM boe) 8.66 21.66 150
New Natural Gas Production Capacity (bcf) 3.53 12.36 250
1H 021H 01 Change (%)
13August 19, 2002
E&P — Segment Performance
Crude Oil and Natural Gas Realized Price
(RMB MM)
E&P Segment EBIT
Crude oil price(US$ / bbl)
Natural gas price(US$ / ’000 cf.)
17.2
22.6
1.992.00
15
18
21
24
Q1 02 Q2 02
1.50
1.70
1.90
2.10
2.30
2.50
19.97
24.32
1.93
2.00
15
18
21
24
27
1H 2001 1H 2002
1.5
1.7
1.9
2.1
2.3
2.5
Crude Oil Natural Gas
4,580
2,030
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Q1 02 Q2 02
6,610
12,169
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1H 2001 1H 2002
14August 19, 2002
Refining — Production Adjustments in Line with Market
Crude Oil Processed (1,000 bbl / day)
Refining Utilization Rate (%)
Gasoline Production (MM tonnes)
Diesel Production (MM tonnes)
Refining Yield (%)
Cash Operating Cost (US$ / bbl)
Kerosene Production (MM tonnes)
Light Stream Yield (%)
Chemical Feedstock Production (MM tonnes)
2,109
80.4
6.7
91.70
2.07
-1.9
-100bps
14.4
58bps
-2.4
2,069
79.4
7.6
92.28
2.02
9.7 -5.29.2
18.6 1.118.8
2.26 2.72.32
70.58 73.11 253bps
1H 021H 01 Change (%)
15August 19, 2002
Refining — Segment Performance
Refining Margins / Cash Operating Cost(US$ / bbl)
Refining Segment EBIT(RMB MM)
-412
2,001
-1,000-500
0500
1,0001,5002,0002,5003,000
Q1 02 Q2 02
3.72
3.21
2.022.03
0.00
1.00
2.00
3.00
4.00
5.00
Q1 02 Q2 02
2.00
2.02
2.04
2.06
2.08
2.10
3.483.67
2.02
2.07
0.00
1.00
2.00
3.00
4.00
5.00
1H2001 1H2002
2.00
2.04
2.08
2.12
2.16
2.20
Refining Margin Cash Operating Cost
2,776
1,589
0
500
1,000
1,500
2,000
2,500
3,000
1H 2001 1H 2002
16August 19, 2002
Marketing — Expanding Marketing Network and Retail Volume
Franchised Gas Stations (Unit)
Owned or Operated Gas Stations (Unit)
Annual Throughput Per Station (tonne / station)
Cash Operating Cost (RMB / tonne)
Domestic Sales of Refined Products (MM tonnes)
Retail (MM tonnes)
Distribution (MM tonnes)
Share in Principal Retail Markets (%)
4,184
33.68
14.23
5.48
63
23,565
1,394
3,233
34.07
16.86
6.18
67
24,256
1,506
-22.7
1.2
18.5
400bps
2.9
12.8
8.0
166 161 -3.0
1H 021H 01 Change (%)
17August 19, 2002
Gasoline #90 Retail Guidance Price (RMB / tonne)
2,500
3,000
3,500
4,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Marketing — Segment Performance
Diesel #0 Retail Guidance Price (RMB / tonne)
Marketing Segment EBIT Analysis
(RMB MM)
2,000
2,500
3,000
3,500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2001 2002
974
3,283
-3,000-2,000
-1,0000
1,000
2,0003,0004,000
1H 2001 1H 2002
EBIT Wholesale Retail Distribution
754
2,529
-1,500-1,000
-5000
5001,0001,5002,0002,5003,000
Q1 02 Q2 02
18August 19, 2002
Chemicals — Production Adjustments in Line with Market
B-2-B Sales (RMB Bn)
1,146
1,678
201
1,844
493
33%
7.40
41%
1,245
217
1,895
568
1,838
34%
8.21
47%
8.7
7.9
2.8
15.2
9.5
100 bps
10.9
600bps
159.9 147.7 -7.6
(1,000 tonne)
Ethylene
Synthetic Resins
Synthetic Rubbers
Monomers & Polymers for Synthetic Fibers
Synthetic Fibers
Ethylene Cash Operating Cost (US$ / tonne)
% of Differential Fibers in Synthetic Fibers
% of Performance Compound in Synthetic Resins
1H 021H 01 Change (%)
19August 19, 2002
Chemicals — Segment Performance
Domestic Chemical Prices Chemicals Segment EBIT(RMB MM)
4,000
4,500
5,000
5,500
6,000
6,500
7,000
7,500
8,000
8,500
9,000
PTA PET Fiber Grade
LDPE Film Grade PP Fiber Grade
-691
215
-800
-600
-400
-200
0
200
400
Q1 02 Q2 02
186
-476
-800
-600
-400
-200
0
200
400
1H 2001 1H 2002
(RMB / tonne)
20August 19, 2002
Cost Cutting
2002 Interim Actual Cost Cutting RMB 1,259MM
• Cost cutting in raw material procurement e.g. crude oil
• Reduce energy and material consumption
• Optimize resources allocation and logistics
• Efficiency gained from headcount reduction last year
E&P287
Refining399
Chemicals242
Marketing331
(RMB MM)
21August 19, 2002
Prudent Investment to Enhance Return
1H 2002 Capex Allocation
• E & P – RMB 9,502MM,increase new reserves and production
• Refining – RMB 2,660MM,improve quality of refined product
• Marketing – RMB 3,477MM, new-build and upgrade existing retail stations, storage and transport facilities
• Chemicals – RMB 4,016MM, additional production capacity, e.g. ethylene expansion
RMB 19.9 Bn
0%
20%
40%
60%
80%
100%
E&P 47.7%
Refining 13.4%
Marketing 17.5%
Chemicals20.2%
Others 1.2%
22August 19, 2002
• BASF-Yangzi ethylene project commenced construction, expected completion in 2004
Smooth Progress on JV Projects
• Established PCITC with PCCW
• Feasibility study for Fujian integrated petrochemical project submitted for government approval
• Shanghai Seco ethylene project commenced construction, expected completion in 2005
• ZRCC & bp LPG JV feasibility study submitted for government approval
• Dongting coal gasification JV established; project commenced construction
• East China Sea gas field ODP completed; ongoing negotiation JV contract
Retail JVs on track
23August 19, 2002
Information Technology
On
go
ing
De
ve
lop
me
nt
Co
nti
nu
ou
sE
nh
an
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me
nt
Financial Mgmt.System
Refined Products Sales System
Materials Procurement
B-2-B
Chemicals Marketing B-2-B
Crude Oil
Products Flow
Refining
Cost ControlSystem
PerformanceReview System
Database
Co
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ev
elo
pm
en
tP
roje
cts
Co
mp
reh
ensi
ve E
nte
rpri
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eso
urc
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ERP
Optimizations
Ap
ply
Mo
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n IT
Sys
tem
to
En
han
ce P
erfo
rman
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f T
rad
itio
nal
Bu
sin
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s
2H 2002 Outlook
25August 19, 2002
2002 Market Outlook
Global economic outlook remains uncertain, but China’s economy will maintain strong growth momentum
International crude oil price remains at a relatively high level
Refining margin remains stable at current level
Chemical prices rebound in second half as the industry has bottomed out in the chemical cycle
Government continues to promote healthy competition in refined products market leading to a better operational environment
China’s accession to WTO will create new competitive pressure in the short term
26August 19, 2002
E&P
2H 02 Plan : Crude Oil Production
136MM bbl
Natural gas production
88.3bcf
Jungel BasinZhongyuan Oil Field
ShengliOil Field
East China Sea Oil & Gas FieldSichuan Basin
Ordos Basin
Tarim Basin
Growth from 1H (%)
1.6
0.6
South China Sea
27August 19, 2002
Refining
Optimize resources and reduce crude procurement cost
Optimize products slate, increase chemical feedstock products
Improve refining utilization rate through increasing external raw materials processing and expanding refining products export
Increase light stream and refining yield
Strengthening marketing efforts on other refined products
Accelerate construction of Ningbo-Shanghai-Nanjing crude pipeline facilities
2H 02 Plan : Crude oil processing 53.1MM tonnes
Light stream yield 73.5%
Refining yield 92.5%
Growth from 1H 02 (%)
4.2
40bps
20bps
28August 19, 2002
Improve coordination and cooperation with market players
to create a healthy market and stabilize product prices
Increase market share by optimizing sales structure and ex
panding market
Develop network in highways, marine and rural areas
JV with Shell, bp, ExxonMobil in gas stations
2H 02 Plan : Domestic Sales of Refined Products
35 MM tonnes
- retail 17.5MM tonnes
- distribution 6.6MM tonnes
Throughput Per Station 1,530 tonnes / year
Marketing
Growth from 1H 02 (%)
2.7
3.8
6.8
1.6
29August 19, 2002
Chemicals
(Unit 1,000 tonnes)
Ethylene
Synthetic Resins
Synthetic Rubbers
Monomers & Polymers for Synthetic Fibers
Synthetic Fibers
Sales-to-Production Ratio
1,335
233
1,915
569
2,122
100.0%
7.2
7.4
1.1
0.2
15.5
40bps
2H 02 Plan Growth (%)1H 02 Actual
1,245
217
1,895
568
1,838
99.6%
30August 19, 2002
Conclusion
Robust economic growth in China; rationalize environment in refined
products market, improve operating environment
Grow production volume in oil and gas, refining and chemical products
Flexible operating strategies to reduce cost and improve efficiency
Prudent investment - adjust investment structure and improve return;
maintain a healthy financial structure
Strengthen corporate governance; maintain a relatively stable dividends
payout
Generate Attractive Investor Return
31August 19, 2002
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