SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
For the month of August, 2006
CHINA PETROLEUM & CHEMICAL CORPORATION
A6, Huixindong Street,
Chaoyang District Beijing, 100029
People's Republic of China
Tel: (8610) 6499-0060
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F __X__ Form 40-F _____
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes ____ No __X__
(If "Yes" is marked, indicate below the file number assigned to
registrant in connection with Rule 12g3-2(b): 82-__________.)
N/A
This Form 6-K consists of:
The announcement of the 2006 Interim Results of China Petroleum & Chemical
Corporation (the "Registrant"), made by the Registrant in English on August
25, 2006.
[GRAPHIC OMITTED]
(a joint stock limited company incorporated in the People's Republic of China)
(Stock Code: 386)
Announcement of the 2006 Interim Results
-------------------------------------------------------------------------------
Section 1 Important Notice
1.1 The Board of Directors of China Petroleum & Chemical Corporation
("Sinopec Corp.") and the Directors warrant that there are no
material omissions, or misrepresentations or misleading statements
contained in this announcement and severally and jointly accept full
responsibility for the authenticity, accuracy and completeness of
the information contained in this announcement.
This announcement is a summary of the interim report. The entire
report is also contained in the website of the Shanghai Stock
Exchange (www.sse.com.cn) and Sinopec Corp. (www.sinopec.com). The
investors should read the interim report for more details.
1.2 No Director has any doubt as to, or the inability to warrant, the
truthfulness, accuracy and completeness of the interim report.
1.3 Messrs. Yao Zhongmin and Fan Yifei, Directors of Sinopec Corp.,
could not attend the third meeting of the third session of the Board
for reasons of official duties. Mr. Yao Zhongmin, Director of
Sinopec Corp., authorised Mr. Chen Tonghai, Chairman of Sinopec
Corp., Mr. Fan Yifei, Director of Sinopec Corp., authorised Mr. Wang
Tianpu, Director of Sinopec Corp., to vote on their behalf in
respect of the resolutions put forward in the meeting of the Board.
1.4 The financial statements for the six-month period ended 30 June 2006
of Sinopec Corp. and its subsidiaries ("the Company") prepared in
accordance with the PRC Accounting Rules and Regulations and
International Financial Reporting Standards ("IFRS") have been
audited by KPMG Huazhen and KPMG, respectively, and both firms have
issued standard unqualified opinions on the financial statements.
1.5 Mr. Chen Tonghai (Chairman of the Board), Mr. Wang Tianpu
(President), Mr. Dai Houliang (Director, Senior Vice President and
Chief Financial Officer) and Mr. Liu Yun (Head of the Accounting
Department) warrant the authenticity and completeness of the
financial statements contained in this announcement.
*2 Basic Information of Sinopec Corp.
2.1 Basic Information of Sinopec Corp.
SINOPEC SINOPEC SINOPEC
Stock name CORP CORP CORP
Stock code 0386 SNP SNP 600028
Place of listing Hong Kong New York Stock London Stock Shanghai Stock
Stock Exchange Exchange Exchange
Exchange
Authorized Secretary to the Representative
Representatives Board of on Securities
Directors Matters
Name Mr. Wang Mr. Chen Ge Mr. Chen Ge Mr. Huang
Tianpu Wensheng
Address 6A Huixindong Street, Chaoyang District, Beijing, PRC
Tel 64990060 64990060 64990060 64990060
Fax 64990022 64990022 64990022 64990022
E-mail ir@sinopec.com/media@sinopec.com
2.2 Principal accounting data and financial indicators
2.2.1 Principal accounting data and financial indicators for the
first half of 2006 prepared in accordance with the PRC
Accounting Rules and Regulations
2.2.1.1 Principal accounting data and financial indicators
At 30 June At 31 December Changes from the
2006 2005 end of last year
Items RMB millions RMB millions (%)
Current assets 161,351 141,896 13.71
Current liabilities 211,744 167,792 26.19
Total assets 568,888 520,572 9.28
Shareholders' funds
(excluding minority interests) 228,510 215,623 5.98
Net assets per share
(RMB/share) (Fully diluted) 2.636 2.487 5.98
Adjusted net assets
per share (RMB/share) 2.570 2.426 5.94
============== ============= ===============
Changes over the
Six-month periods ended 30 June same period of
2006 2005 the preceding year
Items RMB millions RMB millions (%)
Net profit 20,679 18,044 14.60
Net profit before extraordinary
gains and losses 20,776 18,087 14.87
Return on net assets (%) 9.05 9.13 (0.08)
(Fully diluted) percentage point
Return on net assets (%) 9.20 9.29 (0.09)
(Weighted average) percentage point
Earnings per share (RMB/share)
(Fully diluted) 0.239 0.208 14.60
Earnings per share (RMB/share)
(Weighted average) 0.239 0.208 14.60
Net cash flow from operating activities 25,166 25,044 0.49
============== ============= ===============
2.2.1.2 Items and amounts under extraordinary gains and losses
__X__ applicable _____ inapplicable
Six-month period
ended 30 June 2006
(Income)/Expense
Items RMB millions
Gain on disposal of long-term equity investments (24)
Written back of provisions for impairment losses in
previous years (339)
Non-operating expenses:
(excluding impairment losses on assets provided in
accordance with the Accounting Regulations for
Business Enterprises) 640
Of which: Loss on disposal of fixed assets 43
Employee reduction expenses 48
Donations 40
Non-operating income (132)
Tax effect (48)
---------------
Total 97
===============
2.2.2 Principal accounting data and financial indicators of the
Company for the first half of 2006 from the financial
statements prepared in accordance with IFRS
Changes over
the same period
Six-month periods ended 30 June of the preceding
2006 2005 year (%)
Items RMB millions RMB millions
Operating profit 34,238 33,682 1.65
Profit attributable to equity shareholders of
the Company 21,406 19,653 8.92
Return on capital employed (%) note 5.46 6.17 (0.71)
percentage point
Basic earnings per share (RMB/share) 0.247 0.227 8.92
Net cash flow from operating activities 21,478 21,082 1.88
============== ============= ===============
Note: Return on capital employed = operating profit x (1 - income tax rate)/capital employed
At 30 June At 31 December Changes from the
2006 2005 end of last year
Items RMB millions RMB millions (%)
Current assets 165,170 145,291 13.68
Current liabilities 215,165 170,649 26.09
Total assets 586,915 537,321 9.23
Total equity attributable to equity
shareholders of the Company 237,159 223,556 6.08
Net assets per share (RMB/share) 2.735 2.578 6.08
Adjusted net assets per share (RMB/share) 2.670 2.518 6.04
============== ============= ===============
2.2.3 Differences between financial statements prepared under the PRC
Accounting Rules and Regulations and IFRS
__X__ applicable _____ inapplicable
2.2.3.1 Analysis of the effects of major differences between the net
profit under PRC Accounting Rules and Regulations and the profit
for the period under IFRS:
Six-month periods ended 30 June
2006 2005
Items RMB millions RMB millions
Net profit under the PRC
Accounting Rules and Regulations 20,679 18,044
Adjustments:
Equity investment differences 394 1,169
Capitalisation of general borrowing costs,
net of depreciation effect 294 216
Depreciation of oil and gas properties 290 417
Acquisition of Sinopec National Star 58 58
Reduced amortisation on revaluation of land use rights 13 9
Unrecognised losses of subsidiaries 11 113
Reduced depreciation on government grants 6 1
Pre-operating expenditures (16) 442
Disposal of oil and gas properties, net of depreciation effect (177) (209)
Effects of the above adjustments on taxation (146) (607)
Minority interests 158 2,116
------------- ---------------
Profit for the period under IFRS 21,564 21,769
============= ===============
2.2.3.2 Analysis of the effects of major differences between the
shareholders' funds under the PRC Accounting Rules and Regulations
and the total equity under IFRS:
At 30 June At 31 December
2006 2005
Items RMB millions RMB millions
Shareholders' funds under the PRC
Accounting Rules and Regulations 228,510 215,623
Adjustments:
Equity investment differences 594 200
Capitalisation of general borrowing costs 2,406 2,112
Depreciation of oil and gas properties 12,523 12,233
Acquisition of Sinopec National Star (2,520) (2,578)
Revaluation of land use rights (940) (953)
Government grants (582) (588)
Pre-operating expenditures (38) (22)
Disposal of oil and gas properties 2,883 3,060
Effects of the above adjustments on taxation (5,677) (5,531)
Minority interests 20,027 29,440
------------- ---------------
Total equity under IFRS 257,186 252,996
============= ===============
Section 3 Changes in share capital and shareholdings of the principal
shareholders
3.1 Statement of changes in share capital
? applicable iiinapplicable
3.2 Top ten shareholders and holders of tradable shares
As at 30 June 2006, there were a total of 227,849 shareholders of
Sinopec Corp., of which 219,385 were holders of domestic A Shares
and 8,464 were holders of overseas H Shares.
Top ten shareholders as at 30 June 2006 Unit: 1,000 shares
Number of
shares held
at the end of
the reporting Percentage Nature of Non-tradable Pledges, lock-ups
Name of shareholders period of shares held shareholders shares held or trusts
China Petrochemical Corporation 61,757,325 71.23% State-owned 61,757,325 Nil
HKSCC (Nominees) Limited 16,684,625 19.24% Foreign Nil Unknown
China Cinda Asset Management Corp. note 2,848,886 3.29% State-owned 2,848,886 Nil
China Orient Asset Management Corp. note 1,296,410 1.50% State-owned 1,296,410 Nil
China Development Bank note 632,570 0.73% State-owned 632,570 Nil
GuoTai JunAn Corp. 590,821 0.68% State-owned 586,760 255,150
(pledged)/
38,230
(locked up)
China Life Corp.,-Participating-
Individual Participating-005L-FH002 Shanghai 98,021 0.11% State-owned Nil Nil
China Life (Group) - Conventional
-Ordinary Insurance Product 57,340 0.07% State-owned Nil Nil
Guangfa Stratrgic Selected Mixed Securities Fund 52,891 0.06% State-owned Nil Nil
International Finance-Standard Chartered -
CITIGROUP GLOBAL MARKETS LIMITED 39,284 0.05% Foreign Nil Nil
Explanation for the relationships among the
above shareholders or any actions in concert:
Among the top ten shareholders, except that China
Life Corp.,-Participating-Individual
Participating-005L- FH002 Shanghai and China Life
(Group) - Conventional -Ordinary Insurance Product
are both subordinates to China Life Insurance
(Group) Company, Sinopec Corp. is not aware of any
connection or actions in concert among the above
shareholders.
Note: According to the Equity Transfer Agreements between China Petrochemical Corporation
("Sinopec Group Company") and each of China Cinda Asset Management Corp, China Orient Asset
Management Corp. and China Development Bank respectively, China Cinda Asset Management
Corp., China Orient Asset Management Corp. and China Development Bank shall each transfer
their entire shareholdings of Sinopec Corp. to Sinopec Group Company. For detailed
information, please refer to Significant Events in this report.
Top ten shareholders with tradable shares as at 30 June 2006 Unit: 1,000 shares
Number of tradable
shares held
at end of the Nature of
Name of shareholders reporting period shares
HKSCC (Nominees) Limited 16,684,625 H share
China Life Corp.,-Participating-Individual Participating
-005L-FH002 Shanghai 98,021 A share
China Life (Group) - Conventional-Ordinary Insurance Product 57,340 A share
Guangfa Stratrgic Selected Mixed Securities Fund 52,891 A share
International Finance-Standard Chartered
- CITIGROUP GLOBAL MARKETS LIMITED 39,284 A share
CIFM China Balanced Fund 37,138 A share
Jinghong Securities Investment Fund 36,607 A share
BOCI Sustained Growth Equity Securities Investment Fund 32,203 A share
Tongsheng Securities Investment Fund 31,532 A share
Yinfeng Securities Investment Fund 31,388 A share
Explanation for the relationships or
any actions in concert:
Among the top ten shareholders, except that China Life among the above shareholders Corp.,
-Participating-Individual Participating-005L-FH002 Shanghai and China Life (Group) -
Conventional-Ordinary Insurance Product are both subordinates to China Life Insurance (Group)
Company, Sinopec Corp. is not aware of any connection or actions in concert among the above
shareholders.
Information disclosed by the shareholders of H Shares according to the
Securities and Futures Ordinance as at 30 June 2006
Approximate
Number of share percentage of
interests held or Sinopec Corp's
regarded as interests
Name of shareholders Nature held (share) (H share) (%)
J.P. Morgan Chase & Co. Beneficial owner 137,949,210 0.82(L)
Investment manager 805,357,086 4.80(L)
Custodian corporation 771,990,035 4.60(L)(P)
Credit Suisse Group Corporate 997,124,580 5.94(L)
754,104,300 4.49(S)
48,538,200 0.29(P)
Alliance Bernstein L.P. Corporate 986,511,840 5.88(L)
UBS AG Beneficial owner 478,366,173 2.85(L)
109,468,745 0.65(S)
Warrant equity 38,308,000 0.23(L)
5,597,900 0.03(S)
Corporate 335,375,700 2.00(L)
10,000,000 0.06(S)
Templetonne Asset Investment manager 848,691,395 5.06(L)
Management L.P.
Note: (L): Long position, (S): Short position, (P): Lending pool
3.3 Changes in the controlling shareholders and the effective controllers
in the reporting period
_____ applicable __X__ inapplicable
*4. Information about the directors, supervisors and senior management
4.1 The engagement or dismissal of Directors, Supervisors and Other
Members of the Senior Management
The Annual General Meeting of Sinopec Corp. for the year 2005 was
held on 24 May 2006. Messrs Chen Tonghai, Zhou Yuan, Wang Tianpu,
Zhang Jianhua, Wang Zhigang, Dai Houliang, Fan Yifei, Yao Zhongming,
Liu Zhongli, Shi Wanpeng, and Li Deshui were elected as Directors of
the Third Session of the Board of Sinopec Corp. Messrs Wang Zuoran,
Zhang Youcai, Kang Xianzhang, Zou Huiping, Li Yonggui were elected
as Supervisors of the Third Session of the Supervisory Committee of
Sinopec Corp. (Messrs Su Wensheng, Zhang Jitian, Cui Guoqi, and Li
Zhonghua were elected by the employees as the employees'
representative Supervisors of the Third Session of the Supervisory
Committee of Sinopec Corp.)
The First Meeting of the Third Session of Board of Directors of
Sinopec Corp was held on 24 May 2006. Mr. Chen Tonghai was elected
as Chairman of the Board of Directors and Mr. Zhou Yuan was elected
as Vice-Chairman. Mr. Wang Tianpu was appointed as President, Messrs
Zhang Jianhua, Wang Zhigang, Cai Xiyou and Dai Houliang were
appointed as Senior Vice Presidents. Mr. Dai Houliang was appointed
as CFO (amongst other positions held), Messrs Zhang Kehua and Zhang
Haichao were appointed as Vice Presidents. Mr. Chen Ge was appointed
as Secretary to the Board of Directors.
The First Meeting of the Third Session of Supervisory Committee of
Sinopec Corp. was held on 24 May 2006. Mr. Wang Zuoran was elected
as Chairman of the Third Session of Supervisory Committee and Mr.
Zhang Youcai was appointed as Vice Chairman of the Third Session of
Supervisory Committee.
4.2 Information about the changes in the shares held by the directors,
supervisors and senior management
_____ applicable __X__ inapplicable
As of 30 June 2006, none of the directors, supervisors or senior
management of Sinopec Corp. had any interest in any shares of
Sinopec Corp.
During the reporting period, none of the directors, supervisors or
senior management or any of their respective associates had any
interests and short positions in any shares, debentures or related
shares of Sinopec Corp. or its associated corporations (as defined
in Part XV of the Securities and Futures Ordinance) which were
required to be notified to Sinopec Corp. and the Hong Kong Stock
Exchange pursuant to Division 7 and 8 of Part XV of the Securities
and Futures Ordinance or which were required pursuant to section 352
of the Securities and Futures Ordinance to be entered in the
register referred to therein, or which were required to be notified
to Sinopec Corp. and the Hong Kong Stock Exchange pursuant to the
Model Code for Securities Transactions Entered by Directors of
Listed Companies as specified in the Listing Rules of The Stock
Exchange of Hong Kong Limited (including those interests and short
positions that are deemed to be such, or are regarded to be owned in
accordance with the relative provisions under the Securities and
Futures Ordinance).
Section 5. Business Review and Prospects and Management's Discussion and
Analysis
5.1 Business Review
In the first half of 2006, the Chinese economy continued to grow at
a rapid rate, with a GDP growth rate of 10.9%, and demand for
petroleum and petrochemical products kept increasing. According to
the Company's statistics, apparent domestic consumption of refined
oil products (i.e. gasoline, diesel and kerosene) and consumption of
ethylene equivalent increased by 7.1% and 6.3% respectively over
that of the same period last year.
During the reporting period, international oil prices kept
increasing, and the price of chemical products maintained at high
level. Due to the tight control on domestic prices of refined oil
products, the price gap between domestic and overseas markets remain
wide, despite two upward adjustments on the domestic price. The
Company responded flexibly to the changing markets by fully
leveraging advantage of integrated business structure, extensively
expanding oil & gas resources, accelerating structural adjustments,
strengthening the linkage between production and sales, optimising
resource allocation and consolidating its dominant position in
market. As a result, both the production volume and financial
returns maintained stable growth.
5.1.1 Production and Operation
(1) Exploration and Production Segment
In the first half of 2006, the international crude oil prices
kept increasing. The average Brent crude price was USD 66.56
per barrel, representing an increase of 29.49% over that of the
first half of 2005. The average crude price realised by the
Company during the first half of 2006 was RMB 3,309.71 per
tonne, representing an increase of 42.88% over that of the same
period last year.
In the first half of 2006, the Company strengthened its
innovation in oil & gas exploration theory and technology, in
particular, in the marine facies sedimentation theory and
technology, and accelerated exploration. It resulted in a
series of important discoveries, represented by the discovery
of Puguang Gas Field.
[GRAPHIC OMITTED]
Trend of International Crude Prices
In oilfield development and production, by seizing the
opportunities of increasing crude oil price, the Company
optimised and accelerated construction of new production
capacity. A series of major capacity building projects were put
into operation. Efforts are also made to stabilise production
in mature oil fields by restoring marginal wells and conducting
specialised water treatments. As a result, the overall
production in mature oilfield improved. In respect of natural
gas development, more efforts were made in Daniudi Gas Field in
Erdos basin in North China. The preparations for development of
Puguang Gas Field in northeast Sichuan Province were
accelerated.
In the first half of 2006, the Company achieved a new record in
both oil and gas production, with 140.89 million barrels of
crude oil and 126.2 billion cubic feet of natural gas produced,
representing a year on year increase of 3.07% and 20.42%
respectively.
Summary of Operations of Exploration and Production Segment
Six-month periods
ended June 30 Changes
2006 2005 (%)
Crude oil production (mmbbls) note (1) 140.89 136.69 3.07
Natural gas production (bcf) 126.2 104.8 20.42
Newly added proved reserve of
crude oil (mmbbls) 143.89 85.69 67.92
Newly added proved reserve of
natural gas note 2 (bcf) 175.5 518.1 (66.13)
At June 30 At December 31 Changes
2006 2005 (%)
Proved reserve of crude oil at
the end of the reporting
period (mmbbls) 3,297 3,294 0.09
Proved reserve of natural gas at
the end of the reporting
period note (2) (bcf) 3,001.0 2,951.7 1.67
Note 1: Crude oil production is converted at 1 tonne = 7.1
barrels, and natural gas production is converted at 1
cubic meter = 35.31 cubic feet.
Note 2: Natural gas reserve of Puguang Gas Field is not
included.
(2) Refining Segment
In the first half of 2006, the Company continued to run the
refining facilities at full-load and increased refined oil
production along with improvement on the overall quality of
refined oil products to meet market demands. By fully
leveraging on the Ningbo-Shanghai-Nanjing crude oil pipeline
and the newly operated Yizheng-Changling crude oil pipeline and
optimising resource allocation, the Company achieved cost
savings in both crude oil transportation and storage. The
Company increased the refining throughput of sour and heavy
crude oil in order to reduce purchase cost of crude oil. In
addition, the Company strived to increase the production volume
of high value-added products through optimised production plan
and product mix which resulted in further improvement in both
light products yield and overall refining yield.
Summary of Operations of Refining Segment
Six-month periods
ended June 30 Changes
2006 2005 (%)
Crude oil throughput (million tonnes) 71.68 68.08 5.29
of which: sour crude oil throughput
(million tonnes) 17.60 16.87 4.33
Gasoline, diesel and kerosene output
(million tonnes) 42.73 41.02 4.17
of which: Gasoline (million tonnes) 11.23 11.32 (0.80)
Diesel (million tonnes) 28.32 26.31 7.64
Kerosene including jet fuel
(million tonnes) 3.18 3.39 (6.19)
Light chemical feedstock (million tonnes) 11.47 10.16 12.89
Light products yield (%) 74.81 74.24 0.57
percentage point
Overall refining yield (%) 93.73 93.11 0.62
percentage point
Note: Crude oil throughput is converted at 1 tonne = 7.35 barrels.
(3) Marketing and Distribution
In the first half of year 2006, the Company proactively took
measures to maintain its position in the market by organising
and mobilising resources, making structural adjustments, fully
leveraging transportation and storage facilities such as the
southwest refined oil pipeline. As a result of improved
service-oriented awareness and service quality, both proportion
of sales to end customers and annual throughput per station
further improved. As a result, the Company's position in the
refined oil market continually strengthened. The Company was
also active in developing non-fuel businesses, including
establishment of a strategic partnership with McDonald's. The
customer base for IC fueling cards continued to grow, with an
aggregate of over 11 million petrol IC cards issued.
Summary of Operations of Marketing and Distribution Segment
Six-month periods
ended June 30 Changes
2006 2005 (%)
Total domestic sales volume of refined oil
products (million tonnes) 54.32 50.77 6.99
of which: retail volume (million tonnes) 35.33 29.56 19.52
direct sales volume (million tonnes) 9.69 10.39 (6.74)
wholesale volume (million tonnes) 9.30 10.82 (14.05)
Total No. of service stations 29,198 30,352 (3.80)
of which: No. of self-operated service stations 27,628 26,870 2.82
No. of franchised service stations 1,570 3,482 (54.91)
Average annual throughput per station (tonne) 2,558 2,200 16.27
(4) Chemicals
In the first half of 2006, the Company fully leveraged the
newly built production capacity and strengthened operation
management on facilities to ensure safe, stable, sustained,
full-load and optimal operation of major facilities. The
production of ethylene and other major chemical products, such
as synthetic resins, etc., significantly increased. The Company
continued to reinforce product mix improvement, with more high
value-added products.
In the first half of 2006, the intensive operations of the
Chemical Sales Company and its improved adaptabily to market
conditions resulted in a steady growth in the Company's
proportion of direct sales, which laid a solid foundation for
maximisation of the overall returns of the Chemicals Segment.
Summary of Production of Major Production of Chemical Operation Unit: thousand tonnes
Six-month periods
ended June 30 Changes
2006 2005 (%)
Ethylene Note 3,031 2,434 24.53
Synthetic Resin 4,184 3,528 18.59
Synthetic fiber monomers and polymers 3,577 3,152 13.48
Synthetic fiber 770 756 1.85
Synthetic rubber 318 308 3.25
Urea 906 998 (9.22)
Note: 100% production of two ethylene joint ventures, namely
BASF-YPC and Shanghai Secco were included.
5.1.2 Cost reduction
In the first half of 2006, the Company took various measures to
reduce costs, such as optimising resource allocation and fully
leveraging the modern logistics system to reduce transportation
costs, further increasing the throughtput of sour and heavy crude
oil to reduce procurement costs, optimising the operation of
facilities to reduce material and energy consumption, improving
utilisation of oil and water wells and intensifying treatment of
heavy viscous oils. In the first half of 2006, the Company
effectively saved RMB 1.382 billion in cost. Of the total cost
saved, the Exploration and Production Segment, the Refining Segment,
the Marketing and Distribution Segment and the Chemicals Segment
achieved cost saving of RMB 396 million, RMB 348 million, RMB 287
million and RMB 351 million respectively.
5.1.3 Capital Expenditure
In the first half of 2006, the Company's total capital expenditure
was RMB 30.452 billion. Among which, the capital expenditure for
Exploration and Production segment was RMB 11.676 billion. With the
investment, the Company achieved a number of important exploration
results through strengthening progressive exploration and
preliminary exploration in new blocks. The newly built production
capacity of crude oil and natural gas was 2.95 million tonnes per
year and 758 million cubic metres per year respectively. The capital
expenditure for Refining Segment was RMB 5.121 billion. With the
investment, the construction of Yizheng-Changling crude oil pipeline
was completed; the refinery projects including Guangzhou, Yanshan
and Qingdao Projects made smooth progress. The capital expenditure
in Chemicals Segment was RMB 5.93 billion. With the Investment,
Sinopec Yangzi PX and PTA expansion and revamping project was
completed and has commenced production; the second round of Maoming
Ethylene revamping project, Fujian Integrated Project and Tianjin
ethylene project as well as the fertiliser coal gasification
projects were proceeding as planned. The capital expenditure in
Marketing and Distribution Segment was RMB 6.685 billion. With the
investment, the construction and acquisition of service stations in
key areas started to turn in an initial pay-off; with the newly
added 353 service stations, the marketing network was further
improved. The capital expenditure for Corporate and Others amounted
to RMB 1.04 billion.
In addition, the total capital expenditure for joint ventures
amounted to RMB 179 million.
5.2 Principal Operations categorised by business segments and the status
of the connected transactions
The following table sets out the principal operations categorised by
business segments and the details of the connected transactions,
including income from principal operations and cost of sales for
each business segment, extracted from the Company's financial
statements prepared under the PRC Accounting Rules and Regulations:
Increase/
decrease
of income
from
principal Increase/decrease
operations of cost of sales
Gross compared to of compared to the Increase/
profit same period same period of decrease of
Categorised by ratio preceding year preceding year gross profit ratio
(RMB million) (RMB million) (%) note(1) (%) (%) (percentage point)
Exploration and Production 65,497 19,596 60.53 47.53 13.83 7.06
Refining 268,982 276,547 (5.33) 28.63 37.37 (6.00)
Chemicals 97,944 86,849 11.13 17.91 27.90 (6.67)
Marketing and Distribution 275,115 252,663 8.03 32.21 32.64 (0.30)
Others 93,681 92,198 1.56 75.93 75.27 0.38
Elimination of inter-segment sales (319,231) (318,556) -- -- -- --
Total 481,988 409,297 12.40 34.17 39.61 (3.71)
Of which: connected transactions note (2) 47,194 44,163 5.40 48.43 53.47 (3.67)
Pricing policy for (1) Government-prescribed prices and
connected transactions government-guided prices are adopted for
products or items if such prices are
available;
(2) Where there is no government-prescribed price or
government-guided price for products or items,
the market price (inclusive of bidding price)
will apply;
(3) Where none of the above is applicable, the
price will be decided based on the reasonable
cost incurred plus sales taxes and reasonable
profit. Reasonable cost means the average
production cost of products by the same type
of enterprises within regions with proximity
using the same kind of raw materials.
Reasonable profit means profit margin of not
more than 6% of the cost incurred based on the
current interest rate level set by the
government.
Note 1: Gross profit ratio = profit from principal operations/income
from principal operations.
Note 2: During the reporting period, the total amount of
connected transactions of the products sold and the services
provided by the Company to Sinopec Group Company was RMB
29.853 billion.
5.3 Principal operations in different regions
_____ applicable __X__ inapplicable
5.4 Other operating activities with major influences on net profit
_____ applicable __X__ inapplicable
5.5 Operations of associated companies (applicable to circumstances when
the return on investment is more than 10% of the listed company's
net profit)
_____ applicable __X__ inapplicable
5.6 Reasons of material changes in the principal operations and their
structure
_____ applicable __X__ inapplicable
5.7 Reasons of material changes in the principal operations' earning power
(gross profit ratio) as compared to the preceding year
_____ applicable __X__ inapplicable
5.8 Reasons of changes in profit composition as compared to that in the
preceding year
__X__ applicable _____ inapplicable
The financial information presented in this section are derived from
the Company's audited financial statements that have been prepared
in accordance with IFRS.
In the first half of 2006, the Company's turnover and other
operating revenues were RMB 493.1 billion and the operating profit
was RMB 34.2 billion, representing an increase of 33.8% and 1.7%
over the same period of 2005 respectively. These results were
largely attributable to the significant increase in international
crude price and the fact that by seizing the favourable
opportunities of steady growth of the domestic economy, the Company
proactively developed the market, increased oil and gas production,
optimised crude oil processing structure, and increased the
production of chemical products and sales of refined oil products.
5.8.1 Turnover and other operating revenues
In the first half of 2006, the Company's turnover and other
operating revenues were RMB 493.1 billion, of which turnover was RMB
482.0 billion, representing an increase of 34.2% over the first half
of 2005. These results were largely attributable to the increase in
international crude oil price, and the Company's effort in expanding
sales volume of our petroleum and petrochemical products and
optimising our sales and marketing structure. In the first half of
2006, the Company's other operating revenue was RMB 11.1 billion,
representing an increase of 21.0% over the first half of 2005. This
was mainly due to the increase of raw materials sales to Sinopec
Group Company and to third parties during the period.
The following table lists the Company's external sales volume,
average realised prices and the respective rate of changes between
the first half of 2006 and the first half of 2005 for the Company's
major products:
Average realised price
Sales Volume (RMB/tonne, RMB/
(thousand tonnes) thousand cubic meters)
Six-month periods Rate of Six-month periods Rate of
ended June 30 changes ended June 30 changes
2006 2005 (%) 2006 2005 (%)
Crude oil 2,710 2,569 5.5 3,290 2,367 39.0
Natural gas
(million cubic meters) 2,600 1,962 32.5 745 658 13.2
Gasoline 15,986 14,609 9.4 4,968 4,151 19.7
Diesel 35,109 32,571 7.8 4,259 3,514 21.2
Kerosene, including
jet fuel 2,702 3,086 (12.4) 4,301 3,414 26.0
Basic chemical
feedstock 4,941 3,836 28.8 5,336 4,948 7.8
Synthetic fiber
monomers and polymer 1,704 1,412 20.7 8,602 9,026 (4.7)
Synthetic resin 3,523 2,898 21.6 9,485 9,144 3.7
Synthetic fiber 825 784 5.2 10,723 11,499 (6.7)
Synthetic rubber 382 303 26.1 13,911 12,394 12.2
Chemical fertiliser 928 1,004 (7.6) 1,699 1,463 16.1
Most of crude oil and a small portion of natural gas produced by the
Company were internally used for refining and chemical production
and the remaining were sold to the refineries owned by Sinopec Group
Company and other customers. In the first half of 2006, turnover
from crude oil and natural gas that were sold externally by the
Exploration and Production Segment amounted to RMB 12.1 billion,
representing an increase of 40.3% over the first half of 2005,
accounting for 2.5% of the Company's total turnover and other
operating revenues. The increase was mainly due to significant
increases in crude oil prices as well as the increase in price and
sales volume of natural gas.
The Company's Refining Segment and Marketing and Distribution
Segment sell refined oil products (mainly consisting of gasoline,
diesel, jet fuel, kerosene and other refined oil products) to third
parties. In the first half of 2006, the external sales revenue of
refined oil products by these two segments were RMB 321.8 billion,
accounting for 65.3% of the Company's turnover and other operating
revenues, representing an increase of 32.0% compared with that in
the first half of 2005. The increase was mainly due to the increased
prices of refined oil products and our proactive efforts in
increasing sales volume, optimisng sales and marketing structure and
expanding the markets of other refined oil products. The sales
revenue of gasoline, diesel and kerosene was RMB 240.6 billion,
accounting for 74.8% of the total turnover of refined oil products,
representing an increase of 29.6% over the same period in 2005. The
turnover of other refined oil products was RMB 81.2 billion,
accounting for 25.2% of the total turnover of refined oil products,
representing an increase of 39.6% compared with the first half of
2005.
The Company's external turnover of chemical products was RMB 92.7
billion, accounting for 18.8% of its turnover and other operating
revenues, representing an increase of 24.0% compared with the first
half of 2005. The increase was mainly due to the fact that the
Company utilitised the new production capacity resulting in higher
sales volume.
5.8.2 Operating expenses
In the first half of 2006, the Company's operating expenses were RMB
458.9 billion, representing an increase of 37.1% over the first half
of 2005. The operating expenses mainly consisted of the following:
Purchased crude oil, products and operating supplies and expenses
The Company's purchase of crude oil, products and operating supplies
and expenses were RMB 400.2 billion, representing an increase of
41.4% over the first half of 2005, accounting for 87.2% of the total
operating expenses, of which:
Purchased crude oil expenses was RMB 207.7 billion, representing an
increase of 40.1% over the first half of 2005, accounting for 45.3%
of the total operating expenses, up by 1.0 percentage point over the
first half of 2005.
To meet the increasing demands in the fast growing Chinese economy,
the Company increased its throughput of crude oil purchased
externally. In the first half of 2006, the throughput of the
Company's crude oil purchased externally was 56.05 million tonnes
(excluding amounts processed for third parties), representing an
increase of 6.9% compared with the same period in 2005. Average cost
for crude oil processed which were purchased externally in the first
half of 2006 was RMB 3,706 per tonne (equivalent to USD 62.8 per
barrel), representing an increase of 31.1% compared with the first
half of 2005.
In the first half of 2006, the Company's other purchase expenses
were RMB 192.5 billion, representing an increase of 42.8% over the
first half of 2005, accounting for 42.0% of the total operating
expenses. The increase was mainly due to the increased costs of
purchased refined oil products and chemical feedstock externally.
Selling, general and administrative expenses
In the first half of 2006, the Company's selling, general and
administrative expenses totalled RMB 16.4 billion, representing an
increase of 5.9% over the first half of 2005. This increase was
mainly due to the increased operating leases charges, research and
development costs, natural resources compensation fees, and costs of
supporting units.
Depreciation, depletion and amortisation
In the first half of 2006, the Company's depreciation, depletion and
amortisation were RMB 16.5 billion, representing an increase of 8.9%
compared with the first half of 2005. The increase was mainly due to
the additions of fixed assets.
Exploration expenses
In the first half of 2006, the Company's exploration expenses were
RMB 3.1 billion, representing a decrease of 8.0% compared with the
first half of 2005. This was mainly due to the decrease of
geological and geophysical exploration expenses.
Personnel expenses
In the first half of 2006, the Company's personnel expenses were RMB
9.2 billion, representing an increase of 7.7% compared with the
first half of 2005. The increase was largely due to the remuneration
reforms initiated by the Company in the second half of 2005.
Employee reduction expenses
In the first half of 2006, in accordance with the Company's
voluntary employee reduction plan, the Company recorded employee
reduction expenses of approximately RMB 50 million relating to the
reduction of approximately 1,000 employees.
Taxes other than income tax
In the first half of 2006, the Company's taxes other than income tax
were RMB 12.9 billion, representing an increase of 57.5% over the
first half of 2005. The increase was mainly attributable to the
accrual of RMB 3.7 billion as special oil income levy imposed by the
Chinese government effect from 26 March 2006, and an increase of RMB
740 million in consumption tax as a result of the increase in sales
volume of gasoline and diesel and the increase in the number of
items subject to consumption taxes.
Other operating expenses, net
In the first half of 2006, the Company's other operating expenses,
net were RMB 0.5 billion, representing a decrease of 43.6% compared
with the first half of 2005. This was mainly due to the decrease in
the impairment losses on long-lived assets.
5.8.3 Operating profit
In the first half of 2006, the Company's operating profit was RMB
34.2 billion, representing an increase of 1.7% over the first half
of 2005.
5.8.4 Net finance costs
In the first half of 2006, the Company's net finance costs were RMB
3.1 billion, representing an increase of 22.4% compared with the
first half of 2005, which was mainly due to the increase of crude
oil price and expanded scale of operation, leading to an increase in
short term loan as a result of more capital being employed by
operating activities such as purchase of inventories.
5.8.5 Profit before taxation
In the first half of 2006, the Company's profit before tax was RMB
31.7 billion, representing a decrease of 0.1% over the first half of
2005.
5.8.6 Taxation
In the first half of 2006, the Company's income tax was RMB 10.1
billion, representing an increase of 1.7% over the first half of
2005.
5.8.7 Profit attributable to minority interests
In the first half of 2006, the Company's profit attributable to
minority interests were RMB 0.2 billion, representing a decrease of
92.5% compared with the first half of 2005. The decrease was mainly
as a result of acquisition of minority interests of the five
subsidiaries by the Company.
5.8.8 Profit attributable to equity holders of the parent
In the first half of 2006, the Company's profit attributable to
equity shareholders of the Company was RMB 21.4 billion,
representing an increase of 8.9% over the first half of 2005.
5.9 During this reporting period, there was no significant difference in
terms of cash flow, source of funds and capital structure compared
with the same period last year.
5.10 Use of the proceeds from share issue
5.10.1 Use of the proceeds from share issue
_____ applicable __X__ inapplicable
5.10.2 Change of projects
_____ applicable __X__ inapplicable
5.11 Business prospects and operating plan for the second half
__X__ applicable _____ inapplicable
Looking into the second half of 2006, China's economy will continue
to grow rapidly and demands for petroleum and petrochemical products
will increase steadily, while international crude price is expected
to remain high. Domestic refineries will face considerable
operations pressure, and due to the effects of high raw materials
price and other factors, the price of chemical products is expected
to remain high. In addition, under China's WTO accession commitment,
China will fully open its domestic wholesale market for refined oil
products by the end of 2006, which will result in intensified market
competition.
Confronted with the complicated market situation, the Company will
adopt flexible operating strategies, deepen reforms, strengthen
management, optimise resources and make structural adjustments while
organising various production and operation activities in the
following manner:
In Exploration and Production Segment, the Company will continue to
stick to the strategy of resources and endeavor to increase oil and
gas production. The Company intends to focus on building production
capacity in Tahe Oilfield in western China and Erdos blocks, while
taking actions to improve management with an aim of stabilising
production and comprehensive adjustment in the mature oilfields, so
as to stabilise and increase reserves. The preparation for gas
exploration in northeast Sichuan will be accelerated. In the second
half of 2006, the Company plans to produce 20.16 million tonnes of
crude oil and 3.5 billion cubic metres of natural gas.
In Refining Segment, the Company will adhere to the strategy of
diversified sources of crude oil, strive to increase the refining
throughput of sour and heavy crude to reduce the procurement cost of
crude oil. In addition, the Company will optimise its product mix by
increasing the production of value added products such as BTX
products to reduce losses and improve returns. In the second half of
2006, the Company plans to process 73.30 million tonnes of crude
oil.
In Marketing and Distribution Segment, the Company will closely
monitor the market trend, make timely adjustments to operation while
making appropriate resource deployment. The modern logistics system
will be brought into full play by optimising resource allocation.
Operational management will also be strengthened, and sales
structure optimized to improve economic returns. In the second half
of 2006, the Company will target its total domestic sales volume of
refined oil products at 56.0 million tonnes.
In Chemicals Segment, the Company will focus on successful start-up
new facilities and maintain safe and stable operation of the
existing facilities. The product mix will also be optimised, and the
linkage between production and sales will be strengthened to produce
more profitable products to meet robust demand so as to increase
profitability. In addition, the Company will fully leverage the
specialised operation of the newly established chemical sales
company to improve its overall competitiveness. In the second half
of 2006, the Company plans to produce 3.03 million tonnes of
ethylene.
In the second half of 2006, the Company will continue to adhere to
the operation guidelines featuring "reform, adjustment, innovation
and development", work hard and aggressively, endeavoring to fulfill
the annual production and operation targets, and maintain its good
performance.
5.12 Caution and explanation as to the anticipated loss of accumulated
net profits from the beginning of the year to the end of the next
reporting period or significant changes over the same period of last
year
_____ applicable __X__ inapplicable
5.13 Explanation of the management about the auditors' "non-standard
opinion" for the reporting period
_____ applicable __X__ inapplicable
5.14 Explanation of the management about the subsequent changes and the
follow up actions of the matters in connection with the auditors'
"non-standard opinion" in the last financial year
_____ applicable __X__ inapplicable
*6 Significant events
6.1 Acquisition, sale of assets and assets reorganisation
6.1.1 Acquisition and purchase of assets
During this reporting period, apart from the acquisition of the four
A share subsidiaries (see item 6.5.10) and the restructuring of
China Phoenix (item 6.5.8), there was no material acquisition,
disposal or restructuring of assets.
6.1.2 Disposition and sale of assets
_____ applicable __X__ inapplicable
6.1.3 Progress and impact on financial positon and operating results of
the relevant event after the issue of asset reorgansation report or
announcement of acquition and sale of assets
_____ applicable __X__ inapplicable
6.2 Material guarantee contracts and status of implementation
External guarantees provided by the Company (not including guarantees
provided to its controlled subsidiaries)
Date of
Occurrence Amount Whether Whether for
(Date of RMB completed a connected
Obligor Execution) millions Type of guarantee Term or not party (note1)
Shanghai Secco Petrochemical 9 February 2002 2,830 Joint and 9 February 2002 No Yes
Co., Ltd. several liability - 20 December 2021
Shanghai Secco Petrochemical 9 February 2002 4,062 Joint and 9 February 2002 No Yes
Co., Ltd. several liability - 20 December 2013
BASF-YPC Co., Ltd. 7 March 2003 4,680 Joint and 7 March 2003 No Yes
several liability - 31 December 2008
Yueyang Sinopec Shell Coal 10 December 2003 377 Joint and 10 December 2003 No Yes
Gasification Co., Ltd. several liability - 10 December 2017
Fujian Zhangzhao Expressway 21 January 2003 10 Joint and 21 January 2003 No Yes
Service Company Limited several liability - 31 October 2007
Total amount of guarantee provided during the reporting period note(2) RMB 20 million
Total amount of guarantee outstanding at the end of the reporting period note (2) RMB 12,015 million
Guarantees provided by Sinopec Corp. for its controlled subsidiaries
Total amount of guarantee provided for its controlled subsidiaries during the reporting period None
Total amount of guarantee for its controlled subsidiaries outstanding at the end of the reporting period RMB 2,561 million
Total amount of guarantee provided by Sinopec Corp. (including those provided for its controlled subsidiaries)
Total guarantee amount note (3) RMB 14,576 million
Total amount of guarantee as a percentage of the Sinopec Corp. net assets 6.3%
Of which:
Amount of guarantee provided for shareholders, effective controlling parties or their connected parties None
Amount of debt guarantee provided directly or indirectly for the
companies with liabilities to assets ratio of over 70% RMB 179
million
The amount of guarantee in excess of 50% of the net assets None
Sum of the above three guaranteed items note (4) RMB 179 million
Note 1: As defined in the Listing Rules of the Shanghai Stock Exchange.
Note 2: Total amount of guarantee provided during the reporting
period and total amount of guarantee outstanding at the end
of the reporting period include the external guarantees
provided by controlled subsidiaries. The amount assumed by
Sinopec Corp. is the aggregate of total amount of the
external guarantees provided by each controlled subsidiary
multiplied by Sinopec Corp. respective shareholdings in the
controlled subsidiary.
Note 3: Total guarantee amount is the sum of the amount of
guarantee outstanding at the end of the reporting period
(excluding the guarantees provided for controlled
subsidiaries) and the total amount of guarantees for
controlled subsidiaries outstanding at the end of the
reporting period.
Note 4: "Sum of the above three guaranteed amounts" is the
aggregate of "amount of guarantee provided for shareholders,
effective controlling parties or their connected parties",
"amount of debt guarantee provided directly or indirectly
for the companies with liabilities to asset ratio of over
70%" and "the amount of guarantee in excess of 50% of the
net asset". Any guarantee qualifying under all three of the
above shall be counted once only.
6.3 Fund provided between connected parties
__X__ applicable _____ inapplicable
Unit: RMB millions
Relation with
Connected Parties the Company Fund to connected parties Fund from connected parties
Net fund Net fund
provided Balance provided Balance
Sinopec Group Company Controlling shareholder 420 2,908 5,243 10,661
and its controlled entity
Other Connected Parties Associates (11) 506 -- --
---------- --------- --------- ---------
Total 409 3,414 5,243 10,661
========== ========= ========= =========
Of which: RMB 420 million fund (net) was provided by the Company to
China Petrochemical Corporation ("Sinopec Group Company") during the
reporting period, and the balance at the end of the reporting period
is RMB 2.91 billion.
6.4 Material litigation and arbitration
_____ applicable __X__ inapplicable
6.5 Explanations of other significant events, their impact and proposed
solutions
__X__ applicable _____ inapplicable
6.5.1 The discovery of large-scale marine facies gas field --
Puguang Gas Field
The Company discovered the largest and most abundant marine facies
natural gas field - Puguang Gas Field -- in northeast Sichuan
Province. According to the appraisal undertaken by the Mineral
Resource Reserve Evaluation Center under the Ministry of Land and
Resources, reserve in Puguang Gas Field is estimated to be 251.071
billion cubic metres, with technically recoverable reserve of
188.304 billion cubic metres. Puguang Gas Field meets the conditions
for commercial development.
6.5.2 The transfer of state owned shares to Sinopec Group
Company from China Orient Asset Management Corporation,
China Cinda Asset Management Corporation and China Development
Bank
During the reporting period, China Orient Asset Management
Corporation ("China Orient"), China Cinda Asset Management
Corporation ("Cinda") and China Development Bank ("CDB"), all of
which are shareholders of Sinopec Corp., entered into equity
transfer agreements with Sinopec Group Company on 29 April 2006, 6
June 2006 and 17 August 2006 respectively, pursuant to which China
Orient, Cinda and CDB respectively transferred 1,296.41 million
(approximately 1.5% of the total shares of Sinopec Corp.),
2,848,886,224 (approximately 3.3% of the total shares of Sinopec
Corp.) and 632.57 million (approximately 0.7% of the total shares of
Sinopec Corp.) state-owned shares to Sinopec Group Company. The
respective total cash considerations of RMB 3,150,276,300.00, RMB
7,207,682,100.00, and RMB 1,537,145,100.00 will be paid to China
Orient, Cinda and CDB by Sinopec Group Company. The equity transfer
agreement with China Orient has been approved by the State-owned
Assets Supervision and Administration Commission ("SASAC") and the
Ministry of Finance. The equity transfer agreement with Cinda has
been approved by SASAC but is pending approval by the Ministry of
Finance while the equity transfer agreement with CDB is pending
approval by SASAC and the Ministry of Finance.
6.5.3 Increase of equity investment in Sinopec Finance Company
Limited
On 31 March 2006, Sinopec Corp. and Sinopec Group Company entered
into an arrangement ("Arrangement") with Sinopec Finance Co., Ltd.
("Sinopec Finance"), under which, the registered capital of Sinopec
Finance increased to RMB 6 billion from RMB 2.5 billion. Sinopec
Corp. and Sinopec Group Company injected RMB 1,602.3 million and
RMB897.7 million respectively into Sinopec Finance. Upon completion
of the Arrangement, the equity holding of Sinopec Corp. in Sinopec
Finance increased to 49% from 38.22%, while the equity holding of
Sinopec Group Company in Sinopec Finance will decrease to 51% from
61.78%. Please refer to the relevant announcements published in the
China Securities Journal, Shanghai Securities News and Securities
Times in Mainland China and Hong Kong Economic Times and South China
Morning Post in Hong Kong on 3 April 2006 for details.
6.5.4 Continuing connected transactions
When listed in 2000, Sinopec Corp. and Sinopec Group Company
executed a series of agreements regarding continuing connected
transactions, including the Mutual Supply Agreement, the Community
Service Agreement, the Land Use Right Leasing Agreement, Property
Leasing Agreement, the Intellectual Property License Agreement, the
Agency Agreement and the SPI Fund Document. On 24 December 2003, the
Stock Exchange of Hong Kong Limited granted a conditional waiver of
three years (from 2004 to 2006) to Sinopec Corp. from strict
compliance with relevant requirements of the Hong Kong Listing Rules
in relation to the continuing connected transactions. The waiver
will expire on 31 December 2006.
It is expected that Sinopec Corp. will continue to conduct the
relevant continuing connected transactions after the expiry of the
waiver period. Sinopec Corp. has entered into supplemental
agreements in relation to the connected transactions with Sinopec
Group Company on 31 March 2006. The relevant supplemental agreements
will apply to the continuing connected transactions of the Company
to be conducted after 1 January 2007.
The proposal regarding continuing connected transactions for the
three-year period from 2007 to 2009 was approved at the 2005 Annual
General Meeting held on 24 May 2006. For further details, please
refer to Sinopec Corp.'s announcements published in China Securities
Journal, Shanghai Securities News and Securities Times in Mainland
China and Hong Kong Economic Times and South China Morning Post in
Hong Kong on 3 April 2006.
6.5.5 Domestic share reform on non-tradable shares
Sinopec Corp. initiated domestic A share reform of non-tradable
shares on 21 August, 2006. All the shareholders holding non-tradable
shares intend to grant 2.8 shares for every ten tradable shares held
by the shareholders as consideration. All shareholders holding
non-tradable shares of Sinopec Corp. have made commitments of not
trading their shares which have acquired the trading rights within
the legal lock up period.
The above domestic A share reform is to be submitted to A share
shareholders' general meeting for approval. Please refer to the
announcement on A Share Reform of Sinopec Corp. published on 28
August, 2006.
6.5.6 Special oil income levy
The Chinese government imposed a special oil income levy on the
revenue derived from the sales of domestically produced crude oil by
any company engaged in oil exploration and production at a price
which exceeds a certain level starting from 26 March 2006. The
special oil income levy system consists of 5 levels and will be
calculated and charged according to the progressive ad valorem rates
on the excess amounts. The levy will be calculated on a monthly
basis and charged and collected on a quarterly basis. The applicable
level of the special oil income levy will be determined based on the
weighted average price of the crude oil sold in a particular month.
The level of levy will be determined based on US dollar per barrel
which starts at US$ 40 per barrel. Please refer to the relevant
announcements published in the China Securities Journal, Shanghai
Securities News and Securities Times in Mainland China and Hong Kong
Economic Times and South China Morning Post in Hong Kong on 4 April
2006 for details.
6.5.7 Issuance of short-term commerical paper
On 19 September 2005, Sinopec Corp. convened the first extraordinary
general meeting of shareholders for 2005, at which a special
resolution was passed for issuance of short-term commercial paper.
For details, please refer to Sinopec Corp.'s announcements published
in China Securities Journal, Shanghai Securities News, and
Securities Times in Mainland China, and Hong Kong Economic Times and
South China Morning Post in Hong Kong on 20 September 2005. 2006
first tranche of commercial paper with a term of 183 days, carrying
a rate of 2.668% was issued on 16 May 2006 to institutional
investors in China's inter-bank commercial paper market, totaling
RMB 10 billion at face value.
6.5.8 The transfer of state-owned legal person shares of China
Phoenix held by Sinopec Corp.
On 18 October 2005, Sinopec Corp. and China Changjiang National
Shipping (Group) Corporation ("Changhang Group") entered into a
equity transfer agreement, under which, Sinopec Corp. agreed to
transfer to Changhang Group a total of 211,423,651 state-owned legal
person shares held by Sinopec Corp. in Sinopec Wuhan Phoenix Company
Limited ("China Phoenix") (representing 40.72% of the total issued
share capital of China Phoenix) and repurchase the operating assets
of China Phoenix. For further details, please refer to the "Report
on Changes of Shareholdings in Sinopec Wuhan Phoenix Company
Limited" dated 20 October 2005 published by Sinopec Corp. on the
website of the Shanghai Stock Exchange. The proposed asset
restructuring of China Phoenix was approved by the China Securities
Regulatory Commission ("CSRC") on 29 April 2006. The relevant equity
transfer procedures were completed by Sinopec Corp. and Changhang
Group on 10 July 2006.
6.5.9 Merger by absorption of Zhenhai Refinery and Chemicals
Pursuant to the agreement entered into between Ningbo Yonglian Co.,
Ltd. ("Ningbo Yonglian") and Sinopec Zhenhai Refining and Chemicals
Company Limited ("ZRCC") on 12 November 2005, Ningbo Yonglian
purchased the listed H shares of ZRCC from its shareholders at a
unit price of HK$ 10.60 per share in cash, amounting to a total
consideration of HK$ 7.672 billion. For further details, please
refer to Sinopec Corp.'s announcements published in China Securities
Journal, Shanghai Securities News and Securities Times in Mainland
China and Hong Kong Economic Times and South China Morning Post in
Hong Kong on 14 November 2005. The proposed merger had been approved
on 12 January 2006 at the general meeting of shareholders and the
general meeting of independent shareholders of ZRCC and approved by
the shareholders of Ningbo Yonglian, as well as by domestic and
overseas securities regulatory authorities. ZRCC was delisted on 24
March 2006.
6.5.10 Tender offer by Sinopec Corp. to four A-share subsidiaries
On 25 February 2006, the 24th meeting of the Second Session of the
Board of Directors of Sinopec Corp. approved its voluntary tender
offers to acquire all the tradable shares of Sinopec Qilu
Petrochemical Co., Ltd. ("Sinopec Oilu") at a price of RMB 10.18 per
share, all the tradable shares of Sinopec Yangzi Petrochemical Co.,
Ltd. ("Sinopec Yangzi") at a price of RMB 13.95 per share, all the
tradable shares of Sinopec Zhongyuan Oil & Gas Hi-tech Co., Ltd.
("Sinopec Zhongyuan Oil & Gas") at a price of RMB 12.12 per share,
and all the tradable shares of Sinopec Shengli Oil Field Dynamic
(Group) Co., Ltd. at a price of RMB 10.30 per share and all the
non-tradable shares (including non-tradable shares held by investors
other than Sinopec Corp.) of Sinopec Shengli Oil Field Dynamic
(Group) Co., Ltd. at a price of RMB 5.60 per share. Sinopec Qilu was
delisted on 24 April 2006, and Sinopec Yangzi, Zhongyuan Oil & Gas
and Sinopec Shengli Oil Field Dynamic (Group) Co., Ltd. were
delisted on 21 April 2006. For further details, please refer to
relevant announcements published in China Securities Journal,
Shanghai Securities News and Securities Times in Mainland China on
16 February and 6 March 2006 (Sinopec Shengli Oil Field Dynamic
(Group) Co., Ltd.'s announcement was only published in China
Securities Journal and Securities Times).
6.5.11 Construction of Tianjin one million tonnes per annum ethylene
project
Construction of Sinopec Tianjin one million tonnes per annum ("tpa")
ethylene and associated facilities project started on 26 June 2006.
This project comprises three parts, which are respectively ethylene
project, revamping of refinery and thermal power generation
facilities, at a total investment of about RMB 20.8 billion.
6.5.12 ZRCC one million tpa ethylene project
ZRCC one million tpa ethylene and associated facilities project was
approved by the State Council in March 2006. The total investment is
approximately RMB 21.9 billion. The Project consists of the ethylene
project and the expansion of thermal power generation facilities.
Initial preparatory work has commenced.
6.5.13 De-registration of Sinopec Shengli Oil Field Company Limited
Sinopec Corp. de-registered Sinopec Shengli Oilfield Co., Ltd. and
on 16 January 2006 established Shengli Oilfield Company. Prior to
the de-registration, Sinopec Shengli Oilfield Co., Ltd. was a wholly
owned subsidiary of Sinopec. Corp.
6.6 Dividend distribution for the year ended 31 December 2005
As approved at the 2005 Annual General Meeting of Sinopec Corp, a
final cash dividend of RMB 0.09 (inclusive of tax) per share for the
year ended 31 December 2005 was distributed, which amounted to an
aggregate of RMB 7.803 billion. On 30 June 2006, Sinopec Corp.
distributed the 2005 year end dividend to shareholders whose names
appeared on the register of members of Sinopec Corp. on 16 June
2006.
For the year 2005, total cash dividend of RMB 0.13 (inclusive of
tax) per share was distributed, and the total cash dividend amounted
to RMB 11.271 billion.
6.7 Interim dividend distribution plan for the six-month period ended 30
June 2006
According to the provisions of the Articles of Association of
Sinopec Corp., the interim dividend distribution plan for the
six-month period ended 30 June 2006 was approved at the third
meeting of the Third Session of the Board of Directors. An interim
cash dividend of RMB 0.04 (inclusive of tax) per share will be
distributed based on the total number of shares of 86,702.439
million as at 30 June 2006. The total cash dividend amounts to RMB
3.468 billion.
The interim dividend will be distributed on or before Thursday, 28
September 2006 to the shareholders whose names appear on the
register of members of Sinopec Corp. on Wednesday, 13 September
2006.
To be entitled to the interim dividend, holders of H shares shall
lodge their share certificate(s) and transfer documents with Hong
Kong Registrars Limited at Shops 1712-1716, 17/F., Hopewell Center,
183 Queen's Road East, Wanchai, Hong Kong for registration of
transfer, no later than 4:00pm on Tuesday, 12 September 2006. The
register of members of the H shares of Sinopec Corp. will be closed
from Wednesday, 13 September 2006 to Tuesday, 19 September 2006
(both dates inclusive).
Dividends will be denominated and declared in Renminbi. Dividends
for domestic shares will be paid in Renminbi and dividends for
foreign shares will be paid in Hong Kong dollars. The exchange rate
for dividends to be paid in Hong Kong dollars is the average of the
basic exchange rate of Hong Kong dollar to Renminbi published by the
People's Bank of China during the week prior to the date of
declaration of dividends, being Friday, 25 August 2006.
*7 Financial Statements
The followings are the financial statements of China Petroleum & Chemical
Corporation ("the Company") and its subsidiaries ("the Group"), which are
extracted from the audited interim financial statements prepared in
accordance with the PRC Accounting Rules and Regulations and
International Financial Reporting Standards ("IFRS") with 2005
comparatives.
7.1 Auditors' opinion
Financial statements _____ Unaudited __X__ Audited
Auditors' opinion __X__ Standard unqualified opinion
_____ Not Standard opinion
7.2 The Group's and the Company's financial statements with comparatives
7.2.1 Financial statements prepared in accordance with the PRC Accounting Rules and Regulations
(1) Balance sheets
At 30 June 2006 At 31 December 2005
The Group The Company The Group The Company
RMB millions RMB millions RMB millions RMB millions
Assets
Current assets
Cash at bank and in hand 10,777 3,993 14,747 5,124
Bills receivable 7,825 1,948 7,143 1,334
Trade accounts receivable 17,449 11,198 14,532 8,826
Other receivables 12,491 15,882 11,487 9,604
Advance payments 7,313 7,268 5,051 4,118
Inventories 105,496 56,488 88,936 49,862
--------- --------- --------- ----------
Total current assets 161,351 96,777 141,896 78,868
--------- --------- --------- ----------
Long-term equity investments
(Including the Group's and
the Company's equity
investment differences of
RMB13,549 million and
RMB13,549 million (2005:
RMB2,003 million
and 2,017 million)) 27,392 109,926 14,146 133,203
--------- --------- --------- ----------
Fixed assets
Fixed assets, at cost 589,872 431,592 572,465 294,206
Less: Accumulated depreciation 282,226 206,560 265,611 123,747
--------- --------- --------- ----------
Net book value of fixed assets
before impairment losses 307,646 225,032 306,854 170,459
Less: Provision for impairment
losses on fixed assets 6,267 4,195 6,234 4,191
--------- --------- --------- ----------
Net book value of fixed assets 301,379 220,837 300,620 166,268
Construction materials 419 419 555 555
Construction in progress 62,628 52,586 48,073 38,937
--------- --------- --------- ----------
Total fixed assets 364,426 273,842 349,248 205,760
--------- --------- --------- ----------
Intangible assets and other assets
Intangible assets 5,835 4,307 5,924 4,238
Long-term deferred expenses 4,088 2,879 3,657 2,656
--------- --------- --------- ----------
Total intangible assets and
other assets 9,923 7,186 9,581 6,894
--------- --------- --------- ----------
Deferred tax assets 5,796 5,408 5,701 3,203
--------- --------- --------- ----------
--------- --------- --------- ----------
Total assets 568,888 493,139 520,572 427,928
========= ========= ========= ==========
Liabilities and shareholders'
funds
Current liabilities
Short-term loans 46,785 35,699 16,124 6,940
Bills payable 27,198 20,389 23,243 19,077
Trade accounts payable 50,636 34,565 52,967 28,833
Receipts in advance 14,624 11,430 14,086 12,491
Wages payable 3,369 2,710 3,436 2,525
Staff welfare payable 1,074 686 1,052 514
Taxes payable 4,105 2,062 5,262 2,075
Other payables 6,105 5,823 1,830 527
Other creditors 30,656 30,800 24,161 22,914
Accrued expenses 1,483 994 512 173
Short-term debentures payable 10,891 9,900 9,921 9,921
Current portion of long-term
loans 14,818 12,958 15,198 12,144
--------- --------- --------- ----------
Total current liabilities 211,744 168,016 167,792 118,134
--------- --------- --------- ----------
Long-term liabilities
Long-term loans 104,232 91,167 103,492 89,113
Debentures payable 3,500 3,500 3,500 3,500
Other long-term liabilities 784 727 782 315
--------- --------- --------- ----------
Total long-term liabilities 108,516 95,394 107,774 92,928
--------- --------- --------- ----------
--------- --------- --------- ----------
Total liabilities 320,260 263,410 275,566 211,062
--------- --------- --------- ----------
Minority interests 20,118 -- 29,383 --
--------- --------- --------- ----------
Shareholders' funds
Share capital 86,702 86,702 86,702 86,702
Capital reserve 37,121 37,797 37,121 37,797
Surplus reserves 36,096 36,096 34,028 34,028
Unrecognised investment losses (583) -- (594) --
Retained profits
(Including cash dividend
declared after the balance
sheet date of RMB 3,468 million
(2005: Proposed cash dividend
of RMB 7,803 million)) 69,174 69,134 58,366 58,339
--------- --------- --------- ----------
Total shareholders' funds 228,510 229,729 215,623 216,866
--------- --------- --------- ----------
--------- --------- --------- ----------
Total liabilities and
shareholders' funds 568,888 493,139 520,572 427,928
========= ========= ========= =========
(2) Income statements and profit appropriation statements
Six-month periods Six-month periods
ended 30 June 2006 ended 30 June 2005
The Group The Company The Group The Company
RMB millions RMB millions RMB millions RMB millions
Income from principal operations 481,988 331,021 359,248 241,340
Less: Cost of sales 409,298 274,683 293,181 212,726
Sales taxes and surcharges 12,918 10,626 8,204 5,386
--------- --------- --------- ----------
Profit from principal operations 59,772 45,712 57,863 23,228
Add: Profit from other operations 490 167 447 175
Less: Selling expenses10,711 6,557 10,359 6,609
Administrative expenses 11,771 9,530 10,600 6,141
Financial expenses 3,522 2,542 2,852 1,852
Exploration expenses,
including dry holes 3,085 3,063 3,355 2,678
--------- --------- --------- ----------
Operating profit 31,173 24,187 31,144 6,123
Add: Investment income/(loss) 184 6,845 (742) 20,934
Non-operating income 132 54 133 99
Less: Non-operating expenses 674 468 1,109 432
--------- --------- --------- ----------
Profit before taxation 30,815 30,618 29,426 26,724
Less: Income tax 9,964 9,952 9,168 8,694
Minority interests 161 -- 2,101 --
Add: Reversal of unrecognised
investment losses (11) -- (113) --
--------- --------- --------- ----------
Net profit 20,679 20,666 18,044 18,030
Add: Retained profits at the
beginning of the period 58,366 58,339 37,124 37,124
--------- --------- --------- ----------
Distributable profits 79,045 79,005 55,168 55,154
Less: Transfer to statutory
surplus reserve 2,068 2,068 1,804 1,804
Transfer to statutory public
welfare fund -- -- 1,804 1,804
--------- --------- --------- ----------
Distributable profits to
shareholders 76,977 76,937 51,560 51,546
Less: Distribution of ordinary
shares' dividend 7,803 7,803 6,936 6,936
--------- --------- --------- ----------
Retained profits at the end
of the period (Including cash
dividend declared after
the balance sheet date of
RMB 3,468 million
(2005: RMB 3,468 million)) 69,174 69,134 44,624 44,610
========= ========= ========= =========
7.2.2 Financial statements prepared in accordance with IFRS
(1) Consolidated income statement
Six-month periods ended 30 June
2006 2005
RMB millions RMB millions
Turnover and other operating revenues
Turnover 481,988 359,248
Other operating revenues 11,140 9,206
------------ ---------------
493,128 368,454
------------ ---------------
Operating expenses
Purchased crude oil, products and
operating supplies and expenses (400,215) (283,036)
Selling, general and administrative expenses (16,429) (15,510)
Depreciation, depletion and amortisation (16,504) (15,155)
Exploration expenses, including dry holes (3,085) (3,355)
Personnel expenses (9,197) (8,536)
Employee reduction expenses (48) (100)
Taxes other than income tax (12,918) (8,204)
Other operating expenses, net (494) (876)
------------ ---------------
Total operating expenses (458,890) (334,772)
------------ ---------------
------------ ---------------
Operating profit 34,238 33,682
------------ ---------------
Finance costs
Interest expense (3,542) (2,845)
Interest income 250 168
Foreign exchange losses (52) (40)
Foreign exchange gains 202 151
------------ ---------------
Net finance costs (3,142) (2,566)
------------ ---------------
Investment income 131 62
------------ ---------------
Share of profits less losses from associates 447 536
------------ ---------------
------------ ---------------
Profit before taxation 31,674 31,714
Taxation (10,110) (9,945)
------------ ---------------
Profit for the period 21,564 21,769
============ ===============
Attributable to:
Equity shareholders of the Company 21,406 19,653
Minority interests 158 2,116
------------ ---------------
Profit for the period 21,564 21,769
============ ===============
Dividend payable to equity shareholders
of the Company attributable to the period:
Interim dividend declared after the balance sheet date 3,468 3,468
============ ===============
Basic earnings per share (RMB) 0.25 0.23
============ ===============
(2) Consolidated balance sheet
At 30 June At 31 December
2006 2005
RMB millions RMB millions
Non-current assets
Property, plant and equipment 315,737 314,573
Construction in progress 62,879 48,267
Goodwill 13,934 2,203
Investments 3,150 2,926
Interest in associates 10,693 9,217
Deferred tax assets 6,167 6,072
Lease prepayments 1,935 1,908
Long-term prepayments and other assets 7,250 6,864
------------ ---------------
Total non-current assets 421,745 392,030
------------ ---------------
Current assets
Cash and cash equivalents 9,939 13,745
Time deposits with financial institutions 838 1,002
Trade accounts receivable 17,449 14,532
Bills receivable 7,825 7,143
Inventories 105,894 89,474
Prepaid expenses and other current assets 23,225 19,395
------------ ---------------
Total current assets 165,170 145,291
------------ ---------------
Current liabilities
Short-term debts 65,199 40,411
Loans from Sinopec Group Company and
fellow subsidiaries 7,295 832
Trade accounts payable 50,636 52,967
Bills payable 27,198 23,243
Accrued expenses and other payables 60,903 48,167
Income tax payable 3,934 5,029
------------ ---------------
Total current liabilities 215,165 170,649
------------ ---------------
------------ ---------------
Net current liabilities (49,995) (25,358)
------------ ---------------
------------ ---------------
Total assets less current liabilities 371,750 366,672
------------ ---------------
Non-current liabilities
Long-term debts 68,279 67,059
Loans from Sinopec Group Company and
fellow subsidiaries 39,453 39,933
Deferred tax liabilities 6,048 5,902
Other liabilities 784 782
------------ ---------------
Total non-current liabilities 114,564 113,676
------------ ---------------
------------ ---------------
257,186 252,996
============ ===============
Equity
Share capital 86,702 86,702
Reserves 150,457 136,854
------------ ---------------
Total equity attributable to equity shareholders
of the Company 237,159 223,556
Minority interests 20,027 29,440
------------ ---------------
Total equity 257,186 252,996
============ ===============
7.3 Notes on the financial statements prepared under IFRS
7.3.1 Turnover
Turnover represents revenue from the sales of crude oil, natural
gas, petroleum and chemical products, net of value-added tax.
7.3.2 Taxation
Taxation in the consolidated income statement represents:
Six-month periods
ended 30 June
2006 2005
RMB millions RMB millions
Current tax
- Provision for the period 9,819 9,608
- Under-provision in prior years 240 477
Deferred taxation 51 (140)
------------ ---------------
10,110 9,945
============ ===============
A reconciliation between actual tax expense and accounting profit at
applicable tax rates is as follows:
Six-month periods
ended 30 June
2006 2005
RMB millions RMB millions
Profit before taxation 31,674 31,714
------------ ---------------
Expected PRC income tax expense
at a statutory tax rate of 33% 10,453 10,466
Tax effect of non-deductible expenses 379 234
Tax effect of non-taxable income (400) (222)
Tax effect of differential tax rate
on subsidiaries' income (Note) (1,161) (870)
Tax effect of tax losses not recognised for deferred tax 600 15
Under-provision in prior years 240 477
Tax credit for domestic equipment purchases (1) (155)
------------ ---------------
Actual tax expense 10,110 9,945
============ ===============
Substantially all income before income tax and related tax expense
is from PRC sources.
Note: The provision for PRC current income tax is based on a
statutory rate of 33% of the assessable income of the Group
as determined in accordance with the relevant income tax
rules and regulations of the PRC, except for certain entities
of the Group, which are taxed at a preferential rate of 15%.
7.3.3 Basic earnings per share
The calculation of basic earnings per share for the six-month period
ended 30 June 2006 is based on the profit attributable to equity
shareholders of the Company of RMB 21,406 million (2005: RMB 19,653
million) and the weighted average number of shares of 86,702,439,000
(2005: 86,702,439,000) during the period.
The amount of diluted earnings per share is not presented as there
were no dilutive potential ordinary shares in existence during the
periods presented.
7.3.4 Dividends
Dividends payable to equity shareholders of the Company attributable
to the period represent:
Six-month periods
ended 30 June
2006 2005
RMB millions RMB millions
Interim dividends declared after the balance sheet date
of RMB 0.04 per share (2005: RMB 0.04 per share) 3,468 3,468
============ ===============
Pursuant to the Company's Articles of Association and a resolution
passed at the Directors' meeting on 25 August 2006, the directors
authorised to declare the interim dividends for the year ending 31
December 2006 of RMB 0.04 (2005: RMB 0.04) per share totalling RMB
3,468 million (2005: RMB 3,468 million). Interim dividend of RMB
3,468 million (2005: RMB 3,468 million) proposed after the balance
sheet date has not been recognised as a liability at the balance
sheet date.
Dividends payable to equity shareholders of the Company attributable
to the previous financial year, approved and paid during the period
represent:
Six-month periods
ended 30 June
2006 2005
RMB millions RMB millions
Final dividends in respect of the previous financial year,
approved and paid during the period
of RMB 0.09 per share (2005: RMB 0.08 per share) 7,803 6,936
============ ===============
Pursuant to the shareholders' approval at the Annual General Meeting
on 24 May 2006, a final dividend of RMB 0.09 per share totalling RMB
7,803 million in respect of the year ended 31 December 2005 was
declared and paid on 30 June 2006.
Pursuant to the shareholders' approval at the Annual General Meeting
on 18 May 2005, a final dividend of RMB 0.08 per share totalling RMB
6,936 million in respect of the year ended 31 December 2004 was
declared and paid on 27 June 2005.
*8 Repurchase, Sales and Redemption of shares
During this reporting period, the Company did not repurchase, sell or
redeem any securities of Sinopec Corp.
*9 Application of the Model Code
In this reporting period, no director has infringed the requirements set
out under the Model Code for Securities Transactions by Directors of
Listed Issuers, Appendix 10 to the Listing Rules stipulated by Hong Kong
Stock Exchange.
*10 A detailed results announcement containing all the information required
by paragraphs 46(1) to (9) of Appendix 16 to the Listing Rules of the
Stock Exchange will be published on the website of the Hong Kong Stock
Exchange in due course.
This announcement is published in both English and Chinese languages. The
chinese version shall prevail.
By Order of the Board
Chen Tonghai
Chairman
Beijing, the PRC, 25 August 2006
As at the date of this announcement, the executive directors of Sinopec Corp.
are Messrs. Wang Tianpu, Zhang Jianhua, Wang Zhigang, Dai Houliang; the
non-executive directors are Messrs. Chen Tonghai, Zhou Yuan, Fan Yifei and Yao
Zhongmin; the independent non-executive directors are Messrs. Liu Zhongli, Shi
Wanpeng and Li Deshui.
-------------------------------------------------------------------------------
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
China Petroleum & Chemical Corporation
By: /s/ Chen Ge
-----------
Name: Chen Ge
Title: Secretary to the Board of Directors
Date: August 28, 2006