Key Takeaways:
Sinopec reported H1 net profit of 25.63 billion yuan ($3.81 billion), up 19.3% year-on-year despite the Middle East conflict and falling domestic fuel demand.
Management said it "closely monitored changing conditions, dynamically adjusted production and operating arrangements, and effectively responded to unexpected shocks and challenges on multiple fronts," according to the filing at the Shanghai stock exchange.
The world's biggest refiner processed 113.31 million metric tons of crude in January-June, down 5.6% year-on-year, while refining margin rose 44.1% to 453 yuan per metric ton. Refining operating profit grew 381.5% by "broadening crude oil sourcing outside the Middle East, closely managing the timing of purchases in line with market conditions, and optimising its product mix based on product profitability," the filing showed.
The result compares with 21.48 billion yuan in the same period a year earlier. The company set aside provisions for asset impairment of 16 billion yuan as a result of volatility in oil and fuel prices during the first six months, it said in a separate filing.
The results come as the Strait of Hormuz has remained largely closed since March, cutting off a route through which Sinopec usually imports large quantities of crude. China has drastically cut oil imports since the war began, freeing up barrels for other buyers and keeping a lid on global prices. Sinopec projects crude throughput of 113 million metric tons for July-December, roughly flat versus the first half.
The chemicals segment remained loss-making, recording an operating loss of more than 200 million yuan, though losses narrowed sharply by around 4 billion yuan. Output of ethylene, a key building block for petrochemicals, sank 15.5% year-on-year to 6.4 million tons as the company faced industry over-capacity and competition from the private sector.
Sinopec relies on the Middle East for half of its crude oil needs, making it vulnerable to the worst supply crisis in history. Beijing has forced the refiner, and others like it, to absorb the oil price shock by limiting their ability to pass higher oil prices through to fuel consumers.
Conflict in the Middle East caused "sharp volatility in international crude oil prices and a substantial increase in imported crude procurement costs," while the domestic refined product and chemicals markets remained weak, management stated in the filing.
The profit growth demonstrates Sinopec's ability to navigate severe supply disruptions through procurement diversification and operational flexibility. Investors will watch the second-half earnings release for whether refining margins can hold above current levels as the Strait of Hormuz closure persists.
This article is for informational purposes only and does not constitute investment advice.
