SINOPEC Engineering Announces 2013 Interim Results
SINOPEC Engineering Announces 2013 Interim Results Achieves Steady Business Growth and Strengthens Market Leadership PR Newswire HONG KONG, Aug. 20, 2013 HONG KONG, Aug. 20, 2013 /PRNewswire/ -- SINOPEC Engineering (Group) Co., Ltd. ("SINOPEC SEG" or "the Company", together with its subsidiaries known as the "Group") (stock code: 2386) today announces its interim results for the six months ended 30 June 2013 (the "Period"). Results Highlights o The Group achieved total revenue of approximately RMB19.645 billion, up 16.3% year-on-year. Profit attributable to shareholders reached approximately RMB2.214 billion, up 10.8% from a year ago. Basic earnings per share were RMB0.66, up 3.1% from the same period last year. o The board of directors resolved to pay an interim dividend of RMB0.134 per share. o During the Period, the value of new contracts amounted to approximately RMB45.080 billion, representing a significant growth of 244.2% over the same period last year. At the end of the Period, the Group's backlog reached approximately RMB101.485 billion, up 33.4% from the year end of 2012 and accounting for 2.6 times of the annual revenue of RMB38.526 billion for 2012. o The Group's revenue growth was mainly driven by Engineering, Consulting and Licensing as well as EPC Contracting operations in terms of business segment. During the Period, revenue from Engineering, Consulting and Licensing operations surged 34.9% year-on-year, while that of EPC Contracting operations advanced 27.2% year-on-year. o The Group derived its revenue mainly from New Coal Chemicals and Petrochemicals industries in terms of revenue sources by industries. During the Period, revenue from New Coal Chemicals industry surged 65.0% year-on-year, while revenue from Petrochemicals industry soared 27.2% year-on-year o Revenue from the PRC increased 14.0% year-on-year to approximately RMB16.190 billion, accounting for 82.4% of the Group's total revenue. Meanwhile, the overseas revenue grew 28.5% year-on-year to approximately RMB3.455 billion, accounting for 17.6% of the Group's total revenue. Business Highlights o Successful Implementation of Major Projects: o The engineering, procurement and construction of Jingbian Coal Chemical Complex was basically completed and the Group will start to conduct commissioning and start-up of the project. o More than 50% of all the units at Yulin Coal Chemical Complex were finished, with its safety, quality and development progress is all under control. o Wuhan Ethylene Complex commenced full operation on 23 August 2013. Meanwhile, the design of Sinochem Quanzhou Complex has been completed and all the major equipment and materials have been procured. o The development of Shijiazhuang Oil Refining and Chemical Complex is progressing well and 70% of the project has been completed. o Excellent Results in Market Development: While maintaining leading advantages in traditional industries such as oil refinery and petrochemicals, the Group stepped up efforts to explore business opportunities in domestic and overseas coal chemical markets. During the Period, the Group signed a number of new contracts with total value of RMB45.080 billion, including RMB22.443 billion for domestic contracts and RMB22.637 billion for overseas contracts. Representative domestic projects signed during the Period included: o the DMTO-II unit for the 700 Ktpa coal-to-olefin project of Pucheng Clean Energy Chemical Co., Ltd., with an EPC contract value of RMB2.398 billion; o the DMTO unit for the 300 Ktpa polyethylene project and the 390 Ktpa polypropylene project of Zhejiang Xingxing New Energy Co., Ltd., with an EPC contract value of RMB1.819 billion; o the tank farm project for Shandong LNG project of SINOPEC Qingdao LNG Co., Ltd., with an EPC contract value of RMB1.665 billion; o the 400 Ktpa phenol-acetone project of SINOPEC Shanghai Mitsui Chemical Co., Ltd., with an EPC contract value of RMB1.230 billion. The traditional petrochemical industry remained the core business of the Company, as shown by the significant increase in the number of new contracts signed. Meanwhile, the number of new contracts signed for new coal chemical projects continued to grow with their total value reached RMB9.069 billion. The coal chemical projects in Zhijin, Guizhou Province and Hebi, Henan Province that the Group has pushed ahead were given the approval by the National Development and Reform Commission ("NDRC") to start pre-launch efforts during the Period. The ethylene and oil refining reconstruction and expansion project of Hainan Refining Chemical Co., Ltd. and the integration project for phase II of CNOOC Huizhou Refining have also been approved by the NDRC. In addition to the above projects, the Group has also followed a number of important projects and expects an optimistic prospect for market exploration. Representative overseas projects signed during the Period included: o the USA PTA and PET project, with a contract value of USD1.150 billion; o the EPC Commissioning/Start-Up Contracting (EPCC) contract for the Kazakhstan KPI project, with a contract value of USD1.850 billion. o Leading Technical Strengths: Levering on the steady progress of its R&D in major technologies for key engineering projects, the Group has made remarkable achievements in 35 major technological R&D projects. In the first half of this year, 39 new technology licensing contracts were signed, amounting to a total value of RMB199 million. The Group completed 202 new patent applications and was granted 121 patents. Moreover, it won 22 awards from the provincial / ministerial-level governments for its technological progress. o Intensified Corporate Reform: The Group has pushed ahead with an all-round corporate reform, aiming to develop itself into "a world-class energy and chemical engineering company" and to create an "integrated operation model and a group-wide approach to management and control". It endeavors to establish a new set of institutions, mechanisms and a group-wide management system that can effectively promote the Group's long-term development and drive its robust business growth. o Safe Production: During the Period, the Group vigorously strengthened implementation and accountability in QHSE management. It stuck to the guiding philosophy of "safety comes first and prevention of accidents under coordinated efforts is the first priority". Moreover, management actively introduced modern management concepts and methods into the Group. As a result, the Group recorded an aggregate of 119.74 million safe man-hours for the Period, with no quality or production accidents were made. Financial Data and Indicators Prepared in Accordance with IFRS Unit: RMB'000 As at Changes As at 31 December from the end 2012 Items 30 June 2013 of last year (%) Total assets 47,428,498 37,130,025 27.7 Total equity attributable to shareholders 19,907,145 7,077,985 181.3 of the Company Net assets per share attributable to shareholders of the Company (RMB) 4.50 2.28 97.4 Unit: RMB'000 Changes over the same Six-month periods ended 30 June period of the preceding year Items 2013 2012 (%) Revenue 19,645,416 16,888,392 16.3 Gross profit 3,645,816 3,077,236 18.5 Operating profit 2,821,410 2,269,798 24.3 Profit before taxation 2,930,287 2,583,889 13.4 Net profit attributable to shareholders 2,214,134 1,998,504 10.8 of the Company Basic earnings per share 0.66 0.64 3.1 (RMB) Net cash flow used in (905,213) (2,668,792) N/A operating activities Net cash flow used in operating N/A (0.27) (0.86) activities per share (RMB) Six-month periods ended 30 June Items 2013 2012 Gross profit margin(%) 18.56 18.22 Net profit margin(%) 11.27 11.83 Return on assets(%) 5.24 5.25 Return on equity(%) 11.12 35.59 Return on invested capital(%) 11.24 35.35 As of 30 June 2013 As at 31 December 2012 Items Asset-liability ratio(%) 58.02 80.93 Business Review Mr. Cai Xiyou, Chairman of SINOPEC SEG, commented, "The year 2013 marks a milestone for SINOPEC Engineering as it was listed in May on the main board of the Stock Exchange of Hong Kong. Our listing signifies that the Group has successfully tapped into the international capital markets. This is the first results announcement made since our listing. It highlights the Group's development strategies to focus on integrated business development, internationalization, differentiation, continuous innovation and low-carbon emission and its efforts to become a world-class energy and chemical engineering enterprise. During the Period, the Group achieved 16.3% and 10.8% year-on-year growth respectively in revenue and net profit and made satisfactory operating results." "We also achieved promising results in market development. While retaining leadership in traditional markets, the Group actively expanded domestic coal chemical markets and stepped up efforts in overseas market exploration. During the Period, we concluded two EPC contracting agreements abroad." Business Performance by Segment The Group's revenue increased 16.3% year-on-year to RMB19.645 billion in the first half of 2013, benefited mainly by several large Engineering, Procurement and Construction Contracting ("EPC Contracting") projects that entered their peak construction stage this year, including the Yanchang Petroleum Jingbian Energy Chemical Complex ("Jingbian Coal Chemical Complex"), Shaanxi Yulin Methanol Acetic Acid Deep Processing and Comprehensive Utilization Complex ("Yulin Coal Chemical Complex"), Wuhan 800 thousand tons per annum ("Ktpa") Ethylene Complex ("Wuhan Ethylene Complex"), Sinochem Quanzhou 12 million tons per annum ("Mtpa") Oil Refining Complex ("Sinochem Quanzhou Complex"), Refined Oil Quality Upgrading and Heavy Crude Oil Adapting Complex of Shijiazhuang Refining and Chemical Company ("Shijiazhuang Refining and Chemical Complex"). The Group's businesses mainly comprise four segments: (1) Engineering, Consulting and Technology Licensing; (2) EPC Contracting; (3) Construction and (4) Equipment Manufacturing. The Engineering, Consulting and Licensing segment is the Group's core business. It provides a variety of engineering and consulting services during a project's preparatory work phase, definition phase and implementation phase. Meanwhile, the Licensing business will benefit the development of its Engineering, Consulting and EPC Contracting operations. During the Period, revenue from Engineering, Consulting and Licensing segment amounted to approximately RMB2.264 billion, up 34.9% year-on-year. The Group provides a full range of EPC contracting services throughout the entire course of engineering and construction projects, which range from process design packages to commissioning and start-up for large and complex engineering and construction projects. Revenue from EPC Contracting segment for the Period totaled approximately RMB10.595 billion, up 27.2% year-on-year. The Group is one of the largest service providers of construction contracting and specialized construction in the oil refining and chemical industries in the PRC. Revenue from Construction segment for the Period grew 8.1% year-on-year to approximately RMB8.099 billion. The Group is also one of the major manufacturers and suppliers of large static equipment used in oil refineries and chemical plants in the PRC. Revenue from Equipment Manufacturing segment for the Period declined 5.0% year-on-year to approximately RMB366 million. Operating results by segment: Six-month period ended 30 June 2013 2012 Percentage Percentage Revenue of total Revenue of total Change revenue revenue (RMB'000) (%) (RMB'000) (%) (%) Engineering, consulting and 2,263,920 10.6 1,677,822 9.4 34.9 licensing EPC Contracting 10,594,811 49.7 8,331,527 46.6 27.2 Construction 8,098,838 38.0 7,495,236 41.9 8.1 Equipment 365,763 1.7 384,928 2.1 (5.0) manufacturing Subtotal 21,323,332 100.0 17,889,513 100.0 Total after inter-segment 19,645,416 16,888,392 16.3 elimination ^(1) (1) The total revenue means the aggregate revenue generated from each business segment after inter-segment elimination to exclude the impact of inter-segment transactions. Inter-segment elimination mainly arises from the inter-segment sales to the EPC Contracting segment made by the construction and equipment manufacturing segments. Revenue by Industries The Group derives its revenue mainly from services provided to clients in the oil refining, petrochemical and new coal chemical industries. During the Period, revenue from Oil Refining industry reached RMB5.130 billion and was flat when compared to the same period last year. This was mainly due to the fact that a number of large domestic projects were at their final stages and new projects like the Kazakhstan Atyrau Refinery Oil Deep Processing Project were at their initial stages of construction. Revenue from Petrochemicals industry soared 27.2% year-on-year to approximately RMB8.626 billion, mainly because a large proportion of revenue from contracts signed by the Company with the industry after 2011 was realized in the Period. Revenue from New Coal Chemicals industry surged 65.0% year-on-year to approximately RMB3.687 billion mainly due to the significant growth in revenue from the projects such as the Jingbian Coal Chemical Complex and the continued increase of uncompleted contracts for new coal chemicals industry. Revenue from Other Industries decreased to approximately RMB2.203 billion when compared to the same period last year. Revenue generated from different industries: Six-month period ended 30 June 2013 2012 Percentage Percentage Revenue of total Revenue of total Changes revenue revenue (RMB'000) (%) (RMB'000) (%) (%) Oil refining 5,129,647 26.1 5,449,534 32.3 (5.9) Petrochemicals 8,625,631 43.9 6,783,294 40.2 27.2 New coal chemicals 3,686,688 18.8 2,234,112 13.2 65.0 Other industries 2,203,450 11.2 2,421,452 14.3 (9.0) Subtotal 19,645,416 100.0 16,888,392 100.0 16.3 Revenue in the PRC and overseas Revenue from the PRC for the Period increased 14.0% year-on-year to approximately RMB16.190 billion, accounting for 82.4% of the Group's total revenue. Meanwhile, overseas revenues grew 28.5% year-on-year to approximately RMB3.455 billion, accounting for 17.6% of the Group's total revenue. The increase in revenue from overseas operations was primarily generated from the Kazakhstan Atyrau Refinery Aromatic Hydrocarbons Project, the Saudi Kayan NDA Project, the SABIC Polyester Project in Saudi Arabia and the Singapore Lubricant Grease Project. Over 70% of the Kazakhstan Atyrau Refinery Aromatic Hydrocarbons Project has been completed, with engineering, procurement and construction in full swing. The project entered its prime and a large proportion of progress was made during the first half of this year. The Saudi Kayan NDA Project and the SABIC Polyester Project have entered their final stages, with most of the progress made within this period. The Singapore Lubricant Grease Project was fully completed in the first half of the year, contributing to the Group's overseas revenue growth. Revenue sources by geographical locations: Six-month period ended 30 June 2013 2012 Percentage Percentage Revenue of total Revenue of total Changes revenue revenue (RMB'000) (%) (RMB'000) (%) (%) PRC 16,189,958 82.4 14,200,348 84.1 14.0 Overseas 3,455,458 17.6 2,688,044 15.9 28.5 Subtotal 19,645,416 100.0 16,888,392 100.0 16.3 Capital Expenditures The Group's capital expenditures were primarily spent on facility expansion, technical upgrading and procurement of equipment. During the Period, the Group spent about RMB209 million of its capital on the construction of production bases and procurement of large-scale construction equipment, which was considerably lower than the capital expenditure of RMB736 million in the same period of the previous year, which was mainly spent on purchasing multiple land use rights. Industry and Business Outlook The global economy recovered slowly in the first half of 2013. In contrast, the overall performance of the Chinese economy remained steady while the government took restructuring initiatives to promote the economic transformation and industrial upgrade. Domestic GDP grew 7.6% during the period. As the new government pursues the policy to improve the quality of economic growth and efficiency, optimize the government structure, push for decentralization, transform the government functions and economic structure, the Chinese economy is expected to maintain steady development. The global oil refining and chemical industries will remain a driver of global economic development for a long period of time. They will continue their growth momentum and offer long-term growth potential despite cyclical fluctuations. Meanwhile, the scale of China's oil refining and chemical engineering market will further expand in the future driven by the following major factors: o Ever increasing demand for oil products, robust demand for chemicals and the considerable room for the refining and chemicals industry to grow resulting from the urbanization process in China; o Growth opportunities for engineering enterprises due to higher environmental protection standards, the need to save energy and reduce emissions, and industrial upgrade and agglomeration to eliminate obsolete production facilities; o Increasing sophistication of technologies for the diversification of raw materials (e.g. the utilization of new coal chemicals and light hydrocarbon) in recent years under the government's support; the development and utilization of unconventional natural gas leading to lower product cost and a rosy outlook for chemicals industry; o Diversification in market players with more newcomers, who often rely heavily on project contracting service providers, thereby creating more opportunities for project contracting business; o Continuing growth of the overall investment scale of the oil refining and chemical engineering industry, which will directly stimulate the sustained growth of refining and chemical engineering industry. Going forward, the Group will implement the following measures to enhance its market leadership: 1. Increase synergies between its companies by: (1) encouraging its engineering and construction subsidiaries to carry out joint general contracting for projects in order to lower management costs; encouraging construction enterprises to contribute at pre-launch stages of projects to carry out constructability studies and create necessary conditions for subsequent construction; (2) strengthening its coordination in market development to promote orderly development and encourage healthy competition; assisting its subsidiaries in enhancing their efficiency of market development beyond existing sectors; (3) standardizing engineering and procurement, modularized construction to enhance work efficiency and lower costs; (4) establishing of HTC to further optimize resource allocation and adopting centralized management; (5) promoting lean management at Ningbo Tianyi Petrochemical, the only manufacturing enterprise under the Group, and assisting in its international expansion and future profitability. 2. Create an integrated value chain for the new coal chemical business and make it a driver of its future profit growth, leverage on its advantages in traditional engineering services to provide a full range of services to customers, including the licensing of process technology, engineering, procurement, construction and start-up services. 3. Increase investment in R&D with primary focus in the following areas: (1) the creation of a new coal chemical technological chain, (2) promotion of mutual technological advancement with SINOPEC, (3) development of patented technologies through win-win cooperation with others to enhance its production technologies, (4) leveraging on the Group's advantages in traditional petrochemical businesses to extend its reach to new resources and new energy sectors, (5) the use of Luoyang laboratory as an innovation base of the Group. The Group will steadily expand into overseas markets under the development strategy of "using the financing and technology-driven approach, smooth construction, stepping in at the pre-launch stage of a project, strengthening international cooperation, differentiation and competition at optimal low-cost". Moreover, it will reinforce corporate management by establishing modern human resources management systems and incentive mechanisms for management and building an IT management platform, driving the sustainable development of the Group. - The End - This press release is issued by PRChina Limited on behalf of SINOPEC Engineering (Group) Co., Ltd. About SINOPEC Engineering (Group) Co., Ltd. SINOPEC Engineering (Group) Co., Ltd. ("SINOPEC SEG" or "the Company") is the leading oil refining, petrochemical and new coal chemical engineering company in the PRC. The Company's main business consists of engineering, consulting and licensing, EPC Contracting, construction and equipment manufacturing. According to ICIS Consulting, the Company ranked first both in 2010 and 2011 among all PRC Exploration and Design Enterprises providing services to oil refining and chemical industries based on total revenue, and ranked among the top 10 global contractors in 2011 based on revenue generated from services provided to oil refining and chemical industries. Leveraging 60 years of industry experience and continual innovation in specialized technologies, the Company has developed the strongest execution capabilities in the PRC with respect to engineering and constructing large-scale oil refining, petrochemical and new coal chemical complexes and is highly competitive in the international engineering market. Disclaimer This press release includes "forward-looking statements". All statements, other than statements of historical facts that address activities, events or developments that the Company expects or anticipates will or may occur in the future (including but not limited to projections, targets, other estimates and business plans) are forward-looking statements. The Company's actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to the price fluctuation, possible changes in actual demand, foreign exchange rate, market shares, competition, environmental risks, possible changes to laws, finance and regulations, conditions of the global economy and financial markets, political risks, possible delay of projects, government approval of projects, cost estimates and other factors beyond the Company's control. In addition, the Company makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements. Investor and Media Enquiries: PRChina Limited Henry Chik / Camille Xiong / Ivan Kau / David Shiu Tel: (852) 2522 1838 / (852) 2522 1368 Fax: (852) 2521 9955 Email: firstname.lastname@example.org / email@example.com / firstname.lastname@example.org /email@example.com SOURCE SINOPEC Engineering (Group) Co., Ltd.