Sinopec Doubles Profits!
Sinopec Doubles Profits!
About: (SNP, CEO, PTR, )
As China’s voracious oil demand continues to soar and vehicle sales roar past the ten million mark, Sinopec (SNP) is reaping the benefits.
China Petroleum & Chemical Corp., or Sinopec, posted third-quarter net profit more than double year-earlier levels, beating out rivals Cnooc Ltd. (CEO) and PetroChina (PTR). Sinopec expects its net profit for 2009 to rise at least 50% from a year earlier!
The company, China’s largest refiner, is well positioned to cash in on Beijing’s fuel price reform launched this year, which grants refiners a guaranteed profit margin if crude stays below $80 per barrel. China’s gas price reforms promise that oil producers will not repeat last years losses because of pump price reforms.
Although the most recent reform of gas prices cut the price-per-gallon due to a temporary dip in fuel prices, we expect that pump prices will quickly be readjusted to reflect the rebound in oil prices, protecting refiners’ profits.
The company says, “Domestic demand for oil products has stopped falling and begun to rebound (and) demand for chemical products has bounced back.” One reason is the explosion in demand for automobiles which we explore in the upcoming monthly edition of the China Stock Digest. China has now become the world’s number one car market.
Sinopec reported a third- quarter net income of 16.55 billion yuan ($2.4 billion), a 25 percent drop from the preceding three months. But profit more than doubled from a year earlier. The results beat expectations by analysts surveyed by Reuters and underperformed expectations of analysts surveyed by Bloomberg.
The company says that fourth quarter results may not be as strong.
Meanwhile, Sinopec says it is expanding oil and gas exploration to help counter potentially lower earnings from refining. The company hopes to more than double its annual domestic natural gas production, a move that competitor PetroChina is also pursuing.
