RNS Number:8483T
Sinopec Zhenhai Refining&Chem Co Ld
2 April 2002
SINOPEC ZHENHAI REFINING & CHEMICAL COMPANY LIMITED
(a joint-stock limited company incorporated in the People's Republic of China)
Annual Results Announcement
for the Year ended 31st December, 2001
SUMMARY
* The Company's (and its subsidiaries, together as the "Group") profit after
taxation for the year of 2001 amounted to about RMB464 million, up by 10.27
per cent from that of 2000, and the Company maintained a leading position in
the domestic refining industry.
* Despite the facility overhaul during the year, the Company's feedstock
throughput volume reached 10.73 million tonnes, which was the highest
throughput volume among all domestic refineries in 2001.
* The Company's comprehensive processing capacity reached 14 million tonnes
per annum ("tpa"), making the Company the largest refinery in the PRC.
FINANCIAL SUMMARY AND NOTES
SUMMARY OF THE FINANCIAL STATEMENTS
The following are summaries of the consolidated financial statements of the
Company and its subsidiaries as at and for the year ended 31st December, 2001,
prepared in accordance with International Financial Reporting Standards ("IFRS")
and audited by Arthur Andersen & Co, Certified Public Accountants, Hong Kong.
CONSOLIDATED BALANCE SHEET
AS OF 31ST DECEMBER, 2001
Notes 2001 2000
RMB'000 RMB'000
ASSETS
Non-current assets
Leasehold land 191,864 188,328
Property, plant and equipment 6,738,347 6,328,754
Intangible assets 28,946 33,874
Investments in associates 265,204 285,579
Other long-term investments 158,948 163,148
Other long-term receivables 100,452 99,387
Deferred tax assets 34,941 31,798
Total non-current assets 7,518,702 7,130,868
Current assets
Inventories 1,362,385 1,525,515
Trade receivables, net 4 158,162 212,814
Due from associates 2,270 14,002
Due from affiliated companies 572,500 397,169
Prepayments, deposits and other receivables, net 126,496 198,455
Cash at banks and on hand 443,195 2,117,996
Total current assets 2,665,008 4,465,951
Total assets 10,183,710 11,596,819
EQUITY AND LIABILITIES
Capital and reserves
Share capital 2,523,755 2,523,755
Reserves 5,242,428 4,927,007
Total equity 7,766,183 7,450,762
Non-current liabilities
Long-term bank loans, net of current portion 965,000 765,000
Other non-current liabilities 10,256 173,283
Convertible bonds, net of current portion 4,803 1,515,341
Total non-current liabilities 980,059 2,453,624
Current liabilities
Short-term bank loans 62,416 -
Trade payables 5 358,031 516,710
Due to affiliated companies 80,570 142,022
Due to parent company 35,000 52,605
Taxes payable 170,182 501,322
Dividends payable 45,875 830
Accruals and other payables 482,219 426,201
Current portion of long-term bank loans 202,157 52,743
Current portion of convertible bonds 1,018 -
Total current liabilities 1,437,468 1,692,433
Total equity and liabilities 10,183,710 11,596,819
CONSOLIDATED STATEMENTS OF INCOME AM) RETAINED EARNINGS
FOR THE YEAR ENDED 31ST DECEMBER, 2001
Notes 2001 2000
RMB'000 RMB'000
Turnover 19,827,660 21,689,964
Cost of sales (18,224,920) (20,104,015)
Gross profit 1,602,740 1,585,949
Other operating income 59,748 51,515
Selling expenses (278,468) (268,488)
General and administrative expenses (520,868) (483,234)
Other operating expenses (94,719) (206,585)
Profit from operations 768,433 679,157
Finance cost (120,940) (109,556)
Share of profits and losses of associates 3,106 21,219
Others, net (28,570) (15,216)
Profit before tax 6 622,029 575,604
Income tax expense 7 (158,030) (154,827)
Net profit for the year 463,999 420,777
Retained earnings, brought forward 434,586 579,678
Transfer to statutory surplus reserve 8 (54,469) (54,073)
Transfer to statutory public welfare fund 8 (54,469) (54,073)
Transfer to discretionary surplus reserve 9 (5,545) (331,535)
Dividends (151,425) (126,188)
Retained earnings, carried forward 632,677 434,586
Earnings per share 11
- Basic RMB0.18 RMB0.17
- Diluted RMB0.18 RMB0.17
The above financial statements were approved by the Board of Directors on 29th
March, 2002.
Notes:
1. The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), as published by the International
Accounting Standards Board, effective as of 31st December, 2001, the disclosure
requirements of the Hong Kong Companies Ordinance and the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited.
2. Revenue from sales of goods are recognised when delivery has taken place and
transfer of risks and rewards has been completed.
3. Change in accounting policies
Following the introduction of International Accounting Standards ("IAS") No. 39
"Financial Instruments: Recognition and Measurement", available-for-sale
investments are carried at fair value and all derivative financial instruments
have been recognised as assets or liabilities. There is no significant financial
impact caused by adopting the standard on the opening balances of this financial
statement.
4. Ageing analysis of the Group's trade receivables was as follows:
2001 2000
RMB'000 RMB'000
Ageing
- not exceeding one year 157,554 210,155
- more than one year but not exceeding two years - 1,967
- more than two years but not exceeding three years 1,632 3,351
- more than three years 4,263 2,283
163,449 217,756
Less: Provision for doubtful accounts (5,287) (4,942)
158,162 212,814
5. The Group's trade payables are all aged less than one year.
6. Profit before tax in the consolidated income statements was determined after
charging the following depreciation and amortisation:
2001 2000
RMB'000 RMB'000
Amortisation of prepaid rentals for leasehold land 4,345 4,115
Depreciation of property, plant and equipment 868,721 807,847
Amortisation of intangible assets 5,928 5,204
7. Individual companies within the Group are generally subject to Enterprise
Income Tax ("EIT") at 33 per cent on taxable income determined according to the
PRC tax laws. Pursuant to the relevant tax regulations, the Company is eligible
to certain EIT preferential treatments because of its recycling of certain
wasted materials. The amount of the reduced EIT was RMB69,697,000 (2000 -
RMB32,028,000).
In addition, prior to 2000, some of the subsidiaries of the Group registered in
Ningbo Bonded Area, Ningbo Economic & Technology Development Zone, Zhenhai
Technology Development Zone and Ningbo Daxie Development Area, which together
contributed less than 7 per cent of the consolidated profit during the year
ended 31st December, 1999, were granted partial refund of EIT, Value-Added Tax
and Business Tax as a local subsidy. However, according to Circular Guofa (2000)
2 issued in January 2000, effective 1st January, 2000, the above refund would
require approval from the State authority for which the Group has yet to obtain.
Hence, the said benefits has ceased to be available to the Group effective 1st
January, 2000. During the year ended 31st December, 2000, the Group received
such refund in relation to 1999 in the amount of RMB14,763,000, and recorded
RMB9,452,000 as reduction to EIT of the period and RMB5,311,000 as subsidy
income. The Group did not receive such refund during the year ended 31st
December, 2001.
The Group was not subject to Hong Kong profits tax as the Group did not earn any
profit that was subject to Hong Kong profits tax.
Details of taxation charged during the year are as follows:
2001 2000
RMB'000 RMB'000
Current income tax 228,315 220,764
Reduction of income tax due to preferential treatments (69,697) (32,028)
Deferred tax liability arising from overhaul expense
accrued in advance under PRC GAAP
but reversed under IFRS (6,600) (17,415)
Deferred tax expense (credit) relating to the
origination and reversal of temporary differences
- Difference between tax base and accounting base
of property, plant and equipment 3,800 8,300
- Provisions for doubtful debts, inventory net
realisable value and impairment in value of
long-term investments (343) (30,719)
Share of tax of associates 2,555 5,925
158,030 154,827
8. Statutory reserves include statutory surplus reserve ("SSR") and statutory
public welfare fund ("PWF") - both of which were appropriated from the Company's
statutory after-tax profit.
In accordance with the PRC Company Law, the Company is required to appropriate
10 per cent of its statutory after-tax profit (after offsetting any prior years'
losses) to the SSR until the balance of SSR reaches 50 per cent of the Company's
share capital and thereafter any further appropriation is optional, SSR can be
utilised to offset prior years' losses or for issuance of bonus shares. However,
such SSR shall be maintained at a minimum of 25 per cent of share capital after
such issuance.
In accordance with the provisions of the Company's articles of association, the
Company shall appropriate 5 to 10 per cent of its statutory after-tax profit to
the PWF. PWF shall be utilised for collective staff benefits such as building of
staff quarters or housing. No distribution of the fund shall be made other than
on liquidation of the Company.
Furthermore, pursuant to the Notice (1995) 31 issued by MOF on 24th August,
1995, provisions of SSR and PWF should be based on after-tax profit determined
in accordance with PRC accounting standards and regulations.
9. The appropriation of profit to discretionary surplus reserve is made in
accordance with the Company's articles of association and the recommendation of
the Board of Directors and is subject to approval by shareholders at general
meetings.
10. Retained earnings are to be carried forward for future distribution. The
distribution of retained earnings/dividends is made in accordance with the
Company's articles of association and the recommendation of the Board of
Directors and is subject to approval by shareholders in general meetings.
Pursuant to the Notice (1995) 31 issued by MOF on 24th August, 1995, the amount
of profit available for distribution to the shareholders will be determined
based on the lower of retained earnings determined in accordance with (i) PRC
accounting standards and regulations, and (ii) IFRS or Hong Kong Statement of
Standard Accounting Practice.
As of 31st December, 2001, the reserve available for distribution was
approximately RMB466,349,000 (2000 - RMB311,918,000) before taking into account
the current year's proposed final dividend.
The calculation of final dividend for the year ended 31st December, 2001 was
based on the number of shares in issue according to the register of shareholders
as of 31st December, 2001. However, actual dividend payments will be based on
the total registered shares of the Company as at 13th May, 2002.
11. The calculation of basic earnings per share was based on consolidated net
profit of approximately RMB463,999,000 (2000 - RMB420,777,000) and on the
weighted average number of 2,523,754,468 shares (2000 - 2,523,754,468 shares) in
issue during the year.
The calculation of diluted earnings per share was based on adjusted consolidated
net profit of approximately RMB464,095,000 (2000 - RMB488,277,000) on the
assumption that all unredeemed convertible bonds were converted on 1st January,
2001 and on the weighted average number of approximately 2,525,357,000 shares
(2000 - 2,952,500,000 shares) deemed to have been in issue during the year.
12. Pursuant to related rules and regulations of housing reform issued by the
State Council, the Zhejiang Provincial Government and the Ningbo Municipal
Government, allocation of living quarters as staff housing welfare is
terminated. Instead, qualified employees are to be compensated in the form of
monetary housing subsidies. In this respect, the Company is in the process of
formulation of such plan. The financial impact of which will be reflected in the
financial statements of the relevant year when such plan is formulated and
approved.
As of 31st December, 2001, no formal plan has yet been developed by the Company
nor delivered to the local government for approval. Moreover, the Company has
not announced such plan to its employees. Thus, the Company had no obligation to
make any payment or provision for such monetary housing subsidies as of 31st
December, 2001.
MOF issued Document Caiqi (2000) No. 295 on 6th September, 2000 which became
effective on the same date, announcing the accounting treatment in relation to
such housing reform. The Company's Board of Directors has evaluated the policies
referred to in the document, and believes that except for the impact of the
above mentioned monetary housing subsidies which could not be reasonably
estimated, other related policies will not have a material impact on the Group.
13. Notice of the annual general meeting to be held on 7th June, 2002 was
published separately on 2nd April, 2002.
DIVIDEND
The Board of Directors recommended a final dividend of RMB0.035 per share for
the year ended 31st December, 2001. Together with the paid interim dividend of
RMB0.025 per share, the total dividend would be RMB0.06 per share or a total
dividend distribution of RMB88.33 million for the year ended 31st December,
2001. The calculation of the final dividend for the year ended 31st December,
2001 was based on the number of shares in issue according to the register of
shareholders as of 31st December, 2001. However, actual dividend payment will be
based on the total number of registered shares in the Company as of 13th May,
2002. Subject to shareholders' approval at the annual general meeting of the
Company to be held on 7th June, 2002, the final dividend will be paid on 28th
June, 2002 to shareholders whose names appear on the register of shareholders of
the Company on 13th May, 2002.
The dividend payable to China Petroleum & Chemical Corporation ("Sinopec"), the
Company's controlling shareholder, will be paid in Renminbi, while the dividend
payable to holders of H shares will be paid in Hong Kong dollars converted at
the average of the basic exchange rates of Renminbi for Hong Kong dollars
published by the People's Bank of China in the calendar week immediately before
the declaration date of the dividends.
REGISTRATION OF SHARE TRANSFERS
Holders of the Company's H shares should note that the register of shareholders
of the Company will be closed from 7th May, 2002 to 6th June, 2002 (both days
inclusive), during which period no transfer of shares will be effected. In order
to qualify for the final dividend for the year of 2001, holders of H shares
shall lodge the transfers together with the relevant share certificates to the
Company's H shares registrar, Hong Kong Registrars Limited, at 2/F, VICWOOD
PLAZA, 199 DES VOEUX ROAD, CENTRAL, HONG KONG not later than 4:00 p.m., 6th May,
2002.
REVIEW OF 2001
* In the year of 2001, the Company rode out the rigorous and complicated market
conditions and overcame the challenges of the discrepancy between international
prices of petroleum products and crude oil that lasted for several months. The
Company's profit after taxation increased by 10.27 per cent and ranked the
highest among domestic refining and chemical enterprises despite a mild decline
in the Company's turnover.
* The Company has taken a market-driven approach to organize its production and
made timely adjustment to the throughput volume and product mix in accordance
with the change in the domestic market demand for petroleum products. The
feedstock throughput volume reached 10.73 million tonnes. Despite the facility
overhaul in 2001, the throughput volume during the year maintained at the same
level of that of the previous year, and continued to be the highest throughput
volume in the domestic industry in 2001. The Company's total sales volume in
2001 was 9.83 million tonnes, leading among domestic refineries. During the
year, the output of diesel, gasoline and jet fuel ranked the first, the third
and the third highest in the PRC respectively. In 2001, the Company produced
4.25 million tonnes of diesel, with the diesel to gasoline ratio stood at 2.55.
* The Company has made tremendous effort in optimizing its production under a
relatively low utilization rate with various economic and technical statistics
demonstrated significant improvement in the Company's operation. The light oil
yield increased by 2.7 percentage points from that of the previous year, with
wastage during processing and comprehensive energy consumption declined from
those of 2000. The Company's unit refining cash operating cost was RMB81.77
(about US$1.35 per barrel), which was lower than the average level of the
domestic refining industry and reached the average level of the refineries in
the Asia Pacific region.
* The Company continued to fully capitalize on the advantage of its proximity
to a deep sea port and its facilities to capture the opportunities derived from
changing market environment, by increasing its processing of imported feedstock
oil, particularly sour crude oil. In 2001, the Company processed 9,107,100
tonnes of imported crude oil, which accounted for 85 per cent of its total
processing volume. Among the processed imported crude oil, 5.43 million tonnes
were sour crude oil, which accounted for 50.6 per cent of the total processing
volume and represented an increase of 13.6 percentage points from that of the
previous year. The Company's average CIF price of imported feedstock oil was
US$24.87 per barrel, and basically at the same level of the average FOB price of
BRENT crude oil in the Singapore market during the year.
* In 2001, the Company's total investment in fixed assets was RMB1,070 million,
including: the completion of upgrading the Berth No. 6 and Berth No. 7, which
enhanced the handling capacity of the jetty from 20 million tpa to 25 million
tpa; the construction and commencement of the operation of three new crude oil
tanks, each with a capacity of 100,000 cubic meters, which increased the
Company's crude oil storage capacity to 1.29 million cubic meters and helped
mitigate the impact of fluctuation in international crude oil prices; the
completion of the upgrading of delayed coking unit and other units, which raised
the Company's comprehensive processing capacity to over 14 million tpa since May
2001, making the Company the largest refining enterprise in the PRC.
PROSPECTS FOR THE YEAR OF 2002
* For 2002, in light of the uncertainties during the world economic recovery,
domestic consumption of petroleum products is expected to rise as a result of
the continued growth in the national economy under the State's strategy to
continue expanding domestic demand. In addition, the refineries in the PRC will
benefit from the new petroleum product pricing mechanism, which links domestic
product oil prices to those in the Singapore, Rotterdam and New York markets.
* Following China's accession to WTO, the anticipated immense changes in
economic interaction will pose both opportunities and challenges to the oil
refining industry. On the one hand, the domestic refining industry has to
withstand the challenges brought forth by the incoming foreign products and
capital. On the other hand, Sinopec's overall market dominance continues to
expand. Sinopec is implementing a series of business strategies, including
giving priority to the development of coastal refineries with comprehensive
integrated advantages, to meet the challenges of China's accession to WTO. The
measures are expected to bring to the Company new opportunities for further
development.
* The throughput volume of the Company is forecast to increase, in the year
2002, to 11.3 million tonnes, up by 5.31 per cent from that of 2001. The Company
will strive to enhance its facility utilization through rationalization of its
operation structure, and optimizing its flexibility in operating in the domestic
and international markets, in order to further capitalize on the advantage of
its operation scale and technological strength.
* In 2002, the Company will actively pursue the following measures to achieve
cost-effectiveness. First, the Company will fine-tune its feedstock mix and the
procurement of crude oil to raise overall efficiency. Second, the Company will
intensify integration in the production flow and resources of its oil refining
and urea plant to lower operating cost. Third, the Company will explore the
potential in the engineering works of resources and energy utilities for water,
electricity, gas and compression air to further reduce energy and material
consumption. Fourth, the Company will adjust its product mix, enhance its diesel
to gasoline ratio, increase the output of high value-added products, upgrade its
products and strive to develop new markets. The Company will also expand sales
of modified asphalt to substitute for imported products.
* The Company will commence its reorganization of management structure and
business operation flow in 2002 as follows: 1) to simplify management
organization via streamlining the Company's corporate structure and reducing
management levels, and to further reduce its workforce; 2) to implement
Enterprise Resource Planning ("ERP") to enhance quality management of the
Company's core businesses and operation efficiency through application of
advanced information technology; 3) to adopt the Health, Safety and Environment
("HSE") management system and to adopt quality management measures complying
with the ISO9000 - 2000 version to enhance the overall management quality of the
Company, which is the largest oil refining base in the PRC.
* In 2002, the Company's planned fixed asset investments will be over RMB1.5
billion. The investments will focus on increasing the capacity of the refining
unit for new standard diesel and high quality gasoline, enhancing its capacity
in clean production.
The Company will also apply funds to the construction of the paraxylene ("PX")
and polypropylene ("PP") projects, which are in their planning stage. Meanwhile,
the Company will continue to fine-tune its development plan for the next few
years in an attempt to increase the throughput volume in accordance with the
increase in the processing capacity. The Company will also further lower its
total investment, intensify integration between its refining and chemical
plants, and better utilize its stock and assets to increase its return on
investment.
LOANS TO THIRD PARTY AND OVERDUE TIME DEPOSIT
The Company had not had any loan to third party or overdue time deposit as at
31st December, 2001.
LOCAL TAX POLICIES
For details, please refer to note 7 of the financial statements.
REDEMPTION OF THE CONVERTIBLE BOND
The Company issued US$200 million convertible bonds on 19th December, 1996. As
of 19th December, 2001, convertible bonds in the principal amount of
approximately US$155 million were still outstanding. According to the terms and
conditions of the convertible bonds, with the exception of bondholders holding
US$580,000 in principal amount of convertible bonds, all other bondholders
exercised the right to have the bonds redeemed on 19th December, 2001. The
Company paid a total amount of about US$190 million principal and interest to
such bondholders.
PURCHASE, SALE AND REDEMPTION OF THE COMPANY'S SHARES
During the year ended 31st December, 2001, neither the Company nor its
subsidiaries had purchased, sold or redeemed any of the Company's shares.
FIXED ASSETS DEPRECIATION METHOD
The Company took an extensive review of the expected useful lives of certain of
its plants, machinery and equipment at the beginning of 2002 and has taken into
consideration of the fixed assets depreciation method currently adopted by
domestic petrochemical industry. The Company has determined to adjust the period
of amortization for its fixed assets depreciation; in particular, the
amortization period of major manufacturing facilities has been adjusted from
between 8 and 9 years to 14 years, with effect from 1st January, 2002, in order
to fairly reflect the impact of the advance in commerce and technology on the
assets, as well as their normal deterioration in condition.
STAFF HOUSING REFORM
For details, please refer to note 12 of the financial statements.
OTHERS
There is no significant change between the current information listed in
paragraph 32 of Appendix 16 of the Rules ("the Listing Rules") Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited ("the
Exchange") and the information disclosed in the recent annual report of the
Company. In accordance with the requirement, the Company will submit the CD ROM
containing the detailed information as stipulated by paragraphs 45(1) to 45(3)
of Appendix 16 of the Listing Rules to the Exchange for posting on the
Exchange's website.
By Order of the Board
Sun Weijun
Chairman
29th March, 2002, Ningbo, the PRC
NOTICE OF THE ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the annual general meeting of Sinopec Zhenhai
Refining & Chemical Company Limited (the "Company") for 2001 will be held at the
1/F conference room of Donghai Hotel at the Company's premises at Zhenhai,
Ningbo, Zhejiang Province, the People's Republic of China on Friday, 7th June,
2002 at 10:00 am to review and approve, if appropriate, the following
resolutions:
1. To consider and approve the audited accounts of the Company and the reports
of the board of directors and auditors for the year ended 31st December,
2001;
2. To consider and approve the report of the supervisory committee for 2001;
3. To consider and approve the proposed profit distribution for the year ended
31st December, 2001;
4. To determine the remuneration of the members of the board and the
supervisory committee for the year of 2002;
5. To appoint KMPG, Certified Public Accountants, as the auditors of the
Company for 2002 and to authorize the board of directors to determine their
remuneration.
By Order of the Board
Su Dewen
Company Secretary
29th March, 2002, Ningbo, the PRC
Notes:
1. Each shareholder entitled to attend and vote at the meeting mentioned above
is entitled to appoint one or more proxies to attend and vote at the meeting on
his/her behalf. A proxy need not be a member of the Company. Shareholders or
their proxies are entitled to one vote for each share held.
2. To be valid, the proxy form of a holder of H share of the Company together
with the signed power of attorney or authority (if any) or notarially certified
power of attorney or authority must be delivered to the Company's H share
registrar, Hong Kong Registrars Limited at 2nd Floor, Vicwood Plaza, 199 Des
Voeux Road, Central, Hong Kong, not less than 24 hours before the time for
holding the meeting.
3. Shareholders or their proxies shall produce their identity documents when
attending the meeting.
4. The register of members of the Company will be closed from Tuesday, 7th May,
2002 to Thursday, 6th June, 2002 (both days inclusive), during which period no
transfer of shares will be effected. The record date for the final dividend for
the year of 2001 is Monday, 13th May, 2002. Shareholders whose names appear on
the register of members on 13th May, 2002 are entitled to the said dividend. In
order to qualify for the final dividend mentioned above, holders of H shares
shall lodge the transfers to the Company's H shares registrar, Hong Kong
Registrars Limited, (together with the relevant share certificates) not later
than 4:00 p.m., 6th May, 2002.
5. Shareholders whose names appear in the register of members on Monday, 13th
May, 2002 are entitled to attend and vote at the meeting.
6. The Annual General Meeting is not expected to take more than one day. The
attending shareholders and proxies shall be responsible for their own traveling
and accommodation expenses.
7. Holders of H share who intend to attend the meeting shall complete and lodge
the reply slip and return the same to the Company or its Hong Kong share
registrar on or before 18th May, 2002. The reply slip may be delivered by hand,
by post, or by fax at (86-574) 86456155/86444663.
"Please also refer to the published version of this announcement in the SCMP"
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