China Petroleum & Chemical Corporation

For the first three quarters of 2007, Sinopec reported revenue of CNY875.218 billion, up 13.62% year over year; EBIT of CNY74.065 billion, up 38.28%; profit attributable to shareholders of CNY49.818 billion; and EPS of CNY0.575, up 43.21%. Operating cash flow was CNY98.486 billion, investing cash flow was CNY69.158 billion used, and ending cash and cash equivalents were CNY8.343 billion. As of September 30, short- and long-term debt totaled CNY109.725 billion, down CNY4.716 billion from the start of the year. For the outlook discussed on the call, management said the Xinhau Refinery project remains on schedule, with key equipment to be completed by the end of this year and 4Q 2008, and commissioning expected in 2Q next year. No specific quantitative full-year or next-quarter earnings guidance was provided.

Dai Houliang framed the quarter as one of solid execution in a difficult pricing environment, emphasizing strategic production management, synergy between production and marketing, and continued progress on major construction projects. He said Sinopec focused on conservation, emissions reduction, and secure supply while dealing with surging international crude prices. His tone was cautious but constructive, repeatedly stressing supply stability and the company’s social responsibility.

The financial update highlighted strong top-line and profit growth, with revenue up 13.62%, EBIT up 38.28%, and EPS up 43.21% for the first nine months. He also cited a healthier balance sheet, with debt down CNY4.716 billion from the start of the year and ending cash of CNY8.343 billion. CapEx was CNY59.91 billion, including CNY30.807 billion in E&P, CNY12.178 billion in refining, CNY7.207 billion in chemicals, CNY7.948 billion in marketing and distribution, and CNY1.77 billion in corporate and others.

Analysts focused on diesel shortages, refining losses, crude mix, subsidy risk, upstream pricing, and possible overseas asset purchases from the parent. Management said diesel supply in China was generally stable, with only some regional disruptions due to weather and transport issues, and explained that refining pressure came from high crude costs and controlled product prices rather than a broad supply failure. Dai also said Sinopec has no concrete plan yet for overseas asset purchases, the Xinhau Refinery project is on track, Puguang gas will mainly go to eastern China with about 1 billion cubic meters reserved for Sinopec use, and the company is still studying MTO and biodiesel projects.