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Business News for Tuesday January 6, 2009
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Sinopec: Q1 profit drops 69 percent
Monday April 28, 2008
China's second-biggest oil company, Sinopec, says its first quarter profit fell 69 percent due to government controls that bar it from passing on record crude costs to consumers. Net profit for the three months through March was 6.1 billion yuan ($871 million; 560 million euros), the company, whose full name is China Petroleum & Chemical Co., said late Sunday.
Chinese gasoline and diesel sales are soaring due to rising incomes and a boom in car ownership. But at a time when global oil giants are reporting record profits, Chinese producers are being squeezed by controls that have frozen retail prices, forcing them to absorb the rising cost of crude. The companies have been subsidizing refining losses out of bigger profits from their oil drilling units. The government says it will pay subsidies to help make up Chinese refining losses. But Sinopec said profits still were down despite a 7.4 billion yuan ($1 billion; 676 million euro) subsidy that it counted as part of its quarterly revenues. Sinopec said its sales of gasoline, diesel and other refined products jumped 10 percent to 211 million barrels. "The prices of international crude oil continued to go up. The prices of oil products in China were still under tight control," the company statement said. The report gave no details on Sinopec's refining losses. But the company said earlier its refining unit lost 13.7 billion yuan ($2 billion; 1.3 billion euros) in 2007 due to price controls. Beijing froze retail gasoline and diesel prices in September as part of efforts to contain rising inflation. It raised prices by about 10 percent in November to curb surging demand but has rejected appeals by the oil companies for more increases. Sinopec, Asia's biggest refiner by volume, has been especially hard hit because it refines more oil than it produces. China's biggest oil company, China National Petroleum Corp., produces more than it refines and has benefited from soaring crude prices. Both companies said last week the government would pay them subsidies to cover refining losses -- an indication that Beijing has no plans to ease price controls in the near future. The Finance Ministry said earlier that both companies would receive a rebate on taxes for importing refined fuel to ease shortages.
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