HONG KONG, April 27 Sinopec Corp,
Asia's largest refiner, expects earnings to improve in the
second quarter after posting a first-quarter profit that missed
estimates because of massive losses from processing crude oil,
people briefed by the company said.
"They (Sinopec management) are hinting the worst might be
over for them. The second quarter at least is not going to be as
bad as the first," said one person who attended the company's
earnings conference call on Friday with analysts and investors.
Officials at Hong Kong-listed Sinopec said they are
optimistic about the second quarter after the Chinese government
raised oil product prices in February and March and demand for
chemicals started to recover, according to another person at the
They requested anonymity as they needed to brief their
clients on Sinopec's results first. The conference call was
off-limits to the media.
Sinopec did not issue any earnings
guidance at the call, spokesman Huang Wensheng said.
Company officials said the latest hike in Chinese fuel
prices has eased the pressure on refining margins, according to
Shares of Sinopec gained 0.73 percent at midday, roughly in
line with the broader stock market.
Sinopec reported a 35 percent drop in first-quarter profit,
dragged down by losses from selling diesel and gasoline at
Net income reached 13.41 billion yuan ($2.13 billion) in the
first three months compared with 20.6 billion a year earlier,
the company said on Thursday after markets closed. That missed
the average forecast of 16.69 billion yuan by seven analysts
polled by Reuters.
Chinese refiners cannot fully pass on higher crude costs
to consumers because the government controls oil product
prices to curb inflation. Fuel price hikes in China are often
smaller, and implemented later, than required under a
government-set formula that tracks changes in global crude
Sinopec's refining division had a loss of 9.2 billion yuan
in the first quarter, after reporting a loss of 37.6 billion
yuan in 2011.
Operating profit at Sinopec's chemicals segment dived 86
percent to 1.31 billion yuan in the first quarter, with the
company citing more expensive raw materials such as naphtha and
sluggish global prices of chemical products.
"Petrochemical prices have already stabilized, and (crude)
oil prices appear to have softened in the second quarter, and
naphtha costs are under control. They pretty much hinted that
the second quarter will be better," said one of the sources,
quoting Sinopec officials as saying.