August 25, 2013 / 10:58 AM / in 4 years

UPDATE 1-Margins lift Sinopec profit after China allows price rise

HONG KONG, Aug 25 (Reuters) - Asia’s largest refiner Sinopec Corp posted a 22 percent rise in second-quarter net profit, helped by better refining margins after China introduced measures to let domestic fuel prices follow the international market more closely.

Net profit at Sinopec rose to 13.58 billion yuan ($2.22 billion) in April-June from 11.09 billion yuan a year earlier, according to Reuters calculations based on first-half results released through the Shanghai stock exchange on Sunday.

That figure, compiled under international accounting standards, lagged an average forecast of 15.23 billion yuan by five analysts polled by Thomson Reuters.

China implemented a more flexible fuel pricing mechanism in March - the first major revamp in four years - allowing higher prices in a bid to tackle soaraway fuel consumption and stave off potential shortages. The country, the world’s second-largest oil user, is set to double its fuel use by 2030.

However, Chinese refiners still cannot fully pass on higher crude costs to consumers because the government still retains control of oil prices in order to curb inflation. For years, state oil companies like Sinopec Corp and PetroChina <0857.HK< have suffered losses at their refining segments because domestic fuel prices lagged the gains in costs of crude oil .

Sinopec’s refining division moved into the black in the first half of 2013, generating a profit of 213 million yuan versus a loss of 18.5 billion yuan in the year-earlier period, it said, adding that its refining throughput increased 5.17 percent to 115.44 million tonnes in the first six months.

In a similar pattern, peer PetroChina posted a 29 pct rise in its second quarter profits on Thursday after its refining losses halved to 7.77 billion yuan in the first half from 15.5 billion yuan a year ago.

The sharp improvement in Sinopec’s refining business offset a 24 percent fall in operating profits at its exploration and production segment which was due largely to lower international crude prices in the first half.

Oil and gas output rose 3.81 percent to 219.46 million barrels of oil equivalents year on year.

Losses at its chemical division shrank to 409 million yuan from 1.25 billion yuan a year earlier, helped by cost controls, while its marketing business, which included oil distribution and retailing, posted a 16.8 percent fall in operating profit.

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