SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
For the month of October, 2006
CHINA PETROLEUM & CHEMICAL CORPORATION
A6, Huixindong Street,
Chaoyang District Beijing, 100029
People's Republic of China
Tel: (8610) 6499-0060
(Indicate by check mark whether the registrant files or will file
annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F X Form 40-F
--------- ---------
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the information
to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934. )
Yes No X
--------- ---------
(If "Yes" is marked, indicate below the file number assigned to
registrant in connection with Rule 12g3-2(b): 82-__________. )
N/A
This Form 6-K consists of:
The announcement of the third quarterly results for 2006 of China Petroleum &
Chemical Corporation (the "Registrant"), made by the Registrant in English on
October 27, 2006.
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
China Petroleum & Chemical Corporation
By: /s/ Chen Ge
------------
Name: Chen Ge
Title: Secretary to the Board of Directors
Date: October 31, 2006
[GRAPHIC OMITTED]
(a joint stock limited company incorporated in the People's Republic of China
with limited liability)
(Stock code: 386)
Third Quarterly Results for 2006
-------------------------------------------------------------------------------
Highlights of the results of the Company for the third quarter ended
30 September 2006
During the third quarter of 2006, income from principal operations and net
profit of China Petroleum & Chemical Corporation and its subsidiaries (the
"Company") under the PRC Accounting Rules and Regulations amounted to
RMB273,231 million and RMB13,135 million respectively. Turnover & other
operating revenues and profit attributable to equity holders of the parent
under International Financial Reporting Standards ("IFRS") amounted to RMB
280,782 million and RMB 13,011 million respectively.
This quarterly report announcement is prepared in accordance with the
Regulations on Disclosure of Information in Quarterly Reports for Listed
Companies issued by the China Securities Regulatory Commission ("CSRC"). This
announcement is published simultaneously in Shanghai and Hong Kong and the
contents of the announcements published in Shanghai and Hong Kong are the same.
Financial information set out in this quarterly results announcement has been
prepared in accordance with the PRC Accounting Rules and Regulations. Although
it is not required by CSRC, Sinopec Corp. has also included in this
announcement the relevant financial information prepared in accordance with
IFRS.
This announcement is made pursuant to the disclosure requirement under Rule
13.09(2) of the Listing Rules for its publication in Hong Kong.
-------------------------------------------------------------------------------
1. Important Notice
1.1 The Board of Directors of China Petroleum & Chemical Corporation
("Sinopec Corp.") and its directors warrant that there are no material
omissions from, or misrepresentations or misleading statements contained
in this announcement, and severally and jointly accept full
responsibility for the authenticity, accuracy and completeness of the
information contained in this report.
1.2 This quarterly results announcement has been reviewed and approved at the
fifth meeting of the third session of the Board of Directors of Sinopec
Corp.
1.3 The financial statements contained in this announcement are not audited.
-1-
1.4 Mr. Chen Tonghai, Chairman of the Board of Sinopec Corp., Mr. Wang
Tianpu, President of Sinopec Corp., Mr. Dai Houliang, Director, Senior
Vice President and Chief Financial Officer of Sinopec Corp., and Mr. Liu
Yun, Deputy Chief Financial Officer of Sinopec Corp. and Head of the
Accounting Department of Sinopec Corp., hereby warrant the authenticity
and completeness of the financial statements contained in this quarterly
results announcement.
2. Basic Information 2.1 Basic information of Sinopec Corp.
Stock name SINOPEC CORP. SINOPEC CORP. SINOPEC CORP. SINOPEC CORP.
Stock code 386 SNP SNP 600028
Place of listing Hong Kong New York Stock London Stock Shanghai Stock
Stock Exchange Exchange Exchange Exchange
Authorized Representatives Secretary to the Representative on
Board of Directors Securities Matters
Name Mr. Wang Mr. Chen Ge Mr. Chen Ge Mr. Huang
Tianpu Wensheng
Address 6A Huixindong Street, Chaoyang District, Beijing, PRC
Post Code 100029
Tel +86 (10) 64990060
Fax +86 (10) 64990022
E-mail ir @sinopec.com.cn
2.2 Financial Information
2.2.1 Principal accounting data and financial indicators
2.2.1.1 Principal accounting data and financial indicators prepared in
accordance with the PRC Accounting Rules and Regulations
Changes
compared
At 30 At 31 with the
September December preceding
2006 2005 year-end
(%)
Total assets (RMB millions) 582,597 520,572 11.91
Shareholders' funds (excluding minority 237,468 215,623 10.13
interests)(RMB millions)
Net assets per share (RMB) 2.739 2.487 10.13
Adjusted net assets per share (RMB) 2.674 2.426 10.22
-2-
Three-month period ended Nine-month period ended
30 September 30 September
(July to September) (January to September)
Changes compared Changes compared
with the same with the same
period of the period of the
2006 2005 preceding year 2005 2004 preceding year
(%) (%)
Net cash flow from
operating activities 24,953 22,201 12.40 50,119 47,245 6.08
(RMB millions)
Earnings per share 0.151 0.097 55.78 0.390 0.305 27.72
(RMB)
Return on net assets (%) 5.53 4.16 1.37 percentage 14.24 13.07 1.17 percentage
point point
Return on net assets
before non-operating
profits/losses 5.61 4.65 0.96 percentage 14.36 13.67 0.69 percentage
(Fully diluted) (%) point point
(Weighted average) (%) 5.67 4.66 1.01 percentage 14.99 14.03 0.96 percentage
point point
Nine-month
period ended
30 September
Non operating profits/losses 2006
(RMB millions)
Gain on disposal of long-term equity investments (24)
Written back of provisions on assets provided in previous years (346)
Non-operating expenses (excluding normal provisions on assets provided
in accordance with the Accounting Regulation for Business Enterprises) 981
Of which: Loss on disposal of fixed assets 50
Donations 75
Employee reduction expenses 72
Non-operating income (191)
Tax effect (139)
Total 281
-3-
2.2.1.2 Principal accounting data and financial indicators prepared in
accordance with IFRS
Changes compared
with the
At 30 September At 31 December preceding
2006 2005 year-end
(%)
Total assets (RMB millions) 601,255 537,321 11.90
Total equity attributable to equity shareholders of the 246,702 223,556 10.35
Company (RMB millions)
Net assets per share (RMB) 2.845 2.578 10.35
Adjusted net assets per share (RMB) 2.782 2.518 10.48
Three-month period ended Nine-month period ended
30 September 30 September
(July to September) (January to September)
Changes Changes
compared compared
with the same with the same
period of the period of the
2006 2005 preceding year 2006 2005 preceding year
(%) (%)
Net cash flow from operating
activities (RMB millions) 22,742 19,677 15.58 44,220 40,759 8.49
Earnings per share (RMB) 0.150 0.099 51.36 0.397 0.326 21.83
Return on net assets (%) 5.27 4.08 1.19 13.95 13.40 0.55 percentage
percentage point point
2.2.2 Income statements
This section includes the income statements for the third quarter
ended 30 September 2006 prepared in accordance with both the PRC
Accounting Rules and Regulations and IFRS with comparative figures
for the corresponding period in 2005.
2.2.2.1 Income statements prepared in accordance with the PRC Accounting
Rules and Regulations
-4-
(1) Income statements for the three-month period ended 30 September
(July to September)
Three-month period ended Three-month period ended
30 September 2006 30 September 2005
Item (July to September) (July to September)
The Group The Company The Group The Company
(Note 1) (Note 1) (Note 1) (Note 1)
RMB millions RMB millions RMB millions RMB millions
1. Income from principal operations 273,231 199,805 217,742 155,331
Less:Cost of sales 230,221 167,481 186,433 144,342
Sales taxes and surcharges 8,815 7,412 4,505 2,916
2. Profit from principal operations 34,195 24,912 26,804 8,073
Add: Profit/(loss) from other operations 35 6 159 77
Less: Selling expenses 6,059 3,956 5,368 3,461
Administrative expenses 6,330 5,163 6,341 4,508
Financial expenses 1,705 1,410 1,064 801
Exploration expenses, including dry 1,803 1,807 1,229 923
holes
3. Operating profit/(loss) 18,333 12,582 12,961 (1,543)
Add: Investment (loss)/income (157) 6,102 218 14,029
Non-operating income 59 29 117 40
Less: Non-operating expenses 341 242 796 302
4. Profit before taxation 17,894 18,471 12,500 12,224
Less: Taxation 5,375 5,343 3,759 3,798
Minority interests 93 - 262 -
Add: Unrecognised investment losses (Note 2) 709 - (47) -
5. Net profit 13,135 13,128 8,432 8,426
Note: 1. The "Company" means China Petroleum & Chemical Corporation.
The "Group" means China Petroleum & Chemical Corporation and its subsidiaries on a consolidated basis.
2. This item represents the written back of unrecognised investment losses exceeding the investment
costs of long-term investments.
-5-
(2) Income statements for the nine-month period ended 30 September
(January to September)
Nine-month period ended Nine-month period ended
30 September 2006 30 September 2005
Item (January to September) (January to September)
The Group The Company The Group The Company
(Note 1) (Note 1) (Note 1) (Note 1)
RMB millions RMB millions RMB millions RMB millions
1. Income from principal operations 755,219 530,826 576,990 396,671
Less: Cost of sales 639,519 442,164 479,614 357,068
Sales taxes and surcharges 21,733 18,038 12,709 8,302
2. Profit from principal
operations 93,967 70,624 84,667 31,301
Add: Profit/(loss) from other
operations 525 173 606 252
Less: Selling expenses 16,770 10,513 15,727 10,070
Administrative expenses 18,101 14,693 16,941 10,649
Financial expenses 5,227 3,952 3,916 2,653
Exploration expenses,
including dry holes 4,888 4,870 4,584 3,601
3. Operating profit 49,506 36,769 44,105 4,580
Add: Investment income / (loss) 27 12,947 (524) 34,963
Non-operating income 191 83 250 139
Less: Non-operating expenses 1,015 710 1,905 734
4. Profit before taxation 48,709 49,089 41,926 38,948
Less: Taxation 15,339 15,295 12,927 12,492
Minority interests 254 - 2,363 -
Add: Unrecognised investment losses (Note
2) 698 - (160) -
5. Net profit 33,814 33,794 26,476 26,456
Note: 1. The "Company" means China Petroleum & Chemical Corporation.
The "Group" means China Petroleum & Chemical Corporation and its subsidiaries on a consolidated basis.
2. This item represents the written back of unrecognised investment losses exceeding the investment
costs of long-term investments.
-6-
2.2.2.2 Consolidated income statements prepared in accordance with IFRS
Item Three-month period ended 30 Nine-month period ended 30
September September
(July to September) (January to September)
RMB millions RMB millions RMB millions RMB millions
2006 2005 2006 2005
1. Turnover and other operating revenues 280,782 224,134 773,910 592,588
Including:Turnover 273,231 217,742 755,219 576,990
Other operating revenues 7,551 6,392 18,691 15,598
2. Operating expenses (260,852) (210,640) (719,742) (545,412)
Including:Expenses on purchase
of crude oil,
products and (228,488) (183,618) (628,703) (466,654)
operating supplies
Selling, general and
administrative (8,801) (8,745) (25,230) (24,255)
expenses
Depreciation, depletion (8,236) (7,686) (24,740) (22,841)
and amortisation
Exploration expenses, (1,803) (1,229) (4,888) (4,584)
including dry holes
Personnel expenses (4,427) (4,178) (13,624) (12,714)
Employee reduction (24) (6) (72) (106)
expenses
Taxes other than income (8,815) (4,505) (21,733) (12,709)
tax
Other operating (258) (673) (752) (1,549)
expenses, net
3. Operating profit 19,930 13,494 54,168 47,176
4. Net finance costs (1,523) (867) (4,665) (3,433)
Including: Interest expense (1,981) (1,523) (5,523) (4,368)
Interest income 112 107 362 275
Foreign exchange losses (17) (138) (69) (178)
Foreign exchange gains 363 687 565 838
5. Investment income 87 14 218 76
6. Share of profits less losses from 116 209 563 745
associates
-7-
7. Profit before taxation 18,610 12,850 50,284 44,564
8. Taxation (5,507) (3,984) (15,617) (13,929)
9. Profit for the period 13,103 8,866 34,667 30,635
Attributable to:
10. Equity holders of the parent 13,011 8,596 34,417 28,249
11. Minority interests 92 270 250 2,386
12. Profit for the period 13,103 8,866 34,667 30,635
2.2.3 Differences between the net profit for the first three quarters of
2006 and shareholders' funds under the PRC Accounting Rules and
Regulations and IFRS
2.2.3.1 Effects of major differences between the net profit under the PRC
Accounting Rules and Regulations and the profit for the period
under IFRS are analysed as follows:
Nine-month period ended
30 September
2006 2005
RMB millions RMB millions
Net profit under the PRC Accounting Rules and Regulations 33,814 26,476
Adjustments:
Equity investment differences 754 1,175
Depreciation of oil and gas properties 560 648
Capitalisation of general borrowing costs, net of depreciation effect 425 377
Acquisition of Sinopec Corp. National Star 87 87
Reduced amortization on revaluation of land use rights 20 14
Reduced depreciation on government grants 9 2
Pre-operating expenditures (24) 441
Disposal of oil and gas properties, net of depreciation effect (252) (299)
Unrecognised losses of subsidiaries (698) 160
Effects of the above adjustments on taxation (278) (832)
Minority interests 250 2,386
Profit for the period under IFRS 34,667 30,635
-8-
2.2.3.2 Effects of major differences between the shareholders' funds under
the PRC Accounting Rules and Regulations and the total equity under
IFRS are analyzed as follows:
At 30 At 31
September December
2006 2005
RMB millions RMB millions
Shareholders' funds under the PRC Accounting Rules and
Regulations 237,468 215,623
Adjustments:
Equity investment differences 954 200
Depreciation of oil and gas properties 12,793 12,233
Capitalisation of general borrowing costs 2,537 2,112
Acquisition of Sinopec Corp. National Star (2,491) (2,578)
Revaluation of land use rights (933) (953)
Government grants (579) (588)
Pre-operating expenditures (46) (22)
Disposal of oil and gas properties 2,808 3,060
Effects of the above adjustments on taxation (5,809) (5,531)
Minority interests 19,549 29,440
Total equity under IFRS 266,251 252,996
2.3 List of the top 10 shareholders of tradable shares as at the end of this
reporting period:
-------------------------------------------------------------------------------------------------------------------
As at the end of this reporting period, the total number of shareholders is 187,837, inclusive of 179,450 holders
of domestic A-share, and 8,387 holders of H-share listed overseas.
-------------------------------------------------------------------------------------------------------------------
Shareholding Position of the top 10 shareholders with no restriction on selling the shares held
------------------------------------------------------------- ----------------------------------------- -----------
Shareholder's name (full name) Quantity of tradable shares in Nature
possession as at the end of this of
reporting period (10,000 shares) Shareholders
------------------------------------------------------------- ----------------------------------------- -----------
HKSCC (Nominees) Limited 16,680,439,319 H
------------------------------------------------------------- ----------------------------------------- -----------
China Life Corp.,-Participating-Individual 83,938,631 A
Participating-005L-FH002 Shanghai
------------------------------------------------------------- ----------------------------------------- -----------
Industrial and Commercial Bank-EFUND Value Selection 83,687,414 A
Securities Investment Fund
------------------------------------------------------------- ----------------------------------------- -----------
China Banki-DJia Shi Theme Selection Mixed Securities 77,228,636 A
Fund
------------------------------------------------------------- ----------------------------------------- -----------
Industrial and Commercial Bank-Guangfa
Strategic Selected Mixed Securities 72,733,792 A
Fund
------------------------------------------------------------- ----------------------------------------- -----------
China Life(Group)-Conventional-Ordinary Insurance 64,000,000 A
Product
------------------------------------------------------------- ----------------------------------------- -----------
China Banki-DYin Hua Quality Growth Equity Securities 63,615,929 A
Investment Fund
------------------------------------------------------------- ----------------------------------------- -----------
Bank of Communicationi-DAnshun Security
Investment Fund 58,394,961 A
------------------------------------------------------------- ----------------------------------------- -----------
-9-
International Finance-Standard Chartered-CITIGROUP GLOBAL 56,217,823 A
MARKETS LIMITED
------------------------------------------------------------- ----------------------------------------- -----------
China Construction Banki-DBank of Communication Schroder
Sound mixed configuration Securities Investment 49,016,462 A
Fund
------------------------------------------------------------- ----------------------------------------- -----------
2.4 Business Review
2.4.1 Production and Operations
In the first three quarters of 2006, China's economy continued to
grow at a relatively rapid pace, with a GDP growth rate of 10.7%,
whilst the domestic demands for petroleum and petrochemical products
both mantained rational growth rates. Crude Oil prices in the world
market dropped remarkably, after reaching a new record high. The
Company has brought into play our advantages of integrated
operations, endeavored to expand resources and the market, improved
production and operational performances, reinforced competitive
forces in the market, and maintained growth momentum in production
of crude oil and natural gas, processing volume of crude oil, sales
volume of oil products, as well as outputs of ethylene and synthetic
resins.
Exploration & Production: The Company has carefully implemented its
resources strategy, with a combined focus on both crude oil and
natural gas, accelerated efforts in building up production
capacities, and realized stable oil and natural gas production with
various growth rates. To be concrete, production of crude oil and
natural gas grew by 2.84% and 18.08% on a year-on-year basis,
respectively. Moreover, the Company has proactively proceeded with
the development activities in Puguang Gas Field.
Refining: The Company has closely tracked the international crude
oil market, in adherence to its multi-sourcing tactics for crude oil
resources, and brought down costs in crude oil purchasing; besides,
the Company adjusted the product mix, striving to meet market
demand, as well. As a consequence, the processing volume of crude
oil and output of oil products have grown by 4.45% and 2.93%
respectively on a year-on-year basis; while the yield of light oil
and commercialization ratio have both risen up.
Marketing and distribution: The Company has actively deployed
resources, managed to increase the sales volume of oil products
steadfastly, and further improved its marketing structure. At the
same time, the Company has brought into full play the role of its
modern logistics system, and done a good job in organizing the
dispatching and transportation of oil products. In the first three
quarters of 2006, the domestic sales volume and retail volume of oil
products have grown by 7.17% and 17.52% respectively on a
year-on-year basis.
Chemicals: The Company has continually enabled chemical facilities
to conduct production work on a safe, stable and full-load basis,
increased the outputs of major products, optimized product mix, and
proceeded steadfastly on concentrated sales of products. In the
first three quarters of 2006, production of ethylene and synthetic
resins have grown by 17.80% and 13.38% respectively on a
year-on-year basis.
-10-
----------------------------------------------------------------------------------------------------------------------
Nine-month period ended 30 Changes compared with the
Unit September same period of the preceding
(January ~ September) year (%)
----------------------------------------------------------------------------------------------------------------------
2006 2005
----------------------------------------------------------------------------------------------------------------------
Exploration and Production
----------------------------------------------------------------------------------------------------------------------
Crude oil production '0000 tonnes 3,002 2,919 2.84
----------------------------------------------------------------------------------------------------------------------
Natural gas production Billion cubic meters 5.348 4.529 18.08
----------------------------------------------------------------------------------------------------------------------
Crude oil realized price RMB/ton 3,388.03 2,525.89 34.13
----------------------------------------------------------------------------------------------------------------------
Natural gas realized price RMB/'000 cubic meter 750.70 657.92 14.10
----------------------------------------------------------------------------------------------------------------------
Refining
----------------------------------------------------------------------------------------------------------------------
Refining throughput Million tonnes 108.70 104.07 4.45
----------------------------------------------------------------------------------------------------------------------
Production of gasoline, diesel oil Million tonnes 64.74 62.90 2.93
and kerosene
----------------------------------------------------------------------------------------------------------------------
Of which: Gasoline Million tonnes 16.97 17.23 (1.51)
----------------------------------------------------------------------------------------------------------------------
Diesel Million tonnes 43.01 40.49 6.22
----------------------------------------------------------------------------------------------------------------------
Kerosene Million tonnes 4.75 5.18 (8.30)
----------------------------------------------------------------------------------------------------------------------
Light Chemical feedstock Million tonnes 17.16 15.50 19.06%
----------------------------------------------------------------------------------------------------------------------
Light products yield % 74.64 74.20 0.44 percentage point
----------------------------------------------------------------------------------------------------------------------
Refining yield % 93.63 93.23 0.40 percentage point
-----------------------------------------------------------------------------------------------------------------------
Marketing and Distribution
-----------------------------------------------------------------------------------------------------------------------
Total domestic sales of refined oil Million tonnes 83.06 77.50 7.17
products
-----------------------------------------------------------------------------------------------------------------------
Of which: Retail Million tonnes 54.27 46.18 17.52
-----------------------------------------------------------------------------------------------------------------------
Distribution Million tonnes 14.49 15.42 (6.03)
-----------------------------------------------------------------------------------------------------------------------
Wholesale Million tonnes 14.30 15.89 (10.01)
-----------------------------------------------------------------------------------------------------------------------
Total number of petrol stations Station 28,546 30,583 (6.66)
-----------------------------------------------------------------------------------------------------------------------
Of which: Self-operated Station 27,746 27,048 2.58
-----------------------------------------------------------------------------------------------------------------------
Franchised Station 800 3,535 (77.37)
-----------------------------------------------------------------------------------------------------------------------
Annual Throughput per station (Note tonne/station 2,608 2,277 14.54
1)
-----------------------------------------------------------------------------------------------------------------------
Chemicals (Note 2)
-----------------------------------------------------------------------------------------------------------------------
Ethylene '000 tonne 4534 3849 17.80
-----------------------------------------------------------------------------------------------------------------------
Synthetic resins '000 tonne 6289 5547 13.38
-----------------------------------------------------------------------------------------------------------------------
Synthetic rubber '000 tonne 490 468 4.70
-----------------------------------------------------------------------------------------------------------------------
Synthetic fiber monomers and polymers'000 tonne 5401 4929 9.58
-----------------------------------------------------------------------------------------------------------------------
Synthetic fibers '000 tonne 1137 1161 (2.07)
-----------------------------------------------------------------------------------------------------------------------
Urea '000 tonne 1321 1450 (8.90)
-----------------------------------------------------------------------------------------------------------------------
Notes: 1. Throughput per petrol station data was an annualized average.
2. Operational data of 2005, 2006 includes the 100% production of
YPC-BASF and Shanghai Secco.
Capital expenditure:
In the first three quarters of 2006, the Company's capital
expenditure totaled RMB 44.639 billion, of which RMB 18.081 billion
was spent in the Exploration & Development Segment, which has
achieved an array of significant positive results in terms of oil
and natural gas exploration, by means of intensive and
carpet-to-carpet prospecting and targeting at key areas in newly
found reserve zones; and increased crude oil production capacity by
4.13 million tons per year, as well as increased natural gas
production capacity by 1.287 billion cubic meters per year; RMB
7.098 billion was spent in the Refining Segment, which has built up
and put into production the "Yizheng~Changling Crude Oil Pipeline"
project, and proceeded smoothly on those oil refining projects
located in Guangzhou, Yanshan
-11-
and Qingdao respectively, and commenced the construction work for
the Crude Oil Wharf at Weizhou Island of Beihai City; RMB 9.328
billion was spent in the Chemical Segment, which has already
finished upgrading PX project in Yangtze Petrochemical Company, and
put it into operations, second round of ethylene expansion in
Maoming excluding the LDPE project has been completed and put into
service. The projects, such as "Upgrading PTA Project in Yangtze
Petrochemical Co., Ltd." "Integrated Project in Fujian", "
Integrated Refining & Chemical Project in Tianjin" and "Coal to
Liquid" projects are progressing as planned; and RMB 8.510 billion
was spent in the Marketing & Distribution Segment, which has made
preliminary accomplishments in building up and acquiring petrol
stations in strategic areas such as along the highway, and increased
the total number of petrol stations by 542, as well as further
consummating the marketing network; the rest RMB 1.622 billion was
spent in the Corporate and Others Segment.
3 Management's Discussion and Analysis
3.1 Brief analysis of the Company's general operating activities during
this reporting period
In the third quarter of 2006, according to the PRC Accounting Rules
and Regulations, the Company's income from principal operations was
RMB 273.2 billion, representing an increase of 25.48% over the same
period of the preceding year. Its net profit was RMB 13.1 billion,
representing an increase of 55.78% over the same period of the
preceding year. According to the IFRS, the Company's business
turnover and other operating revenues were RMB 280.8 billion,
representing an increase of 25.27% over the same period of the
preceding year. The profit attributable to shareholders was RMB 13.0
billion, representing an increase of 51.36% over the same period of
the preceding year.
3.1.1 The principal segments or products contributing over 10% to the
Company's income or profit from its principal operations
The following table sets out the segment-based information compiled
in accordance with the PRC Accounting Rules and Regulations:
---------------------------------- ------------------ ----------------- ----------------- ------------------
Segment Income Cost of Profit from Gross profit
from principal principal margin
principal operations operations (Note)
operations (%)
(RMB millions) (RMB millions) (RMB millions)
---------------------------------- ------------------ ----------------- ----------------- ------------------
Exploration and production 35,917 10,668 20,902 58.20
---------------------------------- ------------------ ----------------- ----------------- ------------------
Refining 151,042 158,580 (11,120) (7.36)
---------------------------------- ------------------ ----------------- ----------------- ------------------
Marketing and distribution 158,675 142,069 16,325 10.29
---------------------------------- ------------------ ----------------- ----------------- ------------------
Chemicals 56,658 49,263 6,791 11.99
---------------------------------- ------------------ ----------------- ----------------- ------------------
Others 71,987 70,690 1,297 1.80
---------------------------------- ------------------ ----------------- ----------------- ------------------
Elimination of inter-segment (201,048) (201,048) N/A N/A
sales
---------------------------------- ------------------ ----------------- ----------------- ------------------
Total 273,231 230,222 34,195 12.52
---------------------------------- ------------------ ----------------- ----------------- ------------------
Of which: 19,659 14,403 1,943 9.88
Connected transactions
---------------------------------- ------------------ ----------------- ----------------- ------------------
Note: Gross profit margin = profit from principal operations / income from principal operations
-12-
The following table sets out the segment-based information compiled
in accordance with the IFRS:
-------------------------------- ------------------ --------------- ----------------- ---------------------
Segment Operating Operating Operating Percentage of
operating
revenues expenses profit/(loss) profit/(loss) over
(RMB millions) (RMB millions) (RMB millions) operating revenues (%)
-------------------------------- ------------------ --------------- ----------------- ---------------------
Exploration and production 39,303 20,325 17,585 44.74
-------------------------------- ------------------ --------------- ----------------- ---------------------
Refining 152,605 165,906 (12,583) (8.25)
-------------------------------- ------------------ --------------- ----------------- ---------------------
Marketing and distribution 158,840 149,025 9,815 6.18
-------------------------------- ------------------ --------------- ----------------- ---------------------
Chemicals 58,931 54,069 4,862 8.25
-------------------------------- ------------------ --------------- ----------------- ---------------------
Others 72,151 71,900 251 0.35
-------------------------------- ------------------ --------------- ----------------- ---------------------
Elimination of inter-segment (201,048) (201,048) N/A N/A
sales
-------------------------------- ------------------ --------------- ----------------- ---------------------
Total 280,782 260,177 19,930 7.10
-------------------------------- ------------------ --------------- ----------------- ---------------------
3.1.2 Seasonal or periodic characteristics of the Company's operations
[ ] Applicable [X] Not applicable
3.1.3 The composition of the profits during this reporting period (under
the PRC Accounting Rules and Regulations, significant changes in the
profit from principal operations, profit from other operations,
period expenses, investment income, subsidy income and net
non-operating income/expenses as a percentage of profit before
taxation compared with the preceding reporting period (from January
to June) are listed and explained below)
----------------------- ------------------------------- ------------------------------ ---------------
Item Three-month period as Six-month period as
at at Changes
30 September 2006 30 June 2006 as a
(July to September) (January to June) percentage
----------------------- --------------- --------------- ------------- ---------------- of profit
As a As a before
Percentage Percentage taxation
Amount of profit Amount of profit (Percentage
before before point)
(RMB millions) taxation (%) (RMB millions) taxation (%)
----------------------- --------------- --------------- ------------- ---------------- ---------------
Profit from principal 34,195 191.10 59,772 193.97 (2.87)
operations
----------------------- --------------- --------------- ------------- ---------------- ---------------
Profit from other 35 0.20 490 1.59 (1.39)
operations
----------------------- --------------- --------------- ------------- ---------------- ---------------
Period expenses (15,897) (88.84) (29,089) (94.40) (5.56)
----------------------- --------------- --------------- ------------- ---------------- ---------------
Investment (157) (0.88) 184 0.60 (1.48)
(loss)/income
----------------------- --------------- --------------- ------------- ---------------- ---------------
Net non-operating (282) (1.58) (542) (1.76) (0.18)
income/expenses
----------------------- --------------- --------------- ------------- ---------------- ---------------
Profit before taxation 17,894 100.00 30,815 100.00 -
----------------------- --------------- --------------- ------------- ---------------- ---------------
-13-
3.1.4 Significant changes in, and explanations of, the principal
operations and their structures as compared with those during the
preceding reporting period (January to June)
[ ] Applicable [X] Not applicable
3.1.5 Significant changes in, and explanations of, the profitability
(gross profit margin) of principal operations as compared with those
during the preceding reporting period (January to June)
[ ] Applicable [X] Not applicable
3.2 Significant events and their impacts as well as the analysis and
explanations for the solutions
3.2.1 Connected transactions
In the first three quarters ended at 30 September 2006, the
connected transactions actually conducted by the Company amounted to
RMB 148.629 billion, of which RMB 70.911 billion related to
purchases, whilst RMB 77.718 billion related to sales (including the
sales of products and service that amounted to RMB 77.644 billion,
income from interests that amounted to RMB 34 million, and income
from agency fees that amounted to RMB 40 million). The value of
those products & services (with regard to purchasing, storage &
transportation, exploration & production, and other
production-related services) provided by Sinopec Group Company to
the Company was RMB 62.759 billion, taking up 10.0% in the
transactions of the same kind, and accounting for 8.7% of the
operating expenses of the Company in the first three quarters. The
value of those auxiliary & community services provided by Sinopec
Group Company to the Company was RMB 1.257 billion, taking up 0.17%
of the operating expenses of the Company in the first three
quarters. The value of those products & services provided by the
Company to Sinopec Group Company was RMB 69.37 billion, taking up
9.0% in the transactions of the same kind.
The principles for setting the prices for connected transactions
are: (1) as to those products or projects that the State government
has formulated or suggested prices towards, the State-formulated or
suggested shall govern; (2) as to those products or projects that
the State government has not formulated or suggested prices towards
yet, the market prices (inclusive of the bid prices) shall govern;
(3) as to those products or projects that the State government has
not formulated or suggested prices towards yet, and there are no
market prices for reference to, the prices shall then be set by
"adding a rational profit margin, usually 6% onto the costs".
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3.2.2 China Orient Asset Management Corporation, China Cinda Asset
Management Corporation and China Development Bank signed agreements
upon transfer of State-owned shares to China Petrochemical Corp.
The three original shareholders of Sinopec Corp., China Orient Asset
Management Corporation, China Cinda Asset Management Corporation and
China Development Bank, signed Share Transfer Agreements with
Sinopec Group Company on 29 April, 06 June and 17 August 2006
respectively, pursuant to which they transferred 1,296,410,000
State-owned shares (about 1.5% of the total shares of Sinopec
Corp.), 2,848, 886,224 State-owned shares (about 3.3% of the total
shares of Sinopec Corp.) and 632,570, 000 State-owned shares (about
0.7% of the total shares of Sinopec Corp.) held by them respectively
to Sinopec Group Company; whilst Sinopec Group Company paid the
prices to China Orient Asset Management Corporation, China Cinda
Asset Management Corporation and China Development Bank in cash,
respectively. All the Share Transfer Agreements signed by the three
companies and Sinopec Group Company have been approved by the
State-owned Assets Supervision and Administration Commission of the
State Council and the State Ministry of Finance; whilst the
necessary procedures regarding the share transfers have been
completed on 27 September.
3.2.3 Injection of Capital in the Refining Project in Hainan
On 11 October 2006, Sinopec Corp. entered into a Joint Venture
Contract with Century Bright International Investment Co., Ltd.
("CBI"), an overseas wholly-owned subsidiary under China
Petrochemical Corp. Pursuant to this contract, Sinopec Corp. and CBI
agreed to inject capital ( RMB 2.9895 billion by Sinopec Corp. and
the an equivalent of RMB 996.5 million in foreign currency by CBI)
in Hainan Oil Refining & Chemical Co., Ltd. to increase its
registered capital. Following such investments, Sinopec Corp. and
CBI held 75% and 25% in the share capital of Hainan Oil Refining &
Chemical Co., Ltd., respectively.
3.2.4 Reform on non-tradable shares
Sinopec Corp.'s non-tradable share reform proposal has already been
approved on the meeting of A Share market related shareholders,
which was held on 25 September 2006. As per this proposal, holders
of Sinopec Corp.'s tradable A shares will get 2.8 additional shares
for every 10 shares they held in Sinopec Corp., paid by the holders
of Sinopec Corp.'s originally non-tradable shares. All the holders
of Sinopec Corp.'s originally non-tradable shares commit to obey the
regulations, which set out the restricted trading period. Besides,
the holders of Sinopec Corp.'s originally non-tradable shares have
paid 784,000,000 shares in total, as a consideration specified under
this non-tradable share reform proposal, to all holders of tradable
A shares. Such shares have been launched into the market for trading
on 10 October 2006, namely the very first trading day after the
reform proposal has been put into force. On the same day, the former
non-tradable shares possessed by holders of Sinopec Corp. are
allowed for trading in the market.
-15-
3.2.5 Distribution of interim dividends of 2006
Pursuant to the Articles of Association of the Company and with the
approval from the third meeting of the Third Session of the Board of
Directors of Sinopec Corp., the scheme for distribution of dividends
for the first half of 2006 that ended 30 June 2006, was to
distribute cash dividends of about RMB 3.468 billion in total,
amounting to RMB 0.04 yuan (pre-tax) per share, which was calculated
on the basis of the total number of 86,702,439,000 shares as at 30
June 2006. The dividends for the first half of 2006 have been
distributed on 28 September 2006 to the members of the Company,
whose names appear on the register of members of Sinopec Corp. on 13
September 2006.
3.2.6 Capital expenditure adjustments
The 5th meeting of the Third Session of the Board of Directors held
on 27 October 2006 has approved the capital expenditure adjustments
plan from RMB70 billion to RMB80.391 billion for the year 2006, the
increase is RMB10.391 billion. The increase for Exploration and
Production Segment is RMB1.59 billion, the increase for Refining
Segment is RMB6.259 billion, the increase for Chemicals Segment is
RMB3.013 billion, while the decrease for scientific research,
information and others is RMB0.472 billion.
3.2.7 Appointment of senior management
Mr. Jiao Fangzheng was appointed the vice president at the 5th
meeting of the Third Session of the Board of Directors held on 27
Oct. 2006.
3.3 Descriptions of, and explanations to, accounting policies,
accounting estimations, consolidation scope and significant
accounting errors
[ ] Applicable [X] Not applicable
3.4 Relevant explanations made by the Board of Directors and the
Supervisory Committee after the audit and presentation of
"non-standard opinion".
[ ] Applicable [X] Not applicable
3.5 Caution and explanation as to an anticipated loss from the beginning
of the year to the end of the next reporting period or significant
changes in accumulated net profits for the period over the same
period of the preceding year
[ ] Applicable [X] Not applicable
3.6 Adjustments from time to time to the annual business plan or budget
which has been disclosed
-16-
[ ] Applicable [X] Not applicable
3.7 Special commitments made by the original holders of non-tradable
shares of the Company in the course of share merger reform, and
their performance of such commitments
[ ] Applicable [X] Not applicable
3.8 Annotations to the arrangements for working hours regarding the
non-tradable share reform for those companies that have not
initialized the reform procedure yet as at the date when the present
Quarterly Report is made public
[ ] Applicable [X] Not applicable
3.9 Relevant annotations to those companies that have not initialized
the reform procedure yet as at the date when the present Quarterly
Report is made public
[ ] Applicable [X] Not applicable
3.10 This quarterly report is published in both English and Chinese
languages. The Chinese version shall prevail, in case of any
disparity in construing these two versions.
By Order of The Board
Chen Tonghai
Chairman
27 October 2006
As at the date of this announcement, the executive directors of Sinopec Corp
are Messrs. Wang Tianpu, Zhang Jianhua, Wang Zhigang, Dai Houliang; the
non-executive directors are Messrs. Chen Tonghai, Zhou Yuan, Fan Yifei and Yao
Zhongmin; the independent non-executive directors are Messrs. Shi Wanpeng, Liu
Zhongli and Li Deshui.