Sinopec Shanghai Petrochemical (NYSE:SHI), a major Chinese ethylene and propylene producer, issued profit estimates and outlook for 2009. The comany is expected to report profit for the first six months of 2009, well above last year's numbers. 2008 was a difficult year for Chinese refiners and petrochemical companies as crude soared above $140/barrel. But with the price of oil crumbling in 2009 and changes in the price mechanism in China, SHI expects to report a strong profit for the first half of 2009 and an even better second half. This is in sharp contrast to a net loss in 2008 fist half.
Sinopec Shanghai Petchem Results, Jan 1 - June 30, 2008
| Numbers according to Chinese Accounting Standards | |
| Net Profit/Loss (RMB) |
-372,772,000 |
| EPS (RMB/A-share) |
-0.052 |
The Company issued a positive outlook for the rest of the year based on the following factors:
- Price of crude materials, e.g. oil, is well below 2008 levels. Given that the simple largest cost item for SHI is the price of oil, this alone makes a huge difference from 2008 to 2009.
- China implemented a fuel tax reform, improved the pricing mechanism guaranteeing fair profit for refiners and implemented the “Administrative Measures for Crude Oil Prices (Trial)” or 石油價格管理辦法(試行. As a result, refined product prices reflect the international price of the crude thus eliminating the wide gap between crude and refined product prices.
- Polyethylene and propylene prices have stabilized after a volatile beginning of 2009.
- Capacity utilization is high.
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