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Sinopec to Pump Huge Profits

The oil giant Sinopec is expected to post a half-year profit of no less than 8 billion yuan (US$967 million), despite sliding oil prices, according to Sinopec Chairman Li Yizhong Monday in Beijing.

"Our profit for the first half of this year exceeds half of last year's record profit, thanks to our cost-cutting efforts and marketing campaign," said Li.

Last year, the overseas listed company posted a net profit of 16.1 billion yuan (US$1.95 billion), surging 185.2 percent year-on-year, under the Chinese accounting system.

Li made the remarks at yesterday's promotion for its upcoming domestic initial public offering.

The company will issue 2.8 billion shares on the domestic-investor-only A-share market on July 16, topping Baosteel's 1.87 billion shares as the largest-ever issuance of domestic stocks.

Proceeds raised from the sale of shares, which are expected to run up to 10 billion yuan (US$1.2 billion) would be used to complete the US$779 million acquisition of Sinopec Star from its parent company, Sinopec Group. The rest would fund the construction of two pipelines for crude and refined oil in South and East China.

According to Li, in the first six months of this year, oil production has increased 1,350 barrels per day, or 0.2 percent, over the 675,000 barrels per day produced in the same period last year. Its natural gas production increased 13 percent over the figure for the same period last year to 290 million cubic feet per day. Sales of its refined oil products rose by 3.7 percent year-on-year.

Li said although the oil price would drop from last year's average US$29 a barrel to this year's US$26 a barrel, Sinopec is confident of registering a net profit of 18.1 billion yuan (US$2.2 billion), a rise of 12.3 percent year-on-year.

"The domestic demand has increased, and our cost-cutting management has paid off," said Li.

He said Sinopec would slash costs by 2.2 billion yuan (US$266 million) this year by streamlining employment.

"Also, we will try to raise our retail sales from last year's 36 per cent of total revenues, to 51 per cent, which will help us make more profit," said Li.

A report from China International Capital Corp, the underwriter of Sinopec's A-share offering, said the acquisition of Sinopec Star could bring 360 million yuan (US$43.5 million) to Sinopec's profit for this year.

It predicted that Sinopec Star would contribute 2.9 billion yuan (US$350 million) to refinery-heavy Sinopec's profit by 2005.

(China Daily 07/03/2001)

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