Sinopec's Q1 revenue fell 6.9% year-on-year, and net profit attributable to shareholders plummeted 27.6% | Financial Report Insights

In the first quarter, Sinopec delivered a disappointing report card: revenue fell by 6.9% year-on-year, and net profit attributable to shareholders dropped significantly by 27.6%. Against the backdrop of considerable uncertainty in global economic recovery and slowing demand growth, Sinopec's performance faces significant challenges.

On Monday evening, Sinopec announced its first-quarter financial report:

Financial Performance: Operating revenue decreased by 6.9% year-on-year to 735.4 billion yuan; net profit fell sharply by 27.6% to 13.3 billion yuan; earnings per share were 0.109 yuan, down 28.8% year-on-year.

Segment Performance:

• Exploration and Development — Oil and gas equivalent production increased by 1.7%, natural gas production rose by 5.1%, with segment profit at 13.6 billion yuan, a decline compared to previous quarters;

• Refining — Crude oil processing volume decreased by 1.8%, diesel production fell sharply by 13.9%, with segment profit at 2.4 billion yuan;

• Marketing and Distribution — Total sales volume of refined oil products decreased by 7.1%, with segment profit at 4.9 billion yuan;

• Chemicals — Ethylene production increased by 17.7%, but due to low gross margins, it incurred a loss of 1.321 billion yuan.

Cash Flow: Net cash flow was 8.138 billion yuan, compared to a net outflow of 13.755 billion yuan in the same period last year.

Capital Expenditure: Capital expenditure in the first quarter was 18.248 billion yuan, mainly directed towards exploration and development, chemicals, and refining segments.

Weak Demand and Falling Oil Prices Create Dual Pressure

The decline in performance is primarily due to the dual pressure of falling international oil prices and weak downstream demand.

According to the financial report, the average spot price of Brent crude oil in the first quarter was $75.7 per barrel, down 9.0% year-on-year, while the price of self-produced crude oil also fell by 5.2% to $71.50 per barrel. Meanwhile, domestic refined oil demand decreased by 4.0% year-on-year, and chemical gross margins remained low.

Rising financial costs have become a "profit killer." The quarterly report shows that Sinopec's financial expenses surged by 69.3% year-on-year to 4.58 billion yuan, mainly due to increased net losses from foreign currency loans. This factor has become one of the important reasons dragging down the company's overall performance. Additionally, investment income fell sharply by 69.9% year-on-year to 1.65 billion yuan, mainly affected by fluctuations in hedging business profits and losses, as well as declining performance of some joint ventures and associates.

It is worth noting that the net cash flow generated from operating activities in the first quarter was 8.138 billion yuan, compared to a net outflow of 13.755 billion yuan in the same period last year, indicating an improvement in cash flow conditions.

Clear Differentiation Among Business Segments

Among the main business segments, except for exploration and development, which remained relatively stable, other segments showed clear differentiation:

• Exploration and Development: Exploration and development remain Sinopec's "ballast," achieving an EBITDA profit of 13.631 billion yuan, although this profit has also declined compared to previous quarters. Oil and gas equivalent production increased by 1.7% year-on-year to 130.97 million barrels, with natural gas production growing by 5.1%. This reflects the company's increased strategic investment in natural gas business, aligning with the trend of energy structure transformation.

• Refining Segment: EBITDA profit was 2.39 billion yuan, with crude oil processing volume down 1.8% year-on-year to 62.13 million tons. Notably, the company's diesel production fell sharply by 13.9% year-on-year, while chemical light oil production increased by 11.3%, indicating that the company is actively adjusting its product structure towards high-value products

• Marketing and Distribution: Despite a year-on-year decline of 7.1% in refined oil sales to 55.59 million tons, this segment still contributed RMB 4.87 billion in earnings before interest and taxes, continuing to be the company's main source of profit.

• Chemical Segment: The first quarter saw a loss of RMB 1.321 billion. Although ethylene production increased by 17.7% year-on-year to 3.861 million tons, the overall segment was still unable to turn a profit in the context of persistently low chemical margins.

In the face of declining demand for traditional fuels, Sinopec is accelerating its business transformation. The report shows that the company's retail sales of LNG for vehicles reached 2.05 billion cubic meters, a significant year-on-year increase of 116%. At the same time, it is actively promoting hydrogen energy transportation development and accelerating the layout of gas stations and charging and battery swap stations. These initiatives demonstrate the company's efforts to transform into a comprehensive energy service provider of "oil, gas, hydrogen, electricity, and services" to respond to changes in the future energy landscape.

Capital Expenditure Focused on Transformation Projects, Major Shareholder's Increased Holdings Show Long-term Confidence

In the first quarter, Sinopec's capital expenditure was RMB 18.248 billion, mainly directed towards exploration and development (RMB 12.6 billion), chemicals (RMB 2.6 billion), and refining (RMB 2.1 billion).

Key projects include the construction of oil and gas production capacity in Jiyang, Tahe, and Fuling, as well as chemical projects such as ethylene in Maoming, Zhenhai, Qilu, and Luoyang, and aromatics in Jiujiang.

Additionally, Sinopec's major shareholder, China Petroleum & Chemical Corporation, launched a share buyback plan on April 8, and as of April 25, it had cumulatively increased its holdings by 24.7274 million shares. This action, in the context of current performance declines, may be seen as a statement of the major shareholder's confidence in the company's long-term development prospects