Soaring crude oil prices could erode earnings this year at Sinopec Shanghai Petrochemical Company (0338) as operating costs rise, the firm said yesterday.Crude oil has hovered above US$100 (HK$780) per barrel in recent weeks.
Profits at the Sinopec (0386) controlled firm slid last year by 1.8 billion yuan (HK$2.21 billion) to 986.5 million yuan, from 2.79 billion yuan in 2010. Sinopec Shanghai said refining costs jumped 35 percent on the year.
Chairman Rong Guangdao said profitability was also hurt by domestic retail fuel prices that are "too low." So far this year, Beijing has raised prices of petrol and diesel twice, the latest being in mid- March. Rong said crude oil imports from Iran accounted for less than 10 percent of imports. "We have not received crude oil from Iran so far this year," he said.
As for the petrochemicals business, which had a weak first quarter, the firm said sales prices rose 3 percent in the quarter, but costs also increased.
Rong said capital expenditure will peak this year over construction of oil refineries that will boost refining capacity. About 3.2 billion yuan has been budgeted for capex this year.
Yesterday, Sinopec Shanghai shares fell 1.1 percent to HK$2.77 - nearly a three-month low. GRACE CAO
