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Public company info - Sinopec Shanghai Petrochemical Co. Ltd. - H Shares , 00338.HK

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Sinopec Shanghai Petrochemical Co. Ltd. - H Shares, 00338.HK - Company Profile
Chairman Wu Haijun
Share Issued (share) 3,495,000,000
Par Currency Renminbi
Par Value 1.0
Industry Petroleum & Gases
Corporate Profile Business Summary: The group is which mainly processes crude oil into a broad range of petroleum products, intermediate petrochemical products, resins and plastics and synthetic fibres. Performance for the year: In 2020, the net profit attributable to equity shareholders of the Company amounted to RMB628,110 thousand under CAS (net profit of RMB645,072 thousand under IFRS). Business Review In 2020, the global economy has been severely impacted while facing the most severe economic crisis since the Great Depression in the 1930s under the global COVID-19 pandemic situation. Major developed economies have experienced negative growth without exception, while emerging markets and developing economies have also in general experienced negative GDP growth. Facing a complicated domestic and global situation, especially under the wrath of the COVID-19 pandemic, China adhered closely to the grand principle of seeking progress while maintaining stability and coordinated epidemic prevention and control and economic and social development to guarantee the restoration of economic stability. Throughout 2020, China’s Gross Domestic Product (GDP) saw a growth of 2.3%, a decrease of 3.8 pp year-on-year, yet China was the only global major economy that managed to achieve positive economic growth in the year. China’s petrochemical faced enormous challenges especially in the first quarter. Price of major chemical products seen severe drop while both production and sales were in historic fall. Under the constraints of both resources and environment, the petrochemical industry was in short downward spiral. However with the gradual resumption of works and production in the second quarter, the petrochemical industry saw gradual rebound. Given the global COVID-19 pandemic spread, a short-term historical plunge in international oil price and a sharp fall in market demand in 2020, The Group adhered closely to the grand principle of seeking progress while maintaining stability. The Group sought to ensure “Six-Sphere Stability” and “Six-Sphere Guarantees”, and strove for the resumption of works and production at the same time with pandemic prevention. The Group focused its attention on main contradictions, system optimization, and pandemic prevention to transform potential crises into opportunities, to achieve a level of operation results as expectations with the joint efforts of all staff. (i) An effective and concrete line of defence against the pandemic Facing the sudden onslaught of COVID-19 pandemic, the Group took up the duties and the mission of a state-owned enterprise to participate in the national campaign against the pandemic with effective measures. The Group refined its leadership structure and established a counter-pandemic leadership task force. Its duties included the initiation of class-one responses to major public health emergencies and to ensure a “hand-in-hand and going firm” approach in managing both the pandemic situation and production and operations without any delay. The Group also fulfilled its duties in relevant locations. It made sure of its staff control and for smooth supply of pandemic-countering resources for joint epidemic prevention and control between the enterprises and the localities. The Group also supported location anti-pandemic effort to fulfill its social obligations. The Company managed to resolve production issues of high melt index polypropylene in only 12 days to provide for ease the shortages of materials for surgical masks. The Company implemented all pandemic prevention measures in daily operations to prevent import case while standing guard against domestic cases rebound. The Company implemented prevention measures day-by-day to ensure “Zero Imports, Zero Spread, Zero Blind Spots, Zero Dead Angle, Zero Infection”. (ii) Reinforcement of safety and environmental management with an overall stable production In 2020, the Group focused on building up and implementing stable production as its top priority in production management, and implemented and consolidated its foundation in production operation while cementing safety management. The Company seeks to implement the HSSE management system and put into practice process safety management, and further enhance its ensure equipment integrity assurance regime. In addition, the Company vows to strictly enforce the “10 Major Measures to Step Up Management of Segments In Direct Work Process”. Focusing on contractors and direct work process management, a safety marking system is to be implemented on all staff, while more emphasis will be imposed on change management, limitation management and advance warning management, etc. Moreover, the Company also expands its scope of work on areas such as safety management and job ticket management. Both safety and environment is well regulated overall. The Group also strictly controlled the “ Three Smalls” (i.e. small fluctuations, small anomalies and small deviations) and put an end to the “Three Nons”(i.e. non-planned shutdown of divisions, non-planned shutdown of machine and non-planned shutdown of furnace). The Company has implemented a three- year plan for the prevention and control of work safety and carried out safety hazard management. The Company has carried out the development of green grass-roots level and environmental traceability management. Through the re-examination of Sinopec’s green enterprise, the site environment was continued to improve and the concentration of VOCs at the boundary of the plant decreased. In 2020, there were 17 full-scale unplanned shutdowns in 2020, representing a decrease of 32%, the smoothness rate of equipment for the whole year is 98%, representing an increase of 0.36 percentage point. Among the 58 main technical and economic indicators included in the Company’s 2020 assessment plan, 44 indicators reflected better performance then last year, with a year-on-year improvement rate of 75.86%. In 2020, the Group’s facilities were in generally stable operating conditions. The total volume of processing crude oil for the year was 14.6715 million tons, a year-on-year decrease of 3.47%; the volume of refined oil products produced was 8.3795 million tons, a year-on-year decrease of 8.84%; the total volume of goods within the main commodities categories was 13,957,600 tons, showing a growth of 0.34%. In 2020, the Group’s turnover was RMB74.624 billion, a decrease of 25.58% from the previous year. The product sales rate was 100.11%, and the payment return rate was 100%. Product quality continued to be well maintained and stable. (iii) Oil and petrochemical market was deeply affected by the epidemic with product prices adjusted downwards In 2020, the country’s petrochemical industry faced major challenges. The production and sales of petrochemical products dropped sharply in the first quarter and gradually return to normal after the second quarter with the prices of major petrochemical products were lower than last year. Demand for refined oil was slowing down, especially in the first half of the year while the competition was fierce among products. As of 31 December 2020, the weighted average prices (excluding tax) of the Group’s synthetic fibers, resins and plastics, intermediate petrochemical products, and petroleum products had decreased by 19.84%, 10.65%, 19.49% and 30.48%, respectively as compared with the previous year. (iv) Fluctuation in international crude oil price with a decline in yearly average price and a drop in the volume of crude oil processed In 2020, the international crude oil market was fluctuated violently, with a huge overall decline. From the perspective of trend, prices fell sharply in the first quarter, bottomed out and rebounded in the second quarter. After entering the third quarter, the average price was relatively stable and rose significantly at the end of the year. The annual average price of West Texas Intermediate (WTI) crude oil was $39.51/barrel, a decrease 30.7% over the previous year; the average price of Brent crude oil was $41.74/barrel, a decrease of 35.1%; the average price of Dubai crude oil was $42.18/barrel, a decrease of 33.6%. As of 31 December 2020, the Group had processed a total of 14.6715 million tons of crude oil (of which 402,400 tons were processed on order), indicating a year-on-year decrease of 3.47%. The cost of crude oil processing for the whole year of 2020 was RMB2,380.02/ton, representing a decrease of RMB950.61/ton or 28.54% from the same period last year. The annual crude oil processing total cost decreased by RMB13.117 billion from the same period last year or 27.86%, accounting for 54.86% of the total cost of sales. (v) Further optimization of operation with precision to overcome difficulties and achieve effectiveness In 2020, the Group emphasized effectiveness and focused on business optimization, and actively promoted further optimization of raw materials and product structures. Taking advantage of the plant’s low-load operation during the pandemic, the Group completed the overhaul of 12 sets of oil refining plants. An adjustment was introduced into crude oil procurement strategy to combine with the change of crude oil market price. The Group increased the purchase volume of Kuwait crude oil, carried out crude oil financial derivatives and purchased Oman crude oil in the pricing mode of Dubai commercial exchange. Downstream equipment for externally procured resources such as ethylene, carbon four, carbon five, etc., was fully deployed. The Group also optimized the structure of ethylene feedstock, the operation of the residue hydrotreating unit and the control of catalytic feedstock, and at the same time processed low-sulfur crude oil and realized the full-load operation of the catalytic unit during the replenishing of single- series residue hydrotreating. Furthermore, 614,000 tons of jet fuel were produced, and there was an increased in output of asphalt by 219,600 tons year-on-year. The diesel- gasoline ratio reached 1.22; The Group also seen an increase in production of high-yield products such as butadiene and ethylene oxide, among which 312,900 tons of ethylene oxide were produced, represented a growth of 13.69% and an appreciation of RMB 61.58 million in value in terms of efficiency. There was also a rise in production of high-grade gasoline with the annual sales volume reaching 1.144 million tons, with high-grade gasoline accounted for 34.8% which was a record high; annual product sales rate reached 100.11%. The Group made full force in costs and expenses reduction under strict control and developed the 100-Day Breakthroughs campaign and the ongoing campaign. The Group also continued to explore cost-reduction potential in large-scale procurement and at the same time proactively promoted competitive procurement, open procurement, and the amendment and utilization of backlog materials. Through the issuance of extremely short-term commercial paper and other approaches, the comprehensive financial costs have been decreased. (vi) A further deepening of energy saving and emission reduction In 2020, the Group continued implementing various energy conservation and emission reduction measures as per the national energy conservation and emission reduction requirements. The Group continued to optimize carbon emission accounting methods, and managed to reduce carbon emission compliance costs by RMB5.28 million. In the past year, 49 water resources management optimization measures were devised, and the total volume of retrieved industrial water decreased by 10.54%. In 2020, the Company’s total comprehensive energy consumption was 6.920 million tons of standard coal. The comprehensive output value consumption was 0.743 tons of standard coal/RMB10,000, representing a decrease of 0.27% over 0.745 tons of standard coal/RMB10,000 of last year. The annual COD emissions decreased by 14.97%, sulfur dioxide emissions decreased by 4.74% and nitrogen oxide emissions decreased by 3.37% (Data from the Ministry of Safety and the Ministry of Environment had shown discrepancies), as compared with the same period last year. The volume of annual average cumulative average VOCs concentration at the plant boundary is 99.1 micrograms/m3 , a decrease of 26.92% compared with last year. The comprehensive compliance rate of effluent wastewater was 100%, the compliance rate of controlled waste gas was 100%, and the rate of proper treatment and disposal of hazardous waste was 100%. The heating furnace’s average thermal efficiency was 92.46%, which was equivalent to the level last year. (vii) Innovation in stable steps forward In 2020, the Group moved firmly along the direction of “basic + high-end” development and put innovation as the top consideration in advancing the development of the Company. The Group also sought to strengthen scientific and technological innovations. The Advanced Materials Innovation Research Institute was established to carry out joint researches. A substantial breakthrough was made in the “business unit + company” operation model for carbon fibre. Constructions of projects were accelerated with the Jinshan Area Comprehensive Environment Improvement Oil Product Cleaning Project was put into operation. The oxidation and carbonization part of the second phase project with an annual output of 1,500 tons of PAN-based carbon fiber was suitable for intermediate delivery and the large tow carbon fiber project started on schedule. the group will actively promote joint ventures and cooperation. Acquisition of Zhejiang Jinlian Petrochemical Storage and Transportation Co., Ltd., and participation in Pinghu China Aviation Oil Port Co., Ltd. to meet the current operation and future development needs of the Company’s storage and transportation system. The Group further worked to advance the integration of production, marketing, research and application of new products. No. 92 China VIB grade automotive gasoline was successfully blended and produced for the first time, with a cumulative sales volume of 44,600 tons. The Group also completed a synthetic resin import substitution project. Success was seen in developing large-diameter, low-melting and pressure-bearing pipe products, with an accumulated sales volume of 3,108.6 tons. The export business of chemical products seen good expansion. The new high-endurance polyester engineering plastic and its application won the CIFF New Material Award at the International Industry Fair. Furthermore, the Group also steadily promoted the eight projects that included different areas such as intelligent factory construction and promotion, the upgrade of real-time database to the acceptance benchmark. Projects such as smart warehousing, contractor and direct operation management platform were also went online. (viii)Breakthroughs achieved in management reforms In 2020, the Group made good efforts in reform and innovation and continued to improve management standards with solid adherence to the targets and the schedule. To this end, the Group issued the action plan titled Sinopec Shanghai Petrochemical Standardize World Class Management Promotion Action Implementation Rules and developed a to- do list. The Group worked hard to learn from the best alongside management enhancement. The Group also invited academics and expert groups to provide input on the Company’s development strategies. The Group also initiated a research and study mission to Maoming Petrochemical and formulated the Company’s very own mid-tolong-term catch-up plan. The Group also optimized its management and control model. The shutdown and personnel placement of the polyester department’s industrial filament installations was proceeded in an orderly manner. The Group also proceeded to adjust and optimize its organizational structures, implement category-based guidance and management of joint ventures, and strengthen the management of joint ventures that closely relate to the Company’s production and operation. The Group also standardized internal management and introduced comprehensive risk management and internal control management measures with focus on key areas such as investment, finance, contracts and HSSE, and discovered and investigated problems and risks. A market- oriented simulated sewage disposal program was introduced to strictly demand production units to cut emissions at the source. The Group also actively promoted and fully completed retirees’ social management and the digitization and transfer of retirees’ files. On the other hand, the Group made strong efforts alleviating the burden on the basic level and formed a long-term working mechanism. The Group also promoted good utilization of talents in company enhancement. These efforts included the training and utilization of young officers and the nurturing of elite professional talents, and at the same time formulating a reserve pool of high-level talents. The Group also promoted a program in the train-up of multiple capabilities in every position. Furthermore, the Group moved forward on the training in fundamentals of intelligent exercising, and extensively promoted business competitions. As of 31 December 2020, the net reduction of employees of the Group was 412 including voluntary resignation and retirees), accounting for 4.64% of the total 8,878 employees registered at the beginning of the year. Prospects: 1. Industry competition and development trends Currently, while the world is deep in the crisis of the pandemic, the global economy is expected to undergo a rapid recovery in the wake of swift vaccine research and roll-out. Even so, the ongoing global economic recovery was still clouded by the following challenges: the effectiveness of vaccine is still waiting to be seen; countries may withdraw their stimulus measures sooner; increasing trade protectionism; intensifying geo-political tensions; the global economy still faces intricacy. While China is still moving into a new development phase, the foundation for recovery is yet to be consolidated. Issues in unbalanced and inadequate development remain to be tackled. However, China still enjoys positive economic development factors: 2021 is the commencing year of the “14th Five-Year Plan” which represents the three major objectives have been completed on schedule, and a new development pattern with the domestic big circle as the main body and the domestic and international double circle promoting each other is being accelerated.. China will continue to implement a proactive fiscal policy and a prudent monetary policy so as to keep providing necessary support for economic recovery. It is expected that China’s economic growth is going to operate within a reasonable range. In 2021, COVID-19 pandemic, OPEC+ production cut and geo-politics incidents pose continuing challenges on oil price. The recovery of the global economy in the second half of the year will draw new oil demand. Rising supply is expected from OPEC nations exempted from oil cut and non-OPEC producers like Canada, which are to exert pressure on the supply side. However, global oil supply would run on a lower level should OPEC+ maintain effective enforcement on production cut, so much so that the supply will stay lower than demand. On the political stage, the new US president’s ruling strategy, the degree of support for energy development in US and the positioning of Sino US relations are still uncertain. Whether Sino US trade frictions will come back and the trend of US crude oil production and export are all factors that may affect the oil price trend in 2021. The domestic petrochemical industry is currently facing the challenge of a downward economic cycle. During the “14th Five-Year Plan” period, China’s refining and chemical industry is set to enter a full phase of new release in capacity and fierce competition. Industry integration, transformation and upgrading are also phasing in. Oversupply is further seen in the refined oil market. The transformation of chemical products towards the higher end and the more environmentally friendly will become a new trend. Driven by new energy, new materials, and the new economy, clean, digital, and diversified developments are now the key trends in developments upon the phasing in of a new energy regime in social development. These new developments will impact the energy supply from petrochemical companies, which will put severe pressure on petrochemical companies’ profitability. 2. Development strategies of the Company The Group’s development objectives are to evolve itself into a “leading domestically, first- class globally” energy and chemical and new material enterprise. The key components of the Group’s development strategy are as follows: to take into account both low cost and differentiation, and to focus on both scale and refinement. The Company foscuses on value and market orientation, creativity, talents as the backbone of the Company, the emphasis of environment and low carbon emissions and integrated development, to realize low cost and large scale of the upstream, and high value-added and refinement of the downstream. The Company will give full play to its advantages of wide product chain, diversified products and close monitoring of the market to enhance competitiveness. Under the guidance of the development strategy, the Company further integrates the existing three industrial chains of oil refining, olefin and aromatics with the development idea of “One Leader, One Core and One Base”, enterprise resource optimization and development plan in the Shanghai region. The Company also takes advantage of the new development model of integrated refinery and petrochemical capacity with the concept of molecular refining and petrochemicals, and further advances the integration of industry and city as well as regional integration, while selectively developing the downstream petrochemical product chain with cost and logistics advantages as well as market support. On this basis, the Company is to build an industrial base that features green energy, fine petrochemical, and high-end materials that come with world-scale and first-class competitiveness on the northern shore of Hangzhou Bay, forming an unparalleled industrial complex with a stable profit model. 3. Business plans In 2021, the Group will continue to adhere to the market-oriented, efficiency-centred strategy, and to consolidate the foundation of environmental protection, continue to optimize production and operation, improve corporate governance efficiency with a focus on building talent teams, to achieve high-quality development of the Company and strive to create better economic benefits. In 2021, the Company is looking to process a total of 14.20 million tons of crude oil and produce a total of 8.69 million tons of refined oil, 0.75 million tons of ethylene, 0.49 million tons of paraxylene, 0.42 million tons of polyethylene, 0.43 million tons of polypropylene, 0.30 million tons of purified terephthalic acid, 0.25 million tons of ethylene glycol, 0.03 million tons of polyester fiber and 0.10 million tons of acrylic fiber. In order to realize the operation goals of 2021, the Group will put its mind on the following tasks: (1) To center on green and clean energy for consolidating environmental protection The Company vows to comprehensively promote the establishment of the HSSE management system and establish and improve the PDCA closed-loop management mechanism. Under the key theme of “identifying major risks, eliminating major hidden dangers, and preventing major accidents”, the Company seeks to strengthen risk management and control in key areas and key links, and continue to tighten contractor safety management and control. Furthermore, the Company shall keep on improving employees’ safety awareness and skills and promote the creation of a culture that values safety. The Company shall also emphasize implementing a green and clean strategy and strengthen carbon emission management to realize stable and standard-meeting emission of waste gas and wastewater to ensure that VOCs’ average concentration at the boundary was less than 100 micrograms/m3 and strengthen carbon emission management. The Company also seeks to make a good effort in the supply of anti-epidemic materials, in dealing with emergencies and the workforce’s stability to ensure the safety and physical and mental health of employees, and to strengthen employee safety education and comprehensively improve employee health management standards. (2) To focus on improving qualities and efficiencies the continuous optimization of production and operation The Company vows to optimize its overall planning for operations shutdown and start-up and strengthen the plant’s management and control during the shutdown and start-up phase. The Company shall also improve its technical and economic indicators by improving safety management and its key control and maintenance plans. The Company shall also optimize its systems to further improve the accuracy and reliability of crude oil comparison and selection, production and operation, and product structure optimization. The Company shall also further expand varieties in crude oil procurement and enhance deployment flexibility and reduce crude oil procurement costs. Furthermore, the Company strives to accurately grasp market conditions and adjust marketing strategies and product structures to maximize benefits. The Company shall also emphasize flexibly adjusting the yield of refined oil products and diesel-gasoline ratio, raise the total volume of high-grade gasoline, and develop new channels for exporting gasoline and jet fuel. The Company shall also take advantage of market opportunities and devote efforts in developing new products and specialized materials. The Company shall optimize its public projects and promote the optimization of its storage and transportation logistics system, and optimization its oil refining business. As a significant step forward, the Company is to implement full process safety management while strengthening its process stability and equipment integrity management, and continuously upgrade the automation and intelligences of its equipments. The Company will exert strict control of “Three Smalls” and eliminate “Three Nons”. Special competitions on the reliability of production equipment will continue to take place, while the “The Day of Excellence” activities are continuing to mobilize employees to eliminate safety risks in time, avoid accidents, and strengthen the smooth separation of the equipment. (3) To advance reformations further and to raise efficiencies in corporate governance With a good focus on its strategic planning, the Company seeks to explore its path in organizational reorganization along the business or industrial chain to establish an organizational system which is in line with the management scope. The Company shall also reorganize its organizations and streamline work processes as well as integrate positions, and focus on key tasks in the reform, such as the reformation of “three systems”, the reformation of its scientific research regime, and a sound market-oriented operating system. The Company shall continue to promote its process management to improve the efficiency of business collaboration between different departments. The Company shall also strengthen the management of investment enterprises, and incorporate wholly-owned and holding subsidiaries into the Company’s integrated management system. The Company shall also fully carry out benchmarking and upgrading, and strengthen cost target management across the whole staff body, while further tapping potentials and raise efficiency, with strict control on various expenses and expenditures. The Company also works to integrate business and finance, and transformation from accounting finance to management finance. The Company also implements transparent management, optimises business processes, improves management efficiency and quality, and makes good use of information technology to quickly and effectively convey the Company’s decisions and plans to, and deployment at, the bottom level. The Company is also establishing a back- check mechanism to ensure the all employees are clear about the goals and responsibilities and provided the motivation. (4) To focus on creativity-driven development so as to realize high-quality corporate development In accordance with the “3060” national carbon emission requirement, the Company’s ultimate goal is to ensure “zero carbon emissions” and guarantee coordination of carbon reduction and transformation and development. The Company promoted the construction of large ton carbon fibre, hundred-ton high performance carbon fibre pilot plant project, 3rd circuit 220 kV power supply line project. the group will speed up the construction of hydrogen energy demonstration projects and launch the thermoplastic elastomer project. The Company shall emphasis on tackling key core technologies such as carbon fiber, and increase investment in research and development, and improve the collaborative innovation mechanism. The Company shall also explore opportunities in differentiated high value- added products, and strive to build a new material industry cluster with the carbon fiber industry as the core and utilize polyester, polyolefin, elastomer, C5 downstream fine chemical new materials as the keys to seek breakthroughs and developments. The Company also vigorously promote the construction of a data governance system and the application of advanced control and optimization technologies, and deepen the application of intelligent security, with promoting the construction of an integrated platform for intelligent marketing, and accelerate the advancement of digital transformation. (5) Focus on team building and cementing solid foundation for development The Company shall further empower the Company through recruiting talents and improve the recruitment of fresh graduates. The Company is devising a five-year training programme for new college graduates and building a talent team with engineering thinking. The Company shall also clarify its employment orientation and evaluate officers and talents’ selection and appointment mechanism. The Company continues to explore channels to select and appoint officers by introducing mature talents and the selection and appointment of professional managers to nuture more young officers. The Company is also looking to uphold the pioneering spirit of the base-level and the public and improve staff medical services and improve medical protection standards to raise its staff’s happiness index while further enhancing the cohesion of the staff team.

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