Sinopec Engineering Profits Fall for Second Straight Year

Sinopec Engineering, the oil refinery and chemical plant-building unit of state-owned energy giant Sinopec Group, has reported its second year of declining profits.

Sinopec Engineering (Group) Co. Ltd. saw its attributable profit for 2017 fall to 1.13 billion yuan ($178 million), down by 32.4% from 2016’s 1.67 billion yuan, according to its annual report published Monday.

The Hong Kong-listed company previously reported a profit of 835 million yuan for the first six months of 2017, 22.6% lower than the profit of 1.08 billion yuan for the same period in 2017, meaning that Sinopec Engineering’s profit decline accelerated in the second half of the year.

In 2016, the company faced a serious drop of nearly 50% in its attributable profit, due to falling revenues from the coal-to-chemical industry, and a lower number of projects reaching their peak income-generating stage that year.

A continued slump in the coal-to-chemical and petrochemical industries caused Sinopec Engineering’s income from related projects to fall in 2017, contributing to its overall profit decrease, according to the company’s announcement.

Coal-to-chemical plants use coal as a raw material for liquid fuels and for chemicals used in plastics production.

In contrast, the company’s revenue from oil refining projects grew by 28.6%, due largely to major contracts signed by Sinopec Engineering entering their peak procurement and construction seasons, slightly offsetting the revenue decline in other sectors.

“In 2017, facing the new normal economic development, the new cycle of international oil prices, the new market competition, and the new task of state-owned enterprises reform, the Company faced difficulties and challenges,” Sinopec Engineering Chairman Ling Yiqun said in a statement.

Looking ahead, Sinopec Engineering expects continued slow growth in global investment in refineries and chemical plants, although the “production and management situation in domestic refining (and) chemical engineering industry will be significantly improved,” the company said on Monday.

Contact reporter Teng Jing Xuan (jingxuanteng@caixin.com)