SINOPEC Engineering (Group) Co., Ltd.(“SEG” or the “Company”, together with its subsidiaries collectively known asthe “Group”) (stock code: 2386) today announces its interim results for the sixmonths ended 30 June 2017 (the “Reporting Period”).
In the first half of 2018,the Group has obtained better operation performance by making energetic effortsto develop domestic and foreign markets, strengthening its management andcontrol of projects and improving the level of elaborate management. During the Reporting Period, the Group recognized a revenue ofRMB18.336 billion, representing an increase of 33.2% on a period-on-period basis.The Group’s profits attributable to equity holders was RMB1.108 billion,representing an increase of 32.7% on a period-on-period basis. The ongoingprojects of the Group have been implemented steadily, and the safety, qualityand progress of such projects have been under full control. The Board decided to distribute an interim dividendof RMB0.100pershare, with a dividend payout ratio of 40%.
Significant Increase in newlysigned contracts due to energetic efforts to develop domestic and foreignmarkets: During the Reporting Period, the petroleum andchemical industry in China continues to make a favorable turn while maintainingstabilization, bringing acceleration of oil refining and chemical engineeringindustry investment. The total value of new contracts entered into by the Groupwas RMB35.484 billion, representing an increase of 99.7% on a period-on-periodbasis. Benefiting from the commencement of Sinopec Group to build “fourworld-class refining bases”, new contracts were signed includingZhongke Guangdongoil refining and chemical integrated complex project and Sinopec-SABICPetrochemical polycarbonate project. The value of newly signed domesticcontracts amounted to RMB32.241 billion, representing an increase of 95.6% on aperiod-on-period basis. Seizing the “Belt and Road” construction opportunities,the value of newly signed overseas contracts amounted to approximately USD483million, representing a 152.8% increase.
Strengthening management andcontrol of projects and improving the level of elaborate management: During the Reporting Period, to ensure projects were implementedsteadily, safely and at a higher efficiency, the Group optimized allocation ofresources as well as strengthened its design, subcontracting and accounting management.The Group continued to enhance its risk management and safeguarded the smoothimplementation of projects domestically and overseas. Safety, quality andprogress of projects are fully under control. The Group has established “doubleearly warning” mechanism, promoting project implementation progress and incomeconfirmation progress, and ensured realization of efficiency target. As at theend of the Reporting Period, the Group’s backlog was RMB108.176 billion,representing an increase of 18.8% from that as at 31 December 2017, and 2.99times of the total revenue of RMB36.209 billion in 2017.
Continuing to achieve fruitfulresults in technology innovation: During theReporting Period, the Group was awarded with 65 prizes for scientific andtechnological advancement above provincial/ministerial levels, including twoprojects of “coal-based oil/olefin large-scale modern coal chemical industrycomplete technology development and application” and “high efficiency methanolto olefins whole process technology” that the Group has participated inresearch and development and taken the lead in design were awarded the firstprize of national science and technology progress in 2017; “deep delayed cokingtechnology to improve the yield of light oil” won second prize of nationalscience and technology progress in 2017. 19 projects obtained the 2017 SinopecGroup Science and Technology Progress Award. 6 projects won the annualOutstanding Engineering Design Award of Sinopec Group, 21 projects won theaward of quality engineering.
Chairman of SEG, Mr. LINGYiqun said, “In the first half of 2018, the international oilprice fluctuated and the industrial efficiency of the petroleum and chemicalindustry of China has been further improved. Multiple projects among “seven majorpetrochemical industrial bases” have continuously entered construction peak.C2/C3 conversion utilization has become a new market hot point, multipleprojects of ethane cracking for production of ethylene have started initialplanning or design, and oil price rise has enhanced the investment intention ofowners of new coal chemical industry project. The Company has made energeticefforts to develop domestic and foreign markets, continued to enhance projectassurance capability, optimized business structure and internal resources, andachieved stable and solid growth. In the second half of 2018, the Group willkeep working on the overall solutions involving natural gas, new coalchemicals, environmental protection, energy saving and relevant industries onthe basis of consolidating its conventionally advantaged businesses such as oilrefining and petrochemical industries for the purpose of creating innovationsystem focusing on technology innovation by further deepening thereorganization of specialized engineering, regulating internal transactions andoptimizing allocation of resources. The Group will consolidate the existingoverseas markets, deploy the favorable policies associated with the “Belt andRoad” construction, actively expand the markets in the countries along the“Belt and Road” and keep improving the Group’s overall profitability and riskresistance ability in relation to overseas businesses.
Business Review and Highlights
Fruitful market development
During the Reporting Period, the Group seized market recovery opportunity, exploitedits overall advantages in its industry, business and technical chains, andincreased market development efforts. During the Reporting Period, the value ofnew contracts entered into by the Group was RMB35.484 billion, among which, thevalue of newly signed domestic contracts amounted to RMB32.241 billion, and thevalue of newly signed overseas contracts amounted to approximately USD483million.
In the PRC, during the Reporting Period, the Group entered into new contracts fora number of large projects, such as Zhongke Integrated Project (oil refining,chemical industry and power station parts) with a total contract value ofapproximately RMB19.644 billion; Sinopec Sabic Project with a total contractvalue of approximately RMB4.586 billion; Sinopec Group Yanshan Branch continuousreforming combination unit oil product upgrading and revamping project with atotal contract value of approximately RMB640 million. Overseas, during theReporting Period, the Group entered into new contracts for a number of largeprojects, such as Saudi SABIC GAS Phase-9 Air Separation Project with a totalcontract value of approximately RMB1.756 billion; Kuwait New Collection Center (GC-32)Project with a total contract value of approximately RMB867 million, etc. Inaddition to the above projects, the Group has also kept track of some oilrefining, petrochemical engineering, new coal chemical, energy saving andenvironmental protection projects, which are expected to be signed in thefuture.
Successful Implementation of MajorProjects
Eastern China 's largest coal - based methanol to olefins project: Zhong’An JointCoalification Complex Project has fully entered installation peak period, thegeneral progress has exceeded 70%, and overall quality and safety are undercontrol.
One of SinopecGroup’s “four world-class refining bases”: Zhongke Integrated Project isat detailed design and onsite pile foundation construction phase, the generalprogress has exceeded 10%, and the overall progress is under control.
Sinopec- Saudi Basic Industry Corporation Strategic Cooperation Project: Sinopec-SABICProject is at startup phase, detailed design is in the process and constructionpreparation is being made on site.
Buildinga world-class portside petrochemical base: The design work of the SinochemQuanzhou 1 million tons / year ethylene and oil refining expansion project isat detailed design phase, underground pipe and civil work construction are inthe process onsite, and the overall progress is under control.
Large crude oil commercial reserve base project：Dongjiakou crude oil commercialreservation base project is at installation phase onsite, the progress has exceeded60%, overall quality and safety are under control.
The Company's largest project by contract value in the Gulf region: design work of theKuwait Oil Refining Project has been completed, and main equipment, materialdelivery to site and onsite construction have been completed by over 50%.
The Company's largest project in the Southeast Asian region: the design, purchaseand construction machinery installation works of the Malaysia RAPID OilRefining Project have been completed, onsite pre-commissioning and commissioningare being performed as per plan, and all contract works of the project will becompleted in the second half of 2018.
The Company’s large-scale oil refining projects in Central Asia: the scope of workunder the contract for the FCC Project of Kazakhstan Atyrau Refinery mainlycovers the engineering, procurement, construction & commissioning of 13processing units including 2.43 Mtpa FCC units and 47 utilities units. Theproject successfully completed all aspects of project engineering, procurementand construction, and is now at the stage of commissioning.
Wide cooperation, pursue win-win
In the Reporting Period, the Group has continued to carry out wide cooperation withresearch and development institutions and universities in China and foreigncountries in fields such as new coal chemical, energy saving and environmentalprotection and new energy, in which the new generation of coal (synthetic gas)to glycol technology pilot plant carried out in cooperation with ChineseAcademy of Sciences has been completed and full flow procedure has beeninitiated; has propelled demonstration of direct coal liquefaction technologyin a company in Xingjiang; has signed agreement for implementation ofindustrial unit design on the basis of construction of demonstration unit forbiomass raw material-to-gasoline/diesel technology developed by Henan ShenrunGroup; in response to national policy for promotion of ethanol gasoline, hascollaborated and carried out research of cellulose ethanol industrial pilotplant program research, and has communicated with potential investor; hascooperated with China University of Petroleum (Beijing) to participate indevelopment of “beautiful countryside” in Beijing and provide initial engineeringservice.
Continuous promotion of innovation andtechnological advancement
Steady progress of the R&D of majortechnologies developed along with the key projects.
A batch of key development technologies have been completed, and have reached thedevelopment target: All 5 projects such as large size liquefied natural gas(LNG) receiving station engineering complete set technology, development ofcomplete set technology of producing 100 Ktpa propyleneoxide by hydrogenperoxide solution, coal chemical sewage comprehensive treatment and near-zeroemission technology development have been brought into industrial application;and key technical problem tackling projects such as new type sulfuric acidalkylation technology development and industrial application, the 2nd efficientenvironmental protection arene technology development and industrialapplication of Sinopec, 20 Ktpa slurry bed stredford process hydrogen peroxideproduction complete set technology and SE coal (coke) water slurry gasificationcomplete set technology development have entered onsite construction phase.
Research and development work of a batch of key projects have been progressed stably:Key technical problem tackling targets of different phases have been completedfor projects such as 20 ktpa ZCA-1 solid acid alkylation complete set newtechnology development and industrial application, gas phase polypropyleneproduct VOC deprivation technique complete set technology development, heavyfeed stock for increasing production of low-carbon alkene and BTX keytechnology, solid super acid C5/C6 isomerization technology development andindustrial test, 2,000t level SE coal gasification large-scale industrialdemonstration and application, etc..
Technology licensing was conducted effectively. During the Reporting Period,the value of newly signed technology licensing contract amounted to RMB180.00million.
Good momentum persisted in patent applications. During the Reporting Period,the Group completed 256 new patent applications, including 166 inventionpatents, accounting for 64.8%; licensing of 202 patents, of which 62 inventionpatents, accounting for 30.7%.
Continuingto Achieve Numerous Fruitful Results in Technology Innovation. Duringthe Reporting Period, the Group was awarded with 65 prizes for scientific andtechnological advancement above provincial/ministerial levels, including twoprojects of “coal-based oil/olefin large-scale modern coal chemical industrycomplete technology development and application” and “high efficiency methanolto olefins whole process technology” that the Group has participated inresearch and development and taken the lead in design were awarded the firstprize of national science and technology progress in 2017; “deep delayed cokingtechnology to improve the yield of light oil” won second prize of nationalscience and technology progress in 2017. 19 projects obtained the 2017 SinopecGroup Science and Technology Progress Award. 6 projects won the annualOutstanding Engineering Design Award of Sinopec Group, 21 projects won theaward of quality engineering.
Environmentalprotection and energy saving business was promoted constantly
During the Reporting Period, theGroup signed energy saving and environmental protection contracts with a valueof RMB726 million, including joint sewage treatment plant and alkali wasteincinerator EPC general contract of Sinopec Group and Anhui Province, boilerand combustion engine flue gas denitration reconstruction project of FujianRefining & Petrochemical Company Limited and boiler flue gas denitrationreconstruction project of Yangzi Petrochemical Company, etc..
In the field of energy saving, the Grouphas actively propelled the progress of 56 existing contract energy managementprojects ofSinopec Group and signedcontract for 4 projects, and is performing contract negotiation for 11projects, and the Group promotedprogressof several contract energy management projects in Anqing, etc. The Group isactively organizing and implementingenergysaving technology communication to enrich energy saving technology resources.
In the field of environmentalprotection, the Group has won the bid for EPC project for site pollutionrestoration, abatement andcontrol project of Dongliplant of Polyether Department of Sinopec Tianjin Petrochemical, and isimplementing contract negotiationatpresent; and has actively propelled the progress of a large size polluted soilabatement and control project of China. Incollaboration with advanced technologiesof China and foreign countries, has implemented CO2 trap, conversiondemonstrationdevice program research andinitial stage work of project.
Continuouspromotion of digital factory construction
During the Reporting Period, the Grouphas comprehensively propelled integration design and digital deliveryapplicationand basically completeddigital factory construction platform based on INTERGRAPH/AVEVA productionline, innovation ofengineering design mode ofthe Group has supported intelligent factory operation of owners of China andforeign countries.The Group has strengthenedfull range, full module, full process and full elements cost collectivizedmanagement and control oflarge scale engineeringsoftware, in-depth application of intelligent technique design, comprehensivepromotion of integrationengineering design, qualityand efficiency enhancement of visualized 3D design, breakthrough in digitaldelivery pilot,concentrated management andcontrol of standardized engineering master data, cloud resources sharing ofvirtual engineering,first-class platform,outstanding design and high quality service have effectively ensured highlevel, high quality and highefficiency completion ofmaster contract of different owners of China and foreign countries, meanwhile,have enhanced enterpriseengineering design capabilityand project implementation capability in an overall manner, and have injectednew energy intocreation of intelligentengineering company.
Safe productionremained stable
During the Reporting Period, regardingQHSE (quality, health, safety and environment) management, with long-termmechanismconstruction as the leader,and tamping “three-base management” and strengthening risk prevention andcontrol as the main line,adhere to people-oriented,pay attention to continuous improvement, focus on QHSE system management andquality safetymain responsibilityimplementation, push forward quality and safety standardization constructionand essential security capacitybuilding, pass multi-leveltraining and deepen the design of the essence of safety management, strengthensupervision andinspection, carry outin-depth implementation of quality promotion activities and other measures, andconstantly strengthen QHSEcontrol, lay a more solidfoundation for management, and control overall situation of quality, safety andexternal public security.
As at the end of the Reporting Period,achieved the goal of no reporting accidents in safety, quality, environment,occupationalhealth and overseas publicsecurity accident had happened in the project under execution as a result ofthe awareness and strictmanagement of all employeesof the Group, and 108.3 million safe man hours had been realized inaccumulation.
Business Prospects
Looking forward to the second half of 2018, the uncertainty of the global economyincreases, the uncertainty of international oilprice trendincreases, and the influence of trade friction requires further observation.Domestic oil refining industry will accelerateindustrialpark arrangement and product structure adjustment, the current internationaloil price will enable integrated energycompany torealize full industrial chain benefit creation, the domestic natural gas demandis strong and is facing a tremendousdevelopmentopportunity, the Group will correctly face the situations, sufficiently graspopportunities, actively exert the advantagesofcollectivization, integration and large scale, continuously enhance corecompetition force of enterprise, propel sustainable andhealthydevelopment of enterprise, and make effort to create a “national business card”of oil refining and chemical engineering ofChina.
Regarding market development, the Group will exert one-stop overall solutionadvantages, strengthen overall development oflarge sizeenergy chemical engineering project, solidify and enhance share of traditionalengineering market, so as to ensurerealization ofthe whole-year task target; accelerate promotion of market development in newfield, take energy saving andenvironmentalprotection as breakthrough point, accelerate promotion of contract energymanagement and land restorationbusiness asbenefit growth point, grasp market opportunities to drive development ofengineering markets such as natural gasutilization,biomass new energy and CO2 trap utilization, etc. Taking realization ofsustainable development as target, activelyintegrateexternal advantageous resources, establish strategic cooperation partnershiprelation with leading enterprises in relevantindustriessuch as electricity, shipping and capital construction, innovate cooperationmode, and enhance the competition forceof entirefactory EPC Contracting; exert overall advantages, propel development ofstrategic customers, focus on enhancementof customervalue, make effort to cultivate strategic customer relation featuring long-termstability and recognition of high price forhigh quality.
Regarding project management, the Group will continue to focus oneffectiveness, propel effectiveness-oriented projectmanagementmode, and give prominence to the principle of effectiveness first in largeproject coordination and resourcesconfigurationmanagement under the precondition of assurance of safety, quality and progress.In terms of overseas projectmanagement,regarding the complicated international situations at present, strengthenresearch of overseas project risk,and formulateeffective and feasible program, so as to ensure the Company benefit to themaximum degree. Pay attention toestablishmentof foundation of overseas project implementation management, sufficiently exertintegration advantages, graduallyrealizeresources sharing, and enhance the overall capability of company projectimplementation.
Regarding technology R&D, the Group will focus on overall developmentstrategy, liberate the mind, actively implementtechnologysource survey, especially actively look for technical cooperation in innovativelooking and cutting edge technologiesand certaincommon technologies, and expand technology sources. Regarding projects of whichtechnical basis is good,conditions are goods and industrializationprospect is clear, it is necessary to further strengthen support, so as tospeed outobtainment of achievement and benefit.
In terms of resources optimization, the Group will exert the existing mature resourcesadvantages of subsidiary companies, utilizethe Group integration management mechanism, enhancesubsidiary companies resources configuration efficiency, and realizeresources optimization configuration. In accordancewith the principle of resources optimization and mutual compensation ofadvantages, strengthening of business cooperation aswell as establishment and execution of mutual compensation mechanismof work, accelerate promotion of progress and depth ofresources optimization integration work in regions where conditions areavailable, enhance regional resources configurationefficiency, enhance regional comprehensive competition force, enhanceoverall composition of forces, reduce marginal costand enhance overall efficiency.
About SINOPEC Engineering (Group) Co., Ltd.
SINOPEC Engineering (Group) Co., Ltd. is an international engineering corporation, withthe leading edge in the PRC. The Group provides engineering services for abroad range of industries including oil refining, petrochemicals, new coalchemicals, inorganic chemicals, pharmaceutical chemicals, clean energy, storageand transportation engineering, environmental protection and energy savingengineering, with a complete service chain involving research, development andlicensing, preliminary consultation, financing assistance, design, procurement,construction, large equipment lifting and transportation, andpre-commissioning/start-up services. With its industry experience of more than60 years and continual innovation in technical expertise, the Group has achievedgreat success in the design and construction of large-scale and complex oilrefining, petrochemical, new coal chemical, natural gas processing and storageand transportation engineering projects, and possesses strong competitiveness.
