-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wq4K2ni+AA0k8U6r85ju4RiQTw///uok9L9TwKDXyRUjGtgVSZSx3aV1c5HAc/yO VIUye2j4a5dqyAbNmi28TA== 0000950172-05-001385.txt : 20050429 0000950172-05-001385.hdr.sgml : 20050429 20050429062742 ACCESSION NUMBER: 0000950172-05-001385 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20050428 FILED AS OF DATE: 20050429 DATE AS OF CHANGE: 20050429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHINA PETROLEUM & CHEMICAL CORP CENTRAL INDEX KEY: 0001123658 STANDARD INDUSTRIAL CLASSIFICATION: PETROLEUM REFINING [2911] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15138 FILM NUMBER: 05782526 BUSINESS ADDRESS: STREET 1: #6A HUIXIN EAST ST STREET 2: CHAOYANG DISTRICT CITY: BEIJING STATE: F4 ZIP: 00000 BUSINESS PHONE: 861064990060 MAIL ADDRESS: STREET 1: #6A HUIXIN EAST STREET STREET 2: CHAOYANG DISTRICT CITY: BEIJING CHINA STATE: F4 ZIP: 00000 6-K 1 bei32047-16.txt 6-K 04-28-2005 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the month of April, 2005 China Petroleum & Chemical Corporation A6, Huixindong Street, Chaoyang District Beijing, 100029 People's Republic of China Tel: (8610) 6499-0060 (Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.) Form 20-F X Form 40-F ----- ----- (Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. ) Yes No X ----- ----- (If "Yes" is marked, indicate below the file number assigned to registrant in connection with Rule 12g3-2(b): 82-__________. ) N/A This Form 6-K consists of: The announcement of the results of China Petroleum & Chemical Corporation (the "Registrant") for the first quarter ended 31 March 2005, made by the Registrant in English on April 28, 2005. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. China Petroleum & Chemical Corporation By: /s/ Chen Ge ----------- Name: Chen Ge Title: Secretary to the Board of Directors Date: April 28, 2005 The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. [GRAPHIC OMITTED] (a joint stock limited company incorporated in the People's Republic of China with limited liability) (Stock code: 0386) First Quarter Results Announcement for 2005 - ------------------------------------------------------------------------------- Highlights of the results of the Company for the first quarter ended 31 March 2005 During this reporting period, income from principal operations and net profit of China Petroleum & Chemical Corporation ("Sinopec Corp.") and its subsidiaries (the "Company") under the PRC Accounting Rules and Regulations amounted to RMB 169,040 million and RMB 9,004 million respectively. Turnover and other operating revenues and profit attributable to shareholders of Sinopec Corp. under International Financial Reporting Standards ("IFRS") amounted to RMB 174,127 million and RMB 9,637 million respectively. This quarterly results announcement is prepared in accordance with the Regulations on Disclosure of Information in Quarterly Reports for Listed Companies issued by the China Securities Regulatory Commission ("CSRC"). This announcement is published simultaneously in Shanghai and Hong Kong and the contents of the announcements published in Shanghai and Hong Kong are the same. Financial information set out in this quarterly results announcement has been prepared in accordance with the PRC Accounting Rules and Regulations. Although it is not required by CSRC, Sinopec Corp. has also included in this announcement the relevant financial information prepared in accordance with IFRS. This announcement is made pursuant to the disclosure requirement under Rule 13.09 of the Listing Rules for its publication in Hong Kong. - ------------------------------------------------------------------------------- 1. Important Notice 1.1 The Board of Directors of China Petroleum & Chemical Corporation ("Sinopec Corp.") and its Directors warrant that there are no material omissions from, or misrepresentations or misleading statements contained in this announcement, and severally and jointly accept full responsibility for the authenticity, accuracy and completeness of the information contained in this announcement. 1.2 This quarterly results announcement has been reviewed and approved at the seventeenth meeting of the Second Session of the Board of Directors of Sinopec Corp. 1.3 The financial statements contained in this announcement have not been audited. 1.4 Mr. Chen Tonghai, Chairman of the Board of Sinopec Corp., Mr. Wang Tianpu, President of Sinopec Corp., Mr. Zhang Jiaren, Director, Senior Vice President and Chief Financial Officer of Sinopec Corp., and Mr. Liu Yun, Head of the Accounting Division of Sinopec Corp., hereby declare that the authenticity and completeness of the financial statements contained in this quarterly results announcement are warranted. 2. Basic Information of Sinopec Corp. 2.1 Summary of the information of Sinopec Corp.
Stock name SINOPEC CORP SINOPEC CORP SINOPEC CORP [GRAPHIC OMITTED] Stock code 0386 SNP SNP 600028 Place of listing Hong Kong Stock New York Stock London Stock Exchange Shanghai Stock Exchange Exchange Exchange Authorised Representatives Secretary to the Representative on Board of Directors Securities Matters Name Mr. Wang Jiming Mr. Chen Ge Mr. Chen Ge Mr. Huang Wensheng Address 6A Huixindong Street, Chaoyang District, Beijing, China Postcode 100029 Tel 86-10-64990060 86-10-64990060 86-10-64990060 86-10-64990060 Fax 86-10-64990022 86-10-64990022 86-10-64990022 86-10-64990022 E-mail ir @sinopec.com.cn / media @sinopec.com.cn
2.2 Financial Information 2.2.1 Principal accounting data and financial indicators 2.2.1.1 Principal accounting data and financial indicators prepared in accordance with the PRC Accounting Rules and Regulations
Changes at the end of this reporting period At At compared with data at 31 March 31 December the end of the preceding 2005 2004 year end (%) Total assets (RMB millions) 481,785 460,081 4.72 Shareholders' funds (excluding minority 195,417 186,350 4.87 interests) (RMB millions) Net assets per share (RMB) 2.254 2.149 4.87 Adjusted net assets per share (RMB) 2.206 2.102 4.95 Changes in this Three-month Three-month reporting period period ended period ended compared to the same 31 March 31 March period of the preceding 2005 2004 year (%) Net cash flow from operating activities 14,854 11,208 32.53 (RMB millions) Earnings per share (RMB) 0.104 0.086 20.93 Return on net assets (%) 4.608 4.363 0.25 percentage point Return (adjusted for non-operating 4.681 4.852 (0.17) percentage point profits/losses) on net assets (%)
Three-month period ended Non-operating profits/losses 31 March 2005 (RMB millions) Written back of provisions on assets provided in previous years (123) Non-operating expenses (excluding normal provisions on assets provided in 427 accordance with the Accounting Regulation for Business Enterprises) Of which: Losses on disposal of fixed assets 349 Donations 33 Non-operating income (90) Tax effect of the above (71) Total 143 2.2.1.2 Principal accounting data and financial indicators prepared in accordance with IFRS Changes at the end of this reporting period At At compared with data at 31 March 31 December the end of the preceding 2005 2004 year end (%) Total assets (RMB millions) 497,046 474,594 4.73 Shareholders' funds attributable to 202,677 193,040 4.99 shareholders of the parent (excluding minority interests) (RMB millions) Net assets per share (RMB) 2.338 2.226 4.99 Adjusted net assets per share (RMB) 2.294 2.187 4.89 Changes in this reporting period compared to Three-month Three-month the same period of period ended period ended the preceding year 31 March 2005 31 March 2004 (%) Net cash flow from operating activities 12,793 9,874 29.56 (RMB millions) Earnings per share (RMB) 0.111 0.096 15.63 Return on net assets (%) 4.755 4.612 0.14 percentage point
Note: The data for the first quarter ended 31 March 2004 was restated, please refer to Section 3.3.2 to this quarterly results announcement for more details. 2.2.2 Income statements This section includes the income statements for the first quarter ended 31 March 2005 prepared in accordance with both the PRC Accounting Rules and Regulations and IFRS with comparative figures for the same period of 2004. 2.2.2.1 Income statements prepared in accordance with the PRC Accounting Rules and Regulations
Item Three-month period ended Three-month period ended 31 March 2005 31 March 2004 The Group The Company The Group The Company (Note 1) (Note 1) (Note 1) (Note 1) RMB millions RMB millions RMB millions RMB millions 1. Income from principal 169,040 114,331 123,490 86,063 operations Less: Cost of sales 136,187 98,798 94,583 71,740 Sales taxes and surcharges 4,207 2,766 3,835 2,290 2. Profit from principal 28,646 12,767 25,072 12,033 operations Add: Profit/(loss) from other 320 15 149 (138) operations Less: Selling expenses 4,880 3,140 4,203 2,732 Administrative expenses 6,056 3,555 5,065 3,358 Financial expenses 1,372 954 1,162 926 Exploration expenses, 1,370 1,070 1,454 911 including dry-holes 3. Operating profit 15,288 4,063 13,337 3,968 Add:Investment income 143 9,513 141 8,088 Non-operating income 90 31 72 52 Less:Non-operating expenses 427 258 1,590 1,446 4. Profit before taxation 15,094 13,349 11,960 10,662 Less: Taxation 4,629 4,345 3,456 3,299 Minority interests 1,398 - 1,141 - Add: Unrecognised investment losses (63) - 67 - (Note 2) 5. Net profit 9,004 9,004 7,430 7,363
Notes: (1) The "Company" means China Petroleum & Chemical Corporation; The "Group" means China Petroleum & Chemical Corporation and its subsidiaries; (2) This item represents the (written back) unrecognised investment losses exceeding the carrying value of long-term equity investments. 2.2.2.2 Consolidated income statements prepared in accordance with IFRS
Item Three-month period ended 31 March 2005 2004 RMB millions RMB millions 1. Turnover and other operating revenues 174,127 129,608 Including: Turnover 169,040 124,678 Other operating revenues 5,087 4,930 2. Operating expenses (157,247) (115,220) Including: Purchased crude oil, products and operating (131,349) (90,506) supplies and expenses Selling, general and administrative expenses (7,577) (7,169) Depreciation, depletion and amortisation (8,090) (7,138) Exploration expenses, including dry-holes (1,370) (1,454) Personnel expenses (4,317) (4,048) Taxes other than income tax (4,207) (3,863) Other operating expenses (net) (337) (1,042) 3. Operating profit 16,880 14,388 4. Finance costs (1,239) (1,184) Including: Interest expense (1,330) (1,244) Interest income 78 77 Foreign exchange losses (25) (24) Foreign exchange gains 38 7 5. Investment income/(loss) 33 (11) 6. Share of profits less losses from associates 117 123 7. Profit from ordinary activities before taxation 15,791 13,316 8. Taxation (4,749) (3,868) 9. Profit from ordinary activities after taxation 11,042 9,448 Attributable to: 10. Shareholders of the parent 9,637 8,306 11. Minority interests 1,405 1,142 12. Profit from ordinary 11,042 9,448 activities after taxation
2.2.3 Difference between the net profit for the first quarter of 2005 and shareholders' funds as at 31 March 2005 under the PRC Accounting Rules and Regulations and IFRS 2.2.3.1 Effects of major differences between the PRC Accounting Rules and Regulations and IFRS on the net profit are analysed as follows:
Three-month period ended 31 March 2005 2004 RMB millions RMB millions Net profit under the PRC Accounting Rules and Regulations 9,004 7,430 Adjustments: Pre-operating expenditures 457 (44) Depreciation of oil and gas properties 190 237 Capitalisation of general borrowing costs, net of depreciation 108 94 effect Unrecognised investment losses 63 (67) Acquisition of Sinopec National Star 29 29 Acquisitions of Tianjin Petrochemical, Luoyang Petrochemical, - 460 Zhongyuan Petrochemical and Catalyst Plants Revaluation of land use rights 8 8 Amortisation of Goodwill 7 - Government grants 1 - Disposal of oil and gas properties net of depreciation effect (103) 572 Effects of the above adjustments on taxation (120) (412) Effects of the above adjustments on minority interests (7) (1) Profit attributable to shareholders of the parent under IFRS 9,637 8,306
2.2.3.2 Effects of major differences between the PRC Accounting Rules and Regulations and IFRS on the shareholders' funds are analysed as follows:
At 31 March 2005 At 31 December 2004 RMB millions RMB millions Shareholders' funds under the PRC Accounting Rules and 195,417 186,350 Regulations Adjustments: Pre-operating expenditures - (457) Depreciation of oil and gas properties 11,884 11,694 Capitalisation of general borrowing costs 1,778 1,670 Acquisition of Sinopec National Star (2,666) (2,695) Revaluation of land use rights (1,303) (1,311) Goodwill 7 - Government grants (604) (605) Disposal of oil and gas properties 3,280 3,383 Impairment losses on long-lived assets (113) (113) Effects of the above adjustments on taxation (5,166) (5,046) Effects of the above adjustments on minority interests 163 170 Shareholders' funds attributable to shareholders of the parent 202,677 193,040 under IFRS
2.3 Top ten shareholders with tradable shares Number of shareholders Number of shareholders of Sinopec Corp. as at 31 March 2005 as at 31 March 2005: 266,547, including 256,195 holders of A shares and 10,352 holders of H Shares. Top ten shareholders with tradable shares
Number of shares held at the end of Nature the reporting period (A, B, H share Name of shareholders (10,000 shares) or others) HKSCC (Nominees) Limited 1,667,892.8 H Share EFUND 50 Securities Investment Fund 7,226.1 A Share Xinghe Securities Investment Fund 6,521.9 A Share Harvest Service Sector Fund 6,148.8 A Share Qingdao Port Authority 6,000.0 A Share CITIC Classic Securities Co., Ltd. 5,870.5 A Share China Fund SSE 50ETF Investment Fund 5,706.7 A Share Haifutong Profits Securities 4,703.9 A Share Xinghua Securities Investment Fund 3,950.0 A Share China Southern Sustaining Growth Fund 3,620.0 A Share
2.4. Business review In the first quarter of 2005, the Chinese economy continued to maintain growth and domestic demand for refined oil products and petrochemical products remained strong. International prices of crude oil had fluctuated at a fairly high level. By adopting various measures to increase production volume and optimise operations in respond to the changing market, the Company obtained reasonably good operating results in various areas, including oil and gas production, processing volume of crude oil, sales volume of refined oil products and ethylene production. Exploration and Production Segment: the Company has made further efforts in exploration and development. Significant achievements have been made in exploration of concealed oil and gas reserves in the mature oil fields in eastern China. The exploration in the Tahe oilfield in western China has shown good discoveries. During the period, the Company accelerated the pace of construction for the increase of production capacity in major areas. Oil production was stable and gas production increased over the same period last year. Refining Segment: under the backdrop of pricing control over oil products in domestic market, the Company optimised refining process and resources allocation, adjusted product mix and increased the production of high value-added products. In addition, resources allocation and transportation were optimized and the price difference between sour and sweet crude oil was taken advantage of, processing volume of sour crude oil was increased and stable operation of the refining facilities which had been operated at a high utilization rate was maintained. Marketing and Distribution Segment: the Company coordinated production and sales closely in an effort to meet the strong demand for oil products in domestic market, which resulted in a increase in its domestic sales volume of refined oil products. At the same time, the Company took measures to raise its retail and distribution volume, which resulted in the steady increase in the proportion of retail and distribution sales as a percentage of total domestic sales. Chemicals Segment: the Company adhered to the marketing strategy of "focusing on market, full-load production and low inventories". It also strives to adjust its product mix and optimise its marketing structure. During the period, the production of major chemical products such as synthetic resin, synthetic rubber, monomer and polymers for synthetic fibers has increased significantly. The production volume of high value-added products such as performance compound resins and differential fibers also experienced further increase. In the first quarter of 2005, production has been commissioned for the Secco ethylene project. Summary of Principal Operating Results for the first quarter
Changes compared with Three-month period the same period Operating Data Unit ended 31st March last year 2005 2004 (%) Exploration and Production Crude oil production thousand tonnes 9,530.5 9,538.3 (0.08) Natural gas production million cubic meters 1,469 1,395 5.30 Realised crude oil price RMB/tonne 2,127.29 1,678.63 26.73 Realised natural gas price RMB/thousand 655.36 606.47 8.06 cubic meters Refining Crude processing volume thousand tonnes 34,334.7 32,368.6 6.07 Gasoline, diesel and kerosene thousand tonnes 20,607.2 19,250.9 7.05 production Of which: Gasoline thousand tonnes 5,816.2 5,730.6 1.49 Diesel thousand tonnes 13,112.3 12,043.1 8.88 Kerosene incl. jetfuel thousand tonnes 1,678.7 1,477.2 13.64 Light chemical feedstock thousand tonnes 4,992.2 4,534.0 10.11 Light yield % 73.48 73.85 (0.37) percentage point Refining yield % 92.63 92.82 (0.19) percentage point Marketing and Distribution Total domestic sales of refined oil thousand tonnes 24,130.5 21,704.5 11.18 products Of which: Retail thousand tonnes 13,46.0.0 11,977.2 12.38 Distribution thousand tonnes 5,350.6 4,401.4 21.00 Wholesale thousand tonnes 5,319.9 5,325.9 (0.11) Total number of petrol stations Stations 30,164 30,416 (0.83) Of which: Owned and self-operated Stations 26,682 24,680 8.11 Franchised Stations 3,482 5,736 (39.30) Throughput per petrol station Tonne/station 2,018 1,757 14.85 (Note 1) Chemicals (Note 2) Ethylene thousand tonnes 1,121.8 1,041.5 7.71 Synthetic resins thousand tonnes 1,683.1 1,544.9 8.95 Of which: performance compound resins thousand tonnes 845.6 725.8 16.51 Synthetic rubbers thousand tonnes 158.1 152.1 3.94 Monomers and polymers for synthetic thousand tonnes 1,595.6 1,515.2 5.31 fibers Synthetic fibers thousand tonnes 400.0 407.1 (1.75) Of which: differential fibers thousand tonnes 195.1 133.7 45.92 Urea thousand tonnes 388.3 541.5 (28.29)
Notes 1: Throughput per petrol station is that of annual average; 2: The operating results for the three-month period ended 31 March 2004 are pro-forma data which includes the data of Chemical Assets acquired from China Petrochemical Corporation and its subsidiaries (excluding the Company,) ("Sinopec Group"). Capital expenditure: The capital expenditure of the Company in the first quarter of 2005 was RMB 11.359 billion. The expenditure for Exploration and Production segment was RMB 4.451 billion. The newly added production capacity of crude oil and natural gas amounted to 0.60 million tonnes/year and 90 million cubic meters/year respectively. The expenditure for Refining segment was RMB 1.256 billion. The second phase of the Ningbo-Shanghai-Nanjing crude oil pipeline will be put into operation in the near future. The revamped refining facilities in Yangzi Petrochemical and Jinling Petrochemical have come on stream. The revamping of refining facilities in Yanshan and Guangzhou and construction of the crude oil pipeline along the Yangzi river are on schedule. The expenditure for Chemical segment was RMB 0.804 billion. The expansion of ethylene facilities in Sinopec Maoming Chemical and ethylene glycol innovation project in Shanghai Petrochemical, the Yangtze Petrochemical's PTA revamping project, Gaoqiao Petrochemical's ABS facilities and other key technical innovation projects such as chemical fertilizer coal-gasification projects progressed smoothly. The expenditure for Marketing and Distribution segment was RMB 4.719 billion. The construction of southwest oil products pipeline, revamping and acquization of petrol stations are on schedule. The expenditure for the Company's headquarters and others was RMB 0.129 billion. Information projects such as ERP also made smooth progress. In addition, the capital expenditure for joint ventures such as Shanghai Secco ethylene project, Yueyang Sinopec-Shell coal gasification project and BASF-YPC was approximately RMB 1.292 billion. 3 Management's Discussion and Analysis 3.1 Brief analysis of the Company's general operating activities during the reporting period Based on the PRC Accounting Rules and Regulations, income from principal operations of the Company for the first quarter of 2005 amounted to RMB 169.040 billion, representing an increase of 36.89% over the same period of last year, and the net profit amounted to RMB 9.004 billion, representing an increase of 21.18% over the same period of last year. Based on IFRS, the turnover and other operating revenues of the Company for the first quarter of 2005 amounted to RMB 174.127 billion, representing an increase of 34.35% over the same period of last year. Profit attributable to shareholders of the parent amounted to RMB 9.637 billion, representing an increase of 16.02% over the same period of last year. 3.1.1 Principal segments or products accounting for over 10% of income or profit from principal operations |X| applicable |_| not applicable The table below shows segmental information prepared in accordance with the PRC Accounting Rules and Regulations:
Income from Profit from principal principal Gross profit By segments or by products operations Costs of sales operations ratio (%) (RMB millions) (RMB millions) (RMB millions) (Note) Exploration and production 20,169 8,343 9,104 45.14 Refining 100,035 93,497 2,961 2.96 Marketing and distribution 94,813 86,005 8,696 9.17 Chemicals 41,081 33,115 7,774 18.92 Corporate and others 23,425 23,310 111 0.47 Elimination of inter-segment sales (110,483) (108,083) N/A N/A Total 169,040 136,187 28,646 16.95 Of which:related party transactions 14,533 13,056 1,431 9.85
Note: Gross profit ratio = profit from principal operations/income from principal operations The table below shows segmental information prepared in accordance with IFRS:
Percentage of operating profit/(loss) Operating Operating Operating over operating By segments or by products revenues expenses profit/(loss) revenues (RMB millions) (RMB millions) (RMB millions) (%) Exploration and production 21,278 12,508 6,394 30.05 Refining 101,826 100,131 1,671 1.64 Marketing and distribution 95,061 91,519 3,542 3.73 Chemicals 42,620 36,709 5,911 13.87 Corporate and others 23,825 24,463 (638) -2.68 Elimination of inter-segment sales (110,483) (108,083) N/A N/A Total 174,127 157,247 16,880 9.69
3.1.2 Seasonal or periodic nature of the Company's operations |_| applicable |X| not applicable 3.1.3 The composition of the profits during this reporting period (significant changes in the profit from principal operations, profit from other operations, period expenses, investment income, subsidy income and net non-operating income/expenses as a percentage of profit before taxation are listed and explained below in accordance with the PRC Accounting Rules and Regulations) |X| applicable |_| not applicable
Three-month period Year ended 31 December Item ended 31 March 2005 2004 Change in Percentage Percentage percentage of profit of profit of profit before before before Amount taxation Amount taxation taxation (RMB (%) (RMB (%) (percentage millions) millions) points) Profit from principal operations 28,646 189.78 115,222 215.23 -25.45 Profit from other operations 320 2.12 1,102 2.06 0.06 Period expenses 13,678 90.62 53,371 99.69 -9.07 Investment income 143 0.95 1,088 2.03 -1.08 Net non-operating income/expenses 337 2.23 10,506 19.62 -17.39 Profit before taxation 15,094 100.00 53,535 100.00 -
Significant changes and explanations: o Profit from principal operations The percentage of profit from principal operations to the profit before taxation was 189.78%, representing a decrease of 25.45 percentage points from 215.23% of the same period of the previous year. This was mainly due to the fact that the prices of crude oil, refined oil products and chemical products were still at high level in the first quarter of 2005. The Company also seized the market opportunities of strong demand for refined oil products and chemical products and was devoted to expand the market and increase its sales volume. Despite the significant increase in income from principal operations, the percentage increase in income from sales of goods was less than the percentage increase in the cost of raw materials and, as a result, profit from principal operations experienced a slight decrease of 0.56% over the quarterly average value of RMB 28.806 billon of the previous year; and profit before taxation had an increase of 12.78% over the quarterly average of the previous year. Therefore, the profit from principal operations accounted for a smaller percentage of the total profit before taxation than last year. o Net non-operating income/expenses The Company experienced losses on disposal of fixed assets and impairment losses on long-lived assets amounted to RMB 8.932 billion for the year ended 31 December 2004. However, the loss on disposal of fixed assets was relatively small in the first quarter of 2005. 3.1.4 Significant changes in, and explanations of, the principal operations and their structures as compared with those during the previous reporting period |_| applicable |X| not applicable 3.1.5 Significant changes in, and explanations of, the profitability (gross profit ratio) of principal operations as compared with those during the previous reporting period prepared in accordance with the PRC Accounting Rules and Regulations |_| applicable |X| not applicable 3.2 Significant events and their impacts as well as the analysis and explanations for the solutions |X| applicable |_| not applicable 3.2.1 Connected transactions The aggregate amount of connected transactions actually occurred in relation to the Company during the reporting period was RMB 32.529 billion, of which, incoming trade amounted to RMB 15.710 billion, and outgoing trade amounted to RMB 16.819 billion (including, RMB 16.798 billion of sales of products and services, RMB 9 million of interest earned, RMB 12 million of income from agency fee). During the reporting period, the products and services provided by Sinopec Group (purchase, storage and transportation, exploration and production services and production-related services) to the Company amounted to RMB 14.261 billion, representing 9.1% of the Company's operating expenses of the reporting period; the ancillary and social services provided by Sinopec Group to the Company amounted to RMB 433 million, representing 0.3% of operating expenses of the reporting period; the product sales from the Company to Sinopec Group and other connected parties amounted to RMB 16.798 billion, representing 9.6% of the Company's operating revenue, all of which were within expectation. During the reporting period, profit from principal operations resulted from connected transactions amounted to RMB 1.431 billion, representing 5.0% of the Company's profit from principal operations. The natures and pricing policies of connected transactions did not hav any significant change compared with 2004. 3.2.2 Interest of corporate bonds On 8 March 2004, Sinopec Corp. successfully issued domestic 10-year term corporate bonds which amounted to RMB 3.5 billion with a fixed coupon rate of 4.61%. On 28 September 2004, the corporate bonds were listed on the Shanghai Stock Exchange. On 24 February 2005, Sinopec Corp. repaid coupon interests for the first year in full. For further details, please refer to Sinopec Corp.'s announcement published in China Securities, Shanghai Securities, and Securities Times in Mainland China, and South China Morning Post and Hong Kong Economic Times in Hong Kong on 24 February 2004 , 28 September 2004 and 18 February 2005. 3.2.3 Acquisition of 40.5% shares held by Hong Kong Huarun in Qingdao Qirun Sinopec Corp. and Hong Kong Huarun Petrochemical (Group) Company Limited ("Hong Kong Huarun") entered into a share transfer agreement on 17 November 2004, pursuant to which Sinopec Corp. acquired 30% interest in Qingdao Qirun Petroleum and Chemical Company Limited ("Qingdao Qirun") from Hong Kong Huarun. On 21 January 2005, the parties entered into another share transfer agreement, pursuant to which Sinopec Corp. acquired the remaining 10.5% interest held by Hong Kong Huarun in Qingdao Qirun. The shares transfer represented an aggregate of 40.5% interest in Qingdao Qirun and the total consideration for the transfer amounted to RMB 480 million. 3.2.4 Merger by absorption of Beijing Yanhua Sinopec Corp. proposed to privatise Beijing Yanhua Petrochemical Company Limited (Beijing Yanhua) by way of merger by absorption through Beijing Feitian Petrochemical Company Limited (Beijing Feitian), a wholly-owned subsidiary of Sinopec Corp., established for the purpose of such merger. Pursuant to the agreement entered into between Beijing Feitian and Beijing Yanhua on 29 December 2004, Beijing Feitian will purchase the listed shares of Beijing Yanhua from its shareholders at a unit price of HKD 3.80 per share in cash, the total consideration involved amounts to approximately HKD 3.846 billion. The proposed merger has been approved by relevant shareholders and independent shareholders at the general meeting of independent shareholders of Beijing Yanhua, the general meeting of shareholders of Beijing Feitian, and by domestic and overseas regulators. Beijing Yanhua is applying for the de-listing from the overseas stock exchanges. Please refer to Sinopec Corp.'s announcement published in China Securities, Shanghai Securities and Securities Times in Mainland China and South China Morning Post and Hong Kong Economic Times in Hong Kong on 30 December 2004 and 7 March 2005 for details. 3.2.5 Changes in senior management At the sixteenth meeting of the Second Session of the Board of Directors of Sinopec Corp., the Board approved the resignation applications of Mr. Wang Jiming from the President position and Mr. Mou Shuling from the Senior Vice President position. The Board of Directors also approved the appointment of Mr. Wang Tianpu as President, and Mr. Zhang Jianhua and Mr. Wang Zhigang as Senior Vice President of Sinopec Corp. 3.3 Disclosure and explanations as to the changes in accounting policies, accounting estimates and scope of consolidation and fundamental errors |X| applicable |_| not applicable 3.3.1 Financial statements for the first quarter ended 31 March 2005 prepared under the PRC Accounting Rules and Regulations There is no significant change in the accounting policies, accounting estimates and scope of consolidation adopted in preparing the financial statements for the first quarter of 2005 by the Company as compared to those adopted in preparing the financial statements for the year of 2004. There has been no retrospective adjustment resulting from fundamental accounting errors reflected in the financial statements for the first quarter of 2005. 3.3.2 Financial statements for the first quarter ended 31 March 2005 prepared under IFRS 3.3.2.1 Basis of presentation Pursuant to the resolutions passed at the Extraordinary General Meeting held on 21 December 2004, the Company acquired the equity interests of Sinopec Group Tianjin Petrochemical Company ("Tianjin Petrochemical"), Sinopec Group Luoyang Petrochemical General Plant ("Luoyang Petrochemical"), Zhongyuan Petrochemical Company Limited ("Zhongyuan Petrochemical"), Sinopec Group Guangzhou Petrochemical General Plant ("Guangzhou Petrochemical") and certain catalyst plants ("Catalyst Plants") from Sinopec Group Company (hereinafter referred to as the "Acquisition of Petrochemical and Catalyst Assets"). As the Company, Tianjin Petrochemical, Luoyang Petrochemical, Zhongyuan Petrochemical, Guangzhou Petrochemical and Catalyst Plants are under the common control of Sinopec Group Company, the Acquisition of Petrochemical and Catalyst Assets are considered as "combination of entities under common control" which are accounted in a manner similar to a pooling-of-interests ("as-if pooling-of-interests accounting"). Accordingly, the assets and liabilities acquired from Tianjin Petrochemical, Luoyang Petrochemical, Zhongyuan Petrochemical, Guangzhou Petrochemical and Catalyst Plants have been accounted for at historical cost and the financial statements of the Company for periods prior to the combination have been restated to include the results of operations of Tianjin Petrochemical, Luoyang Petrochemical, Zhongyuan Petrochemical, Guangzhou Petrochemical and Catalyst Plants on a combined basis. In connection with these acquisitions, certain assets, primarily property, plant and equipment and construction in progress, were retained by Sinopec Group Company. The assets retained by Sinopec Group Company were reflected as a distribution in the shareholders' funds. The considerations for these acquisitions were treated as equity transactions. The summarisd results of operations previously reported by the Company for the first quarter ended 31 March 2004 have been restated to include the results of of operations of Tianjin Petrochemical, Luoyang Petrochemical, Zhongyuan Petrochemical, Guangzhou Petrochemical and Catalyst Plants (collectively the "Acquired Group") as set out below:
The Company without the Acquired Group The Acquired Group Combined RMB millions RMB millions RMB millions Results of operations: Operating revenues 128,363 1,245 129,608 Profit attributable to shareholders of the parent 8,008 298 8,306
For the period presented, all significant balances and transactions between the Company and the Acquired Group have been eliminated. 3.3.2.2 Accounting policies The International Accounting Standards Board has issued a number of new and revised IFRS and International Accounting Standards (collectively the "new IFRS") effective from 1 January 2005. The Company has amended the Company's accounting policies according to the new IFRS in preparation of the financial statements for the first quarter ended 31 March 2005. According to the newly effective IFRS No. 3 "Business Combinations", goodwill is no longer amortised and instead reviewed for impairment during reporting period. Except for the accounting policy for goodwill as stated above, the new IFRS has no significant impact on the results of operations and financial condition of the Company for the reporting period. 3.4 Relevant explanations made by the Board of Directors and the Supervisory Committee after the audit and presentation of "non-standard opinion". |_| applicable |X| not applicable 3.5 Caution and explanation as to the anticipated loss of accumulated net profits from the beginning of the year to the end of the next reporting period or significant changes over the same period of last year |_| applicable |X| not applicable 3.6 Adjustments to the annual business plan or budget which have been disclosed |_| applicable |X| not applicable 3.7 This quarterly results announcement is published in both Chinese and English languages. The Chinese version shall prevail. By Order of the Board Chen Tonghai Chairman Beijing, PRC, 28 April 2005 As at the date of this announcement, the directors of Sinopec Corp. are Messrs. Chen Tonghai, Wang Jiming, Mou Shuling, Zhang Jiaren, Cao Xianghong, Liu Genyuan, Gao Jian and Fan Yifei; the independent non-executive directors of the Company are Messrs. Chen Qingtai, Ho Tsu Kwok Charles, Shi Wanpeng and Zhang Youcai; and the employee representative director of the Company is Mr. Cao Yaofeng. -----END PRIVACY-ENHANCED MESSAGE-----