6-K 1 form6-k.htm 6-K WITH FOUR ANNOUNCEMENTS

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 August 2021

CHINA PETROLEUM & CHEMICAL CORPORATION
22 Chaoyangmen North Street,
Chaoyang District, Beijing, 100728
People's Republic of China
Tel: (8610) 59960114

(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                   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    ✔    

(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:

1.          An announcement regarding connected transaction of China Petroleum & Chemical Corporation (the “Registrant”);

2.          An announcement regarding interim results of the Registrant for the six months ended June 30, 2021;

3.          An announcement regarding proposed amendments to the articles of association of the Registrant; and

4.          An announcement regarding renewal of continuing connected transactions and Discloseable transactions;

Each made by the Registrant on August 27, 2021.




Announcement 1


Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibilities for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)
(Stock Code: 00386)

CONNECTED TRANSACTION
FORMATION OF JOINT VENTURE
The Board is pleased to announce that on 27 August 2021, the Board has considered and approved the proposed establishment of the Joint Venture by Shanghai Petrochemical and Baling Petrochemical, both being subsidiaries of the Company. Pursuant to the Joint Venture Agreement, Shanghai Petrochemical and Baling Petrochemical will jointly establish the Joint Venture and each shall contribute in cash the amount of RMB 400 million. Following completion of the Transaction, Shanghai Petrochemical and Baling Petrochemical shall each own 50% equity interest of the Joint Venture.

As at the date of the announcement, the Company directly holds 50.44% equity interest of Shanghai Petrochemical and 55% equity interest in Baling Petrochemical. Baling Petrochemical is owned as to 45% by Assets Company, which is a wholly-owned subsidiary of China Petrochemical Corporation (being the Company’s controlling shareholder). Pursuant to Chapter 14A of the Listing Rules, Baling Petrochemical is a connected subsidiary of the Company and the Transaction constitutes a connected transaction of the Company. In the past 12 months, Hainan Refining and Chemical, being a subsidiary of the Company, entered into a joint venture agreement with Baling Petrochemical (the “Previous Transaction”), which was exempted from the reporting, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules as the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules were less than 0.1%. The Transaction and the Previous Transaction are subject to aggregation pursuant to Rule 14A.81 of the Listing Rules. Since one or more of the applicable percentage ratios as calculated under Rule 14.07 of the Listing Rules on aggregate basis are more than 0.1% but less than 5%, the Transaction is subject to the reporting and announcement requirements but is exempted from the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules.

Shareholders and potential investors of the Company are reminded that the Joint Venture Agreement is pending the execution by Shanghai Petrochemical and Baling Petrochemical. The Company will make a further announcement when the Joint Venture Agreement is signed.

1


INTRODUCTION
The Board is pleased to announce that on 27 August 2021, the Board has considered and approved the proposed establishment of the Joint Venture by Shanghai Petrochemical and Baling Petrochemical, both being subsidiaries of the Company. Pursuant to the Joint Venture Agreement, Shanghai Petrochemical and Baling Petrochemical will jointly establish the Joint Venture and each shall contribute in cash the amount of RMB400 million. Following completion of the Transaction, Shanghai Petrochemical and Baling Petrochemical shall each own 50% equity interest of the Joint Venture.
BASIC INFORMATION ON THE TRANSACTION
The Transaction is a joint external investment with the connected persons. As the Joint Venture is yet to be established, the following information is intended to be indicative and subject to business registration.
Company name:
:
Shanghai Jinshan Baling New Material Company Limited
     
Company nature:
:
Stated-controlled company with limited liability
     
Registered address:
:
Second Industrial Zone, Jinshan District, Shanghai
     
Principal business:
:
Production and sales of styrene thermoplastic elastomer new materials including SBS, SIS, SEBS, SEPS, SSBR (collectively referred to as “SBC”) and their feedstock, intermediate products and by-products; import and export (The specific scope is subject to business registration and items that require further approval under relevant laws may be operated upon obtaining such approval by competent authorities).
     
Registered capital
:
RMB800 million

Shareholders’ name, contribution amount, contribution proportion and contribution method are set out as follows:
RMB million
Shareholders’ Name
 
Contribution Amount
 
Contribution Proportion
 
Method
             
Baling Petrochemical
 
400
 
50%
 
Cash
             
Shanghai Petrochemical
 
400
 
50%
 
Cash
             
In Total
 
800
 
100%
 
-

2


PRICING BASIS OF THE TRANSACTION
The pricing of the Transaction was determined on an arm’s length basis with reference to normal commercial terms, trade practices and market prices without prejudice to the interests of any party, other shareholders or interested parties. Shanghai Petrochemical and Baling Petrochemical jointly invest as well as share profits and risks in accordance with the proportion of their respective contribution.
PRINCIPAL CONTENTS OF THE JOINT VENTURE AGREEMENT
The principal terms of the Joint Venture Agreement are as follows:
Parties
:
Shanghai Petrochemical and Baling Petrochemical
     
Method of Cooperation
:
The registered capital of the Joint Venture shall be RMB800 million, among which, each of Baling Petrochemical and Shanghai Petrochemical shall contribute RMB400 million in cash, representing 50% of the total registered capital respectively. Following completion of the Transaction, Baling Petrochemical and Shanghai Petrochemical shall each hold 50% equity interest of the Joint Venture and the financial results of the Joint Venture shall be consolidated into the financial statements of Baling Petrochemical.
     
Principal business
:
Production and sales of styrene thermoplastic elastomer new materials and their feedstock, intermediate products and by-products; import and export (The specific scope is subject to business registration and items that require further approval under relevant laws may be operated upon obtaining such approval by competent authorities).
     
Effective arrangement
:
The Joint Venture Agreement shall be established upon being duly signed and sealed by both parties and shall take effect after the parties complete the internal and external approvals. Matters not covered by this Agreement shall be mutually negotiated and agreed upon in a written supplemental agreement.
     
Board Composition
:
The Joint Venture shall establish a board of directors composed of 7 directors including 3 recommended by Baling Petrochemical, 3 recommended by Shanghai Petrochemical and 1 employee director.
     
Liabilities for breach of the Agreement
:
Shanghai Petrochemical and Baling Petrochemical shall bear liabilities for false contribution and compensate for the damages caused to third parties during the term of the Agreement. If the defaulting party falls three months behind on its committed contribution amount to the registered capital of the Joint Venture, the non-defaulting party shall be entitled to suspend the Agreement and demand the defaulting party to pay up the contribution amount, and also be entitled to default penalties calculated at 2% of the capital contribution amount and compensation for any losses incurred under the Agreement.
The defaulting party shall indemnify and hold harmless the Joint Venture or the other party against any liabilities or losses due to the defaulting party’s breach of the Agreement, by compensating for any expenses or costs, liabilities to third parties, and other losses borne by the Joint Venture or the other party resulting from such breach.
3



   
Any party failing to perform under the Joint Venture Agreement due to governmental action or force majeure shall promptly notify the other party of the reasons for the non-performance, delay in performance or partial performance and provide a written proof from relevant authorities within 15 days. Upon the receipt of the written proof, it shall be mutually negotiated by Shanghai Petrochemical and Baling Petrochemical as to whether the performance shall be delayed, partially performed or not performed, and whether the liability for breach of contract shall be exonerated in part or in whole based on case-by-case analysis.
Either of Shanghai Petrochemical and Baling Petrochemical which is unable to fulfil the obligations under the Joint Venture Agreement due to force majeure shall adopt effective measures to minimize the economic losses caused to the Joint Venture or the other party.
Equity transfer
:
Any party contemplating to transfer all or any part of its equity in the Joint Venture to a third party shall notify the other party in written form. The non-transferring party shall have the right of first refusal on such equity. The transferring party shall have the right to transfer the equity to a third party in accordance with relevant state-owned equity transfer regulations if the non-transferring party fails to inform the transferring party of its consent or opposition to the proposed transfer within 30 working days upon the receipt of notification from the transferring party, or if the non-transferring party explicitly declines to purchase such equity despite its opposition to the transfer.

REASONS FOR AND BENEFITS OF THE TRANSACTION
The Joint Venture will stay abreast of the active SBC consumer market in Eastern China, optimise regional resource allocation and improve downstream materials industry chain for the Company, which are conducive to enhancing the Company's overall competitiveness where the Joint Venture operates.
OPINIONS OF THE DIRECTORS
As at the date of this announcement, Ma Yongsheng, Zhao Dong, Yu Baocai, Liu Hongbin, Ling Yiqun and Li Yonglin, being the connected Directors, have abstained from voting on the relevant resolution approving the proposed establishment of the Joint Venture at the Board meeting. The Board has considered and approved the resolution on the Transaction. The Directors (including all independent non-executive Directors) are of the opinion that, (i) the Transaction is on normal commercial terms; (ii) the terms and conditions of the Transaction documents are fair and reasonable; and (iii) the Transaction is in the interest of the Company and the Shareholders as a whole.
THE LISTING RULES IMPLICATIONS
As at the date of the announcement, the Company directly holds 50.44% equity interest of Shanghai Petrochemical and 55% equity interest of Baling Petrochemical. Baling Petrochemical is owned as to 45% by Assets Company, which is a wholly-owned subsidiary of China Petrochemical Corporation (being the Company’s controlling shareholder). Pursuant to Chapter 14A of the Listing Rules, Baling Petrochemical is a connected subsidiary of the Company and the Transaction constitutes a connected transaction of the Company.
4


In the past 12 months, Hainan Refining and Chemical, being a subsidiary of the Company, entered into a joint venture agreement with Baling Petrochemical, pursuant to which each of Hainan Refining and Chemical and Baling Petrochemical contributed in cash the amount of RMB300 million to establish a joint venture. The Previous Transaction was exempted from the reporting, announcement, and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules as the applicable percentage ratios calculated under Rule 14.07 of the Listing Rules were less than 0.1%. The Transaction and the Previous Transaction are subject to aggregation pursuant to Rule 14A.81 of the Listing Rules. Since one or more of the applicable percentage ratios as calculated under Rule 14.07 of the Listing Rules on aggregate basis are more than 0.1% but less than 5%, the Transaction is subject to the reporting and announcement requirements but is exempted from the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules.
INFORMATION ON THE PARTIES
The Company
The Company is one of the largest integrated energy and chemical companies in China and is mainly engaged in the exploration and production, pipeline transportation and sale of petroleum and natural gas; the production, sale, storage and transportation of refinery products, petrochemical products, coal chemical products, synthetic fibre and other chemical products; the import and export, including import and export agency business, of petroleum, natural gas, petroleum products, petrochemical and chemical products, and other commodities and technologies; and research, development and application of technologies and information.
Shanghai Petrochemical
Shanghai Petrochemical is a company established in accordance with the PRC laws with limited liability and is primarily engaged in business including processing crude oil into a variety of synthetic fibre, resins and plastics, intermediate petrochemical products and petroleum products. As at the date of this announcement, Shanghai Petrochemical is a subsidiary of the Company and the Company directly owns 50.44% equity interest of it.
Baling Petrochemical
Baling Petrochemical is a company established in accordance with the PRC laws with limited liability and is primarily engaged in business including petrochemical, chemical fibre, chemical fertilizer, and fine chemical products. As at the date of this announcement, Baling Petrochemical is a subsidiary of the Company and the Company directly owns 55% equity interest of it. China Petrochemical Corporation owns 45% equity interest of Baling Petrochemical through Assets Company, being its wholly-owned subsidiary.
China Petrochemical Corporation
China Petrochemical Corporation is a company established under the laws of the PRC with limited liability, and a state-authorized investment organization. Its controlling shareholder is the State. Its principal operations include: exploration, exploitation, storage and transportation (including pipeline transportation), sales and comprehensive utilization of oil and natural gas; oil refining; wholesale and retail of refined oil products; production, sales, storage, transportation of petrochemical products, gas-based chemicals, coal chemical products and other chemical products; industrial investment and investment management; production, sales, storage and transportation of energy products such as new energy and geothermal energy; design, consultation, construction and installation of petroleum and petrochemical engineering projects; repairing and maintenance of petroleum and petrochemical equipment; R&D, manufacturing and sales of electrical and mechanical equipment; production and sale of electricity, steam, water and industrial gas; research, development, application and consulting services of technology, e-commerce, information and alternative energy products; proprietary and agency import and export of relevant products, commodities and technologies; foreign project contracting, bidding and purchasing, and labour export; international storage and logistics business.
5


Assets Company
Assets Company is a company established in accordance with the PRC laws with limited liability and is primarily engaged in industrial investment and investment management, refining of petroleum; production and supply of heat; production and sales of petrochemical, chemical fibre and refined chemical products (excluding hazardous products); warehousing services; leasing of land and self-owned properties. The following projects are operated by external branches: electricity business, centralised water supply, port operations and production and operation of hazardous chemicals, etc. As at the date of this announcement, China Petrochemical Corporation directly owns 100% equity interest of Assets Company.
Shareholders and potential investors of the Company are reminded that the Joint Venture Agreement is pending the execution by Shanghai Petrochemical and Baling Petrochemical. The Company will make a further announcement when the Joint Venture Agreement is signed.
DEFINITIONS
In this announcement, unless otherwise indicated in the context, the following expressions have the meaning set out below:
“Assets Company”
 
Sinopec Group Asset Management Co., Ltd.
     
“Baling Petrochemical”
 
Sinopec Baling Petrochemical Company Limited
     
“Board”
 
the board of directors of the Company
     
“China Petrochemical Corporation”
 
China Petrochemical Corporation
     
“Company” or “Sinopec Corp.”
 
China Petroleum & Chemical Corporation
     
“connected person(s)”
 
has the meaning ascribed thereto under the Listing Rules
     
“Director(s)”
 
the Director(s) of the Company
     
“Group”
 
the Company and its subsidiaries
     
“Hainan Refining and Chemical”
 
Sinopec Hainan Refining and Chemical Company Limited
     
“Joint Venture”
 
Shanghai Jinshan Baling New Material Company Limited (a proposed name subject to approval by business registration authority)
6



“Joint Venture Agreement” or “Agreement”
 
the Joint Venture Agreement on establishing Shanghai Jinshan Baling New Material Company Limited to be entered into by Shanghai Petrochemical and Baling Petrochemical
     
“Listing Rules”
 
the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
     
“Previous Transaction”
 
the transaction under the joint venture agreement entered into by Baling Petrochemical and Hainan Refining and Chemical
     
“PRC”
 
the People’s Republic of China
     
“Shanghai Petrochemical”
 
Sinopec Shanghai Petrochemical Company Limited
     
“RMB”
 
Renminbi, the lawful currency of the PRC
     
“Stock Exchange”
 
The Stock Exchange of Hong Kong Limited
     
“Transaction”
 
the proposed establishment of the Joint Venture by Shanghai Petrochemical and Baling Petrochemical under the Joint Venture Agreement


 
By Order of the Board
 
China Petroleum & Chemical Corporation
 
Huang Wensheng
 
Vice President and Secretary to the Board of Directors

Beijing, the PRC
27 August 2021

As of the date of this announcement, directors of the Company are: Ma Yongsheng#, Zhao Dong*, Yu Baocai#, Liu Hongbin#, Ling Yiqun#, Li Yonglin#, Cai Hongbin+, Ng, Kar Ling Johnny+, Shi Dan+ and Bi Mingjian+.

# Executive Director
*Non-executive Director
+Independent Non-executive Director




7

Announcement 2

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibilities for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)
(Stock Code: 00386)

Interim Results Announcement for the Six Months Ended 30 June 2021

The board of directors (the “Board”) of China Petroleum & Chemical Corporation (“Sinopec Corp.” or the “Company”) hereby announces the unaudited results of Sinopec Corp. and its subsidiaries for the six months ended 30 June 2021. This announcement, containing the full text of the 2021 Interim Report of Sinopec Corp., complies with the relevant requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited in relation to information to accompany preliminary announcement of interim results. Printed version of the 2021 Interim Report of Sinopec Corp. will be delivered to the shareholders of H shares of Sinopec Corp. in September 2021.

PUBLICATION OF RESULTS ANNOUNCEMENT

Both the Chinese and English versions of this results announcement are available on the websites of Sinopec Corp. (www.sinopec.com/listco/) and The Stock Exchange of Hong Kong Limited (www.hkex.com.hk). In the event of any discrepancies in interpretations between the English version and Chinese version, the Chinese version shall prevail.

 
By Order of the Board
 
China Petroleum & Chemical Corporation
 
Huang Wensheng
 
Vice President and Secretary to the Board of Directors

Beijing, the PRC,
27 August 2021

As of the date of this announcement, directors of the Company are: Ma Yongsheng#, Zhao Dong*, Yu Baocai#, Liu Hongbin#, Ling Yiqun#, Li Yonglin#, Cai Hongbin+, Ng, Kar Ling Johnny+, Shi Dan+ and Bi Mingjian+.

#
Executive Director
*
Non-executive Director
+
Independent Non-executive Director




CONTENTS

2
 
Company Profile
4
 
Principal Financial Data and Indicators
6
 
Business Review and Prospects
10
 
Management’s Discussion and Analysis
21
 
Corporate Governance
24
 
Environment and Social Responsibilities
26
 
Significant Events
33
 
Changes in Share Capital and Shareholdings of Shareholders
34
 
Bond General Information
36
 
Financial Statements
136   
 
Index of Documents for Inspection

This interim report contains forward-looking statements. All statements, other than statements of historical facts, that address business activities, events or developments that the Company expects or anticipates will or may occur in the future (including, but not limited to projections, targets, reserves and other estimates and business plans) are forward-looking statements. The actual results or developments of the Company may differ materially from those forward-looking statements as a result of various factors and uncertainties. The Company makes the forward-looking statements referred to herein as at 27 August 2021 and, unless otherwise required by the relevant regulatory authorities, undertakes no obligation to update these statements.


1


COMPANY PROFILE

IMPORTANT NOTICE: THE BOARD OF DIRECTORS (BOARD) AND THE BOARD OF SUPERVISORS OF CHINA PETROLEUM & CHEMICAL CORPORATION (SINOPEC CORP.) AND ITS DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT WARRANT THAT THERE ARE NO FALSE REPRESENTATIONS, MISLEADING STATEMENTS OR MATERIAL OMISSIONS CONTAINED IN THIS INTERIM REPORT, AND SEVERALLY AND JOINTLY ACCEPT FULL RESPONSIBILITY FOR THE AUTHENTICITY, ACCURACY AND COMPLETENESS OF THE INFORMATION CONTAINED IN THIS INTERIM REPORT. THERE IS NO OCCUPANCY OF NON-OPERATING FUNDS BY THE CONTROLLING SHAREHOLDERS OF SINOPEC CORP. Mr. MA YONGSHENG, DIRECTOR AND PRESIDENT, AND MS. SHOU DONGHUA, CHIEF FINANCIAL OFFICER AND HEAD OF CORPORATE ACCOUNTING DEPARTMENT WARRANT THE AUTHENTICITY AND COMPLETENESS OF THE INTERIM FINANCIAL STATEMENTS CONTAINED IN THIS INTERIM REPORT. THE AUDIT COMMITTEE OF SINOPEC CORP. HAS REVIEWED THE INTERIM REPORT OF SINOPEC CORP. FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021.

THE INTERIM FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2020 OF THE COMPANY, PREPARED IN ACCORDANCE WITH THE ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES (CASs) OF THE PEOPLES REPUBLIC OF CHINA (PRC), AND INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS), HAVE NOT BEEN AUDITED.

COMPANY PROFILE
Sinopec Corp. is one of the largest integrated energy and chemical companies in China. Its principal operations include exploration and production, pipeline transportation, and sale of petroleum and natural gas; production, sale, storage and transportation of refining products, petrochemical products, coal chemical products, synthetic fibre, and other chemical products; import and export, including import and export agency business of petroleum, natural gas, petroleum products, petrochemical and chemical products, and other commodities and technologies; and research, development and application of technologies and information.

DEFINITIONS
In this interim report, unless the context otherwise requires, the following terms shall have the meaning set out below:
Sinopec Corp.: China Petroleum & Chemical Corporation;
Company: Sinopec Corp. and its subsidiaries;
China Petrochemical Corporation: The controlling shareholder of Sinopec Corp., China Petrochemical Corporation;
Sinopec Group: China Petrochemical Corporation and its subsidiaries;
Sinopec Finance Co.: Sinopec Finance Co., Ltd.
Century Bright: Sinopec Century Bright Capital Investment Ltd.
CSRC: China Securities Regulatory Commission;
Hong Kong Stock Exchange: The Stock Exchange of Hong Kong Limited;
Hong Kong Listing Rules: Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

CONVERSIONS
For domestic production of crude oil: 1 tonne = 7.1 barrels;
For overseas production of crude oil: 1 tonne = 7.21 barrels
For production of natural gas: 1 cubic meter = 35.31 cubic feet;
Refinery throughput: 1 tonne = 7.35 barrels.


2


BASIC INFORMATION

LEGAL NAME
中國石油化工股份有限公司

CHINESE ABBREVIATION
中國石化

ENGLISH NAME
China Petroleum & Chemical Corporation

ENGLISH ABBREVIATION
Sinopec Corp.

LEGAL REPRESENTATIVE
Mr. Zhang Yuzhuo

AUTHORISED REPRESENTATIVES UNDER THE HONG KONG LISTING RULES
Mr. Ma Yongsheng
Mr. Huang Wensheng

SECRETARY TO THE BOARD
Mr. Huang Wensheng

REPRESENTATIVE ON SECURITIES MATTERS
Mr. Zhang Zheng

REGISTERED ADDRESS, PLACE OF BUSINESS AND CORRESPONDENCE ADDRESS
22 Chaoyangmen North Street,
Chaoyang District, Beijing, China
Postcode: 100728
Tel: 86-10-59960028
Fax: 86-10-59960386
Website:  http://www.sinopec.com
E-mail:ir@sinopec.com

CHANGE OF INFORMATION DISCLOSURE MEDIA AND ACCESS PLACES
There was no change to Sinopec Corp.’s information disclosure media and access place during the reporting period.

PLACES OF LISTING OF SHARES, STOCK NAMES AND STOCK CODES
A Shares:
Shanghai Stock Exchange
Stock name: 中国石化
Stock code: 600028

H Shares:
Hong Kong Stock Exchange
Stock code: 00386

ADRs:
New York Stock Exchange
Stock code: SNP
London Stock Exchange
Stock code: SNP

CHANGE OF REGISTERED ADDRESS IN THE REPORTING PERIOD
There was no change to the registered address in the reporting period.

3


PRINCIPAL FINANCIAL DATA AND INDICATORS

1
FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH CASs


(1)
Principal accounting data

Items
Six-month period ended 30 June
Changes
over the same
period of the
preceding year
(%)
2021
RMB million
2020
RMB million
(adjusted)
2020
RMB million
(before
adjustment)
         
Operating income
1,261,603
1,033,064
1,034,246
22.1
Net profit/(loss) attributable to equity shareholders of the Company
39,153
(23,001)
(22,882)
Net profit/(loss) attributable to equity shareholders of the Company excluding extraordinary gains and losses
38,420
(24,404)
(24,404)
Net cash flow from operating activities
47,736
40,365
39,794
18.3

 
As of
30 June
2021
RMB million
As of
31 December
2020
RMB million
Changes
from the end
of last year
(%)
       
Total equity attributable to shareholders of the Company
765,154
742,463
3.1
Total assets
1,852,964
1,733,805
6.9


Note:
The Company completed the reorganisation of Sinopec Baling Petrochemical Co. Ltd. in 2020. This business reorganisation has been accounted as business combination under common control. Accordingly, the Company has retrospectively adjusted the relevant financial data for the same period in 2020.


(2)
Principal financial indicators

Items
Six-month period ended 30 June
Changes
over the same
period of the
preceding year
(%)
2021
RMB
2020
RMB
(adjusted)
2020
RMB
(before
adjustment)
         
Basic earnings/(losses) per share
0.323
(0.190)
(0.189)
Diluted earnings/(losses) per share
0.323
(0.190)
(0.189)
Basic earnings/(losses) per share (excluding extraordinary gains and losses)
0.317
(0.202)
(0.202)
Weighted average return on net assets (%)
5.19
 
(3.21)
 
(3.21)
 
8.40
percentage points
Weighted average return (excluding extraordinary gains and losses) on net assets (%)
5.10
 
(3.41)
 
(3.42)
 
8.51
percentage points


(3)
Extraordinary items and corresponding amounts

Items
Six-month period
ended 30 June 2021
(income)/expenses
RMB million
   
Net gain on disposal of non-current assets
(281)
Donations
8
Government grants
(1,549)
Gain on holding and disposal of various investments
(166)
Other extraordinary expenses, net
690
Subtotal
(1,298)
Tax effect
388
Total
(910)
Attributable to:
 
Equity shareholders of the Company
(733)
Minority interests
(177)


4


2
FINANCIAL DATA AND INDICATORS PREPARED IN ACCORDANCE WITH IFRS


(1)
Principal accounting data

Items
Six-month period ended 30 June
Changes
over the same
period of the
preceding year
(%)
2021
RMB million
2020
RMB million
(adjusted)
2020
RMB million
(before
adjustment)
         
Operating profit/(loss)
58,109
(21,659)
(21,501)
Profit/(loss) attributable to shareholders of the Company
39,954
(21,844)
(21,725)
Net cash generated from operating activities
47,736
40,365
39,794
18.3

 
As of
30 June
2021
RMB million
As of
31 December
2020
RMB million
Changes
from the end
of last year
(%)
       
Total equity attributable to shareholders of the Company
764,208
741,494
3.1
Total assets
1,852,964
1,733,805
6.9


Note:
The Company completed the reorganisation of Sinopec Baling Petrochemical Co. Ltd. in 2020. This business reorganisation has been accounted as business combination under common control. Accordingly, the Company has retrospectively adjusted the relevant financial data for the same period in 2020.


(2)
Principal financial indicators

Items
Six-month period ended 30 June
Changes
over the same
period of the
preceding year
(%)
2021
RMB
2020
RMB
(adjusted)
2020
RMB
(before
adjustment)
         
Basic earnings/(losses) per share
0.330
(0.180)
(0.179)
Diluted earnings/(losses) per share
0.330
(0.180)
(0.179)
Return on capital employed (%)
6.14
 
(1.91)
 
(1.89)
 
8.05
percentage points


5


BUSINESS REVIEW AND PROSPECTS

BUSINESS REVIEW
In the first half of 2021, as the world economy gradually picked up, China’s economy kept a sustainable and steady recovery, registering a GDP growth of 12.7% year-on-year. Domestic demand for natural gas continued to grow rapidly, with an apparent consumption up by 17.5% year-on-year. Domestic refined oil products demand recovered with a growth of 5.7% year-on-year in the apparent consumption, of which the demand for gasoline and kerosene rose by 10.7% and 39.8% year-on-year respectively, and that for diesel fell by 3.5% year-on-year. Domestic demand for major chemicals sustained growth. Based on our statistics, domestic consumption of ethylene equivalent increased by 1.1% compared with that of the preceding year.

In the first half of 2021, international crude oil prices fluctuated with an upward trend. The average spot price of Platts Brent was USD65.23 per barrel, up by 62.8% year-on-year.


Confronted with the environment where the international oil price went up and the demand for petrochemical products recovered steadily, the Company focused on addressing challenges while increasing profit on a regular basis and stressed on improving our systems, expanding markets, and controlling costs, thus realising outstanding operation results.

1
PRODUCTION & OPERATIONS REVIEW


(1)
Exploration and Production

In the first half of 2021, the Company seized the favourable opportunity of rising oil prices, pressed ahead with high-quality exploration and profit-oriented development, strengthened the foundation of resources, and raised operational efficiency to realise production and profit increase. In terms of exploration, we strengthened risk exploration in new regions and new sectors, which led to new discoveries in Tarim Basin, Sichuan Basin, and Erdos Basin, and major breakthroughs in continental facies shale oilfields of Bohai Bay Basin, Sichuan Basin, and North Jiangsu Basin. In terms of production, we efficiently proceeded with the capacity building of major oilfields, strengthened fine development in mature fields, expanded market, sales and profit of natural gas, signed long-term LNG contracts, stabilised overseas oil and gas supply, and continuously boosted the sales and market penetration of natural gas. The Company’s production of oil and gas reached 235.29 million barrels of oil equivalent, up by 4.2% year-on-year, with domestic crude production reaching 123.62 million barrels and natural gas production totalled 582.6 billion cubic feet, up by 13.7% year-on-year.


6


Exploration and Production: Summary of Operations

 
Six-month period ended 30 June
Changes
 
2021
2020
(%)
       
Oil and gas production (mmboe)
235.29
225.71
4.2
Crude oil production (mmbbls)
138.15
140.27
(1.5)
China
123.62
124.05
(0.3)
Overseas
14.53
16.22
(10.4)
Natural gas production (bcf)
582.60
512.41
13.7


(2)
Refining

In the first half of 2021, the Company grasped the opportunity of market recovery in the post-pandemic period, integrated and coordinated production and marketing, raised processing volume, kept high utilisation rate, and maximised profits along the industrial chain. We optimised crude oil allocation and cut procurement costs. We insisted on the strategy of shifting from oil to chemicals, lowered refined oil products yield and diesel-gasoline ratio, and increased production of readily marketable products like gasoline and light chemical feedstock. We increased production of high value-added products and specialty products, built 4 sets of hydrogen purification units, and developed high-end needle-shaped coke products and lubricating grease, etc., and domestic market share of low-sulphur bunker fuel ranked the first. We expedited advanced capacity building and pushed ahead with restructuring projects. In the first half of 2021, the Company processed 126 million tonnes of crude oil, an increase of 13.7% year-on-year, and produced 72.19 million tonnes of refined oil products, up by 7.4% year-on-year, among which, gasoline production reached 32.40 million tonnes, up by 20.8% year-on-year, and kerosene stood at 11.24 million tonnes, an increase of 13.5% year-on-year.

Refining: Summary of Operations     Unit: million tonnes

 
Six-month period ended 30 June
Changes
 
2021
2020
(%)
       
Refinery throughput
126.11
110.95
13.7
Gasoline, diesel and kerosene production
72.19
67.19
7.4
Gasoline
32.40
26.82
20.8
Diesel
28.54
30.47
(6.3)
Kerosene
11.24
9.90
13.5
Light chemical feedstock production
22.26
19.00
17.2

Note: Includes 100% of production of domestic joint ventures.


(3)
Marketing and Distribution

In the first half of 2021, in view of rising domestic refined oil products consumption, the Company leveraged our advantage of integrated production and marketing network to expand markets, resulting in an elevation of quality and scale. We adopted targeted marketing strategy, and focused on differentiated marketing. We consolidated our resources of customers and marketing throughout the country, and continuously improved the quality of our services. We optimised the network layout to reach end users, accelerated the construction of integrated energy service stations offering petrol, gas, hydrogen, power, and non-fuel services, and put our first carbon-neutral station and BIPV (building integrated photo-voltaic) station into operation. In the first half of 2021, total sales volume of refined oil products was 109 million tonnes, up by 2.0% year-on-year, of which domestic sales volume accounted for 84.01 million tonnes, an increase of 8.1% year-on-year. The Company strengthened the development and marketing of company-owned brands, actively explored emerging business models such as car services, fast food, and advertising, and speed up the development of non-fuel businesses.


7


Marketing and Distribution: Summary of Operations

 
Six-month period ended 30 June
Change
 
2021
2020
(%)
       
Total sales volume of refined oil products (million tonnes)
109.13
107.03
2.0
Total domestic sales volume of refined oil products (million tonnes)
84.01
77.75
8.1
Retail (million tonnes)
55.50
52.50
5.7
Direct sales and Distribution (million tonnes)
28.51
25.24
13.0
Annualised average throughput per station (tonne/station)
3,614
3,419
5.7

Note: The total sales volume of refined oil products includes the amount of refined oil marketing and trading sales volume.

     
Change
 
As of
As of
from the end
 
30 June
31 December
of last year
 
2021
2020
(%)
       
Total number of Sinopec-branded service stations
30,716
30,713
0.0
Number of convenience stores
27,812
27,721
0.3


(4)
Chemicals

In the first half of 2021, by adhering to “following the market and centering on profits”, the Company sped up the advanced capacity building and structural adjustment, and developed a batch of products with high value added and profitability; we fine-tuned chemical feedstock to reduce costs; we adjusted the structure of the facilities and optimised maintenance schedule to raise the utilisation of profitable facilities; we optimised product slate to continuously increase the ratio of high value-added products, raising the ratio of synthetic resin, synthetic rubber, and synthetic fibre by 0.3, 4.9, and 0.8 percentage points respectively year-on-year. In the first half of 2021, ethylene production reached 6.46 million tonnes, up by 11.9% year-on-year. Meanwhile, we scored achievements in key clients management, scaled up profit generation through exports, and launched self-marketing products on e-commerce. The total sales volume of chemical products for the first half of 2021 was 40 million tonnes.

Major Chemical Products: Summary of Operations        Unit: 1,000 tonnes

 
Six-month period ended 30 June
Changes
 
2021
2020
(%)
       
Ethylene
6,463
5,776
11.9
Synthetic resin
9,292
8,376
10.9
Synthetic fiber monomer and polymer
4,507
4,421
1.9
Synthetic fiber
676
573
18.0
Synthetic rubber
594
526
12.9

Note: Includes 100% of production of domestic joint ventures.

2
HEALTH AND SAFETY
In the first half of 2021, the Company revised and launched HSE management system and practice code, and kept improving the construction and operation of the system. We pushed ahead with the health management of all staff, strengthened the COVID-19 prevention and control measures, and safeguarded the occupational, physical, and psychological health of employees both at home and abroad. We continued to enhance safety supervision, took stringent measures in managing and controlling major safety risks, grounded efforts in managing hidden dangers, made solid strides in the three-year programme of special rectification of work safety, and conducted special campaigns targeting at “zero accidents in 100 days”, maintaining a steady momentum in work safety.

3
CAPITAL EXPENDITURES
Focusing on investment quality and profitability, the Company optimised its investment management system, with total capital expenditures of RMB57.941 billion in the first half of 2021. The capital expenditure for exploration and production segment was RMB23.965 billion, mainly for the capacity building of Shunbei oilfield, Weirong, Fuling, and Western Sichuan natural gas projects, and the construction of storage and transportation facilities for phase II of Tianjin LNG project, etc. The capital expenditure for the refining segment was RMB7.887 billion, mainly for the refining structural upgrading projects in Zhenhai and Anqing, and construction of hydrogen purification project, etc. The capital expenditure for the marketing and distribution segment was RMB6.773 billion, mainly for building oil (gas) stations, integrated energy service stations offering petrol, gas, hydrogen, power, and services and logistics facilities, etc. The capital expenditure for the chemicals segment was RMB18.961 billion, mainly for Zhenhai, Sino-Korea, and Hainan ethylene projects, the overseas AGCC project, Jiujiang Aromatics project, Yizheng PTA project, etc. The capital expenditure for corporate and others was RMB355 million, mainly for R&D facilities and information technology projects, etc.


8


BUSINESS PROSPECTS
Looking forward to the second half of the year, the global pandemic continues to evolve, and the external environment remains complex and severe. China’s economy is expected to maintain steady growth on the basis of the good momentum in the first half of the year. It is expected that the demand for refined oil will keep stable, the demand for chemical products will maintain a good growth rate, and the demand for natural gas will grow rapidly. Given the factors such as the supply capacity of oil producers, global demand growth, and inventory levels, international oil prices are expected to fluctuate within a wide range. Regarding the current situation, the Company will exert greater efforts to enhance technology innovation and advancement, optimise and adjust structure, expand market, deepen reform, promote development, control risks, and focus on the following aspects:

Exploration and Production. The Company will continue to intensify exploration efforts, accelerate oil and gas production capacity building, and increase oil and gas reserves, production and profitability. In crude oil development, more efforts will be made in speeding up the capacity building in Shunbei, Tahe and other regions, strengthening the fine management of mature oilfields, advancing the research and application of EOR technologies, and continuously reducing the cost of crude development. In natural gas development, the Company will focus on natural gas leapfrog development by speeding up the capacity building of key projects, vigorously increasing the reserves-production ratio and recovery rates, and promoting large-scale natural gas production. In the second half of the year, the Company plans to produce 141 million barrels of crude oil and 633.5 billion cubic feet of natural gas.

Refining. The Company will integrate and coordinate production and sales, increase efforts in shifting from oil products to chemicals, flexibly adjust the yield of refined oil products, and continue to reduce the diesel-to-gasoline ratio. More high value-added products and specialties will be produced at a faster pace. The Company will optimise the allocation of crude resources and make overall plans for the whole crude supply process to reduce procurement costs. Capacity optimisation will be accelerated to enhance market competitiveness. The Company will continue to optimise low-sulfur bunker fuel oil production and operation plans to reduce production and logistics costs. We plan to process 126 million tonnes of crude oil in the second half of the year.

Marketing and Distribution. The Company will seize opportunities brought by policy adjustment, accurately implement marketing strategies by focusing on meeting customer needs, and improve customer experience, to continuously enhance quality and profitability. End-user network will be further optimised to reinforce and improve advantages. The Company will continue to promote integration of fuel and non-fuel, online and offline business. We will also promote construction of integrated energy service stations offering petrol, gas, hydrogen, power, and services, and accelerate the transformation toward an integrated energy service provider. In the second half of the year, our target for domestic sales volume of refined products is 86.36 million tonnes.

Chemicals. The Company will adhere to the development direction of “basic + high-end” and “chemicals + materials”, strengthen technology innovation, improve quality and profitability, extend the industrial chain and cultivate growth drivers. We will dynamically adjust feedstock and product slate, optimise utilisation and schedule arrangement to improve operation efficiency. The Company will further integrate production, marketing, research and application, intensify the research and development of high-end products and new materials, and continuously increase the proportion of high value-added products. At the same time, market research will be further enhanced to optimise the “one customer, one case” strategy, and acquire a larger market share. In the second half of the year, the Company plans to produce 6.54 million tonnes of ethylene.

Capital Expenditures. The capital expenditures for the second half of the year are budgeted at RMB109.259 billion, and the investment projects will be dynamically optimised and adjusted based on market changes. RMB42.835 billion will be invested in exploration and production segment, mainly for the capacity building of Shunbei oilfield, Weirong, Fuling, and Western Sichuan natural gas projects, the construction of storage and transportation facilities for phase II of Tianjin LNG project, and CCUS project in Shengli oilfield, etc. The capital expenditure for the refining segment is budgeted at RMB12.213 billion, mainly for Zhenhai Refining and Chemical Expansion project and the structural upgrading of the Yangzi project, etc. The capital expenditure for the marketing and distribution segment will be RMB19.727 billion, mainly for oil (gas) stations, integrated energy stations offering petrol, gas, hydrogen, power, and services and logistics facilities, etc. RMB29.639 billion will be invested in the chemicals segment, mainly for Hainan, Zhenhai, Tianjin Nangang, Maoming and other ethylene projects, the overseas AGCC project, Jiujiang Aromatics project, Yizheng PTA project, Guizhou PGA project, Qilu CCUS project, etc. RMB4.845 billion will be invested in corporate and others, mainly for R&D facilities and information technology projects, etc.

9


MANAGEMENT’S DISCUSSION AND ANALYSIS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE COMPANY’S INTERIM FINANCIAL STATEMENTS AND THE ACCOMPANYING NOTES. PARTS OF THE FOLLOWING FINANCIAL DATA, UNLESS OTHERWISE STATED, WERE CONSISTENT WITH THE COMPANY’S INTERIM FINANCIAL STATEMENTS THAT HAVE BEEN PREPARED ACCORDING TO THE IFRS. THE PRICES IN THE FOLLOWING DISCUSSION DO NOT INCLUDE VALUE-ADDED TAX.

1
CONSOLIDATED RESULTS OF OPERATIONS
In the first half of 2021, facing the condition of sustainable and steady recovery of domestic economy, significant increase of global crude oil price, the Company’s revenue from primary business and other operating revenues were RMB1,261.6 billion, representing an increase of 22.1% year-on-year, which was due to the increase of output, sales volume and product prices. In the first half of 2021, the Company achieved an operating profit of RMB58.1 billion, representing an increase of RMB79.8 billion year-on-year by seizing good opportunity of demand picking up, and optimising production and operation to tide over difficulties and improve performance.

The following table sets forth the principal revenue and expense items from the Company’s consolidated financial statements for the first half of 2021 and the corresponding period in 2020:

 
Six-month period ended 30 June
 
 
2021
2020
Change
 
RMB million
RMB million
(%)
       
Revenue
1,261,603
1,033,064
22.1
Revenue from primary business
1,231,980
1,006,808
22.4
Other operating revenues
29,623
26,256
12.8
Operating expenses
(1,203,494)
(1,054,723)
14.1
Purchased crude oil, products and operating supplies and expenses
(947,242)
(835,004)
13.4
Selling, general and administrative expenses
(25,748)
(24,373)
5.6
Depreciation, depletion and amortisation
(54,267)
(51,465)
5.4
Exploration expenses, including dry holes
(4,846)
(4,465)
8.5
Personnel expenses
(45,010)
(38,476)
17.0
Taxes other than income tax
(120,866)
(108,711)
11.2
Impairment reversal/(losses) on trade and other receivables
55
(101)
Other operating (expenses)/income, net
(5,570)
7,872
Operating profit/(loss)
58,109
(21,659)
Net finance costs
(4,901)
(5,263)
(6.9)
Investment income and share of profits less losses from associates and joint ventures
11,247
73
15,306.8
Profit/(loss) before taxation
64,455
(26,849)
Income tax expense
(14,949)
5,791
Profit/(loss) for the period
49,506
(21,058)
Attributable to:
Shareholders of the Company
39,954
(21,844)
Non-controlling interests
9,552
786
1,115.3


(1)
Revenue
In the first half of 2021, the Company’s revenue from primary business was RMB1,232.0 billion, representing an increase of 22.4% year-on-year. The change was mainly due to the gradual picking up of world economy, significant increase of international crude oil price, and the increase of the Company’s sales volume and product prices resulting from the good control of domestic pandemic and the booming demand of petroleum and petrochemical products.


10


The following table sets forth the external sales volume, average realised prices and respective change rates of the Company’s major products in the first half of 2021 as compared with the first half of 2020.

 
Sales Volume (thousand tonnes)
Average realised price
(VAT excluded)
(RMB/tonne, RMB/thousand cubic meters)
 
Six-month period
ended 30 June
Change
Six-month period
ended 30 June
Change
 
2021
2020
(%)
2021
2020
(%)
             
Crude oil
3,537
3,488
1.4
2,794
2,006
39.3
Natural gas (million cubic meters)
14,371
12,475
15.2
1,522
1,360
11.9
Gasoline
45,597
39,799
14.6
7,307
6,372
14.7
Diesel
34,648
35,980
(3.7)
5,388
4,862
10.8
Kerosene
11,016
9,519
15.7
3,397
2,892
17.5
Basic chemical feedstock
17,665
17,109
3.3
5,168
3,578
44.4
Synthetic fibre monomer and polymer
3,408
4,542
(25.0)
6,216
4,347
43.0
Synthetic resin
8,652
8,304
4.2
8,174
6,658
22.8
Synthetic fibre
714
602
18.6
7,356
6,723
9.4
Synthetic rubber
622
647
(3.9)
10,584
7,742
36.7

Most of the crude oil and a small portion of natural gas produced by the Company were internally used for refining and chemical production with the remaining sold to other customers. In the first half of 2021, the revenue from crude oil, natural gas and other upstream products sold externally amounted to RMB67.7 billion, up by 41.1% year-on-year, accounting for 5.4% of the Company’s revenue from primary business and other operating revenues. The change was mainly due to the increase of crude oil and natural gas sales volume and prices.

Petroleum products (mainly consisting of refined oil products and other refined petroleum products) sold externally by the refining segment and the marketing and distribution segment achieved external sales revenues of RMB693.6 billion, representing an increase of 26.4% year-on-year and accounting for 55% of the Company’s revenue from primary business and other operating revenues. Those changes were mainly due to the increased price and sales volume of refined oil products and other refined petroleum products. The sales revenue of gasoline, diesel and kerosene was RMB557.3 billion, representing an increase of 22.2% year-on-year, accounting for 80.4% of the total sales revenue of petroleum products. The sales revenue of other refined petroleum products was RMB136.3 billion, accounting for 19.6% of the sales revenue of petroleum products, up by 46.7% year-on-year.

The Company’s external sales revenue of chemical products was RMB197.9 billion, accounting for 15.7% of its revenue from primary business and other operating revenues, up by 33% year-on-year. The change was mainly due to the gradual recovery of the chemical market, and the increased chemical products’ sales volume and price of the Company.


11



(2)
Operating expenses
In the first half of 2021, the Company’s operating expenses were RMB1,203.5 billion, up by 14.1% year-on-year. The operating expenses mainly consisted of the following:

Purchased crude oil, products and operating supplies and expenses were RMB947.2 billion, representing an increase of 13.4% year-on-year, accounting for 78.7% of total operating expenses, of which:


Crude oil purchasing expenses were RMB300.1 billion, representing an increase of 20% year-on-year. Throughput of crude oil purchased externally in the first half of 2021 was 118 million tonnes (excluding the volume processed for third parties), up by 13.7% year-on-year. The average processing cost of crude oil purchased externally was RMB2,846 per tonne, up by 6.7% year-on-year.


The Company’s purchasing expenses of refined oil products were RMB136.0 billion, up by 0.9% year-on-year.


The Company’s purchasing expenses related to trading activities were RMB260.0 billion, up by 7.7% year-on-year.


Other purchasing expenses were RMB251.2 billion, up by 20.3% year-on-year.

Selling, general and administrative expenses of the Company totalled RMB25.7 billion, representing an increase of 5.6% year-on-year. This was mainly due to the increased freight and other related expenses incurred in sales activities as a result of increased business scale.

Depreciation, depletion and amortisation of the Company were RMB54.3 billion, representing an increase of 5.4% year-on-year. This was mainly because that with the decrease of crude oil price, the proved reserve decreased, which led to the increase of depletion rate in oil and gas assets.

Exploration expenses were RMB4.8 billion, representing an increase of 8.5% year-on-year. This was mainly because the Company enhanced the effort in exploration.

Personnel expenses were RMB45.0 billion, representing an increase of 17% year-on-year. This is mainly due to the temporary enterprise social insurance premium preferential policy adopted by the nation in response to the impact of the COVID-19 last year and was cancelled this year.

Taxes other than income tax were RMB120.9 billion, representing an increase of 11.2% year-on-year, mainly because of consumption tax increased year-on-year resulting from the taxable products production and revenue increased.

Other operating (expenses)/income, net were RMB5.6 billion, mainly due to the loss on derivative financial instruments.


(3)
Operating profit/(loss)
In the first half of 2021, the Company’s operating profit was RMB58.1 billion, representing an increase of RMB79.8 billion year-on-year. This was mainly due to the increase of output, business scale and main products’ margin, resulting from the significant increase of international crude oil price and booming market demand.


(4)
Net finance costs
In the first half of 2021, the Company’s net finance costs were RMB4.9 billion, down by RMB0.4 billion and 6.9% year-on-year.


(5)
Profit/(loss) before taxation
In the first half of 2021, the Company’s profit before taxation amounted to RMB64.5 billion, representing an increase of RMB91.3 billion year-on-year.


(6)
Income tax expense
In the first half of 2021, the Company’s income tax expense totalled RMB14.9 billion, representing an increase of RMB20.7 billion year-on-year. This was mainly because the Company realised good performance and made turnaround from loss compared with the same period last year.


(7)
Profit/(loss) attributable to non-controlling interests of the Company
In the first half of 2021, profit attributable to non-controlling interests was RMB9.6 billion, representing an increase of RMB8.8 billion year-on-year.


(8)
Profit/(loss) attributable to shareholders of the Company
In the first half of 2021, profit attributable to shareholders of the Company was RMB40.0 billion, representing an increase of RMB61.8 billion year-on-year.


12


2
RESULTS OF SEGMENT OPERATIONS
The Company manages its operations by four business segments, namely exploration and production segment, refining segment, marketing and distribution segment and chemicals segment, as well as corporate and others. Unless otherwise specified, the inter-segment transactions have not been eliminated from financial data discussed in this section. In addition, the operating revenue data of each segment includes other operating revenues.

The following table shows the operating revenues by each segment, the contribution of external sales and inter-segment sales as a percentage of operating revenues before elimination of inter-segment sales, and the contribution of external sales as a percentage of consolidated operating revenues (i.e. after elimination of inter-segment sales) for the periods indicated.

 
Operating revenues
As a percentage of
consolidated operating
revenues before elimination
of inter-segment sales
As a percentage of
consolidated operating
revenues after elimination
of inter-segment sales
 
Six-month period
ended 30 June
Six-month period
ended 30 June
Six-month period
ended 30 June
 
2021
2020
2021
2020
2021
2020
 
RMB million
(%)
(%)
       
Exploration and Production Segment
         
External sales*
70,135
50,177
3.2
2.9
5.6
4.9
Inter-segment sales
39,391
28,752
1.8
1.7
   
Operating revenues
109,526
78,929
5.0
4.6
   
Refining Segment
           
External sales*
82,469
52,243
3.7
3.1
6.5
5.1
Inter-segment sales
543,540
386,115
24.4
22.7
   
Operating revenues
626,009
438,358
28.1
25.8
   
Marketing and Distribution Segment
         
External sales*
632,203
527,519
28.5
30.8
50.1
51.1
Inter-segment sales
2,967
2,282
0.1
0.1
   
Operating revenues
635,170
529,801
28.6
30.9
   
Chemicals Segment
           
External sales*
203,158
152,906
9.2
8.9
16.1
13.5
Inter-segment sales
30,025
25,786
1.4
1.5
   
Operating revenues
233,183
178,692
10.6
10.4
   
Corporate and Others
           
External sales*
273,638
261,906
12.3
15.3
21.7
25.4
Inter-segment sales
340,701
222,719
15.4
13.0
   
Operating revenues
614,339
484,625
27.7
28.3
   
Operating revenue before elimination of inter-segment sales
2,218,227
1,710,405
100.0
100.0
   
Elimination of inter-segment sales
(956,624)
(677,341)
       
Consolidated operating revenues
1,261,603
1,033,064
   
100.0
100.0

*   Other operating revenues are included.


13


The following table sets forth the operating revenues, operating expenses and operating profit/(loss) by each segment before elimination of the inter-segment transactions for the periods indicated, and the percentage change between the first half of 2021 and the first half of 2020.

 
Six-month period ended 30 June
 
 
2021
2020
Change
 
RMB million
(%)
     
Exploration and Production Segment
     
Operating revenues
109,526
78,929
38.8
Operating expenses
103,293
84,931
21.6
Operating profit/(loss)
6,233
(6,002)
Refining Segment
     
Operating revenues
626,009
438,358
42.8
Operating expenses
586,611
470,047
24.8
Operating profit/(loss)
39,398
(31,689)
Marketing and Distribution Segment
     
Operating revenues
635,170
529,801
19.9
Operating expenses
619,102
521,137
18.8
Operating profit
16,068
8,664
85.5
Chemicals Segment
     
Operating revenues
233,183
178,692
30.5
Operating expenses
220,178
175,656
25.3
Operating profit
13,005
3,036
328.4
Corporate and Others
     
Operating revenues
614,339
484,625
26.8
Operating expenses
618,074
484,793
27.5
Operating loss
(3,735)
(168)
Elimination
(12,860)
4,500


(1)
Exploration and Production Segment
Most of the crude oil and a small portion of the natural gas produced by the exploration and production segment were used for the Company’s refining and chemical operations. Most of the natural gas and a small portion of the crude oil produced by the Company were sold to external customers.

In the first half of 2021, operating revenues of the segment were RMB109.5 billion, representing an increase of 38.8% year-on-year. This was mainly due to the increase in sales prices of domestic crude oil, as well as the year-on-year increase in sales volume and sales price of natural gas and LNG.

In the first half of 2021, the segment sold 16.94 million tonnes of crude oil, representing a decrease of 1.1% year-on-year. Natural gas sales volume was 14.8 bcm, representing an increase of 11.4% year-on-year. LNG regas sales volume was 9.3 bcm, representing an increase of 30.9% year-on-year. LNG liquid sales volume was 3.31 million tonnes, representing an increase of 36.0% year-on-year. Average realised prices of crude oil, natural gas, LNG regas, and LNG liquid were RMB2,675 per tonne, RMB1,521 per thousand cubic meters, RMB1,933 per thousand cubic meters, and RMB3,107 per tonne, representing increase of 42.7%, 11.1%, 2.5% and 21.6% year-on-year respectively.

In the first half of 2021, the operating expenses of the segment were RMB103.3 billion, representing an increase of 21.6% year-on-year. This was mainly due to LNG procurement cost increased by RMB7.7 billion year-on-year, pipelining cost increased by RMB2.9 billion year-on-year, depreciation, depletion and amortisation increased by RMB2.4 billion year-on-year as a result of the increase in oil and gas asset depletion rate, taxes including resource tax increased by RMB1.1 billion year-on-year.

In the first half of 2021, the oil and gas lifting cost was RMB740.22 per tonne, representing a decrease of 1.2% year-on-year. This was mainly due to the cost of outsourced material, fuels and power decreased as a result of the segment continuously reinforced the cost control.

In the first half of 2021, the operating profit of the segment was RMB6.2 billion, representing an increase of RMB12.2 billion year-on-year. This was mainly because the segment grasped the opportunity facing crude price upward, continuously made efforts to enhance the exploration and production, effectively pushed ahead with the profitable capacity construction and fine development of reservoir, accelerated the construction of nature gas production-supply-storage-marketing system, promoted profitability of the whole industrial chain.


(2)
Refining Segment
Business activities of the refining segment include purchasing crude oil from third parties and the exploration and production segment of the Company as well as processing crude oil into refined petroleum products. Gasoline, diesel and kerosene are sold internally to the marketing and distribution segment of the Company; part of the chemical feedstock is sold to the chemicals segment of the Company; and other refined petroleum products are sold to both domestic and overseas customers through the refining segment.

In the first half of 2021, operating revenues of the segment were RMB626.0 billion, representing an increase of 42.8% year-on-year. This was mainly because the sales volume and price of refined oil products increased as a result of significant recovery of the market demand.


14


The following table sets forth the sales volumes, average realised prices and the respective changes of the Company’s major refined oil products of the segment in the first half of 2021 and that of the same period of 2020.

 
Sales Volume (thousand tonnes)
Average realised price
(VAT excluded)
(RMB/tonne)
 
Six-month period ended
30 June
Change
Six-month period ended
30 June
Change
 
2021
2020
(%)
2021
2020
(%)
             
Gasoline
31,795
25,773
23.4
6,786
5,929
14.5
Diesel
28,021
29,063
(3.6)
5,056
4,390
15.2
Kerosene
8,991
8,208
9.6
3,371
2,969
13.5
Chemical feedstock
22,337
18,334
21.8
3,609
2,561
40.9
Other refined petroleum products
33,752
30,677
10.0
4,600
2,757
66.8

In the first half of 2021, the sales revenues of gasoline were RMB215.8 billion, representing an increase of 41.2% year-on-year, accounting for 34.5% of the segment’s operating revenues.

In the first half of 2021, the sales revenues of diesel were RMB141.7 billion, representing an increase of 11.1% year-on-year, accounting for 22.6% of the segment’s operating revenues.

In the first half of 2021, the sales revenues of kerosene were RMB30.3 billion, representing an increase of 24.4% year-on-year, accounting for 4.8% of the segment’s operating revenues.

In the first half of 2021, the sales revenues of chemical feedstock were RMB80.6 billion, representing an increase of 71.7% year-on-year, accounting for 12.9% of the segment’s operating revenues.

In the first half of 2021, the sales revenues of refined petroleum products other than gasoline, diesel, kerosene and chemical feedstock were RMB155.3 billion, representing an increase of 83.6% year-on-year, accounting for 24.8% of the segment’s operating revenues.

In the first half of 2021, the segment’s operating expenses were RMB586.6 billion, representing an increase of 24.8% year-on-year, which was mainly attributable to the increase of crude procurement costs as a result of international crude oil price increase, as well as the year-on-year increase of income tax and surcharges related to sales revenue.

In the first half of 2021, the average processing cost of crude oil was RMB2,959 per tonne, representing an increase of 8.4% year-on-year. Total crude oil throughput was 130.27 million tonnes (excluding volume processed for third parties), representing an increase of 13.7% year-on-year. In the first half of 2021, the total processing cost for crude oil was RMB385.5 billion, representing an increase of 23.3% year-on-year. This was mainly due to the international crude price increase.

In the first half of 2021, the refining margin was RMB561 per tonne, increased by RMB573 per tonne year-on-year, which was mainly due to the significant recovery of margin resulting from surged demand of refined oil products, as well as the significant inventory gains of crude oil and refined products.

In the first half of 2021, the unit refining cash operating cost (defined as operating expenses less cost of crude oil and refining feedstock, depreciation and amortisation, taxes other than income tax and other operating expenses, divided by the throughput of crude oil and refining feedstock) was RMB188.51 per tonne, representing an increase of 6.7% year-on-year, which was mainly because the facilities overhaul and the HSE related expenses increased.

In the first half of 2021, the operating profit of the segment was RMB39.4 billion, representing an increase of RMB71.1 billion year-on-year. This was mainly because the segment seized the market opportunity to increase the run rate of facilities and make efforts to optimise the product slate.


(3)
Marketing and Distribution Segment
The business activities of the marketing and distribution segment include purchasing refined oil products from the refining segment and the third parties, conducting wholesale and direct sales to domestic and overseas customers and retailing, distributing oil products through the segment’s retail and distribution network, as well as providing related services.


15


In the first half of 2021, the operating revenues of this segment were RMB635.2 billion, increased by 19.9% year-on-year. This was mainly because the sales volume and prices of refined oil products increased as a result of upward trend of international oil price and recovery of market demand. The sales revenues of gasoline were RMB333.3 billion, increased by 28.3% year-on-year, the sales revenues of diesel were RMB187.2 billion, increased by 3.3% year-on-year and the sales revenues of kerosene were RMB37.4 billion, increased by 36.0% year-on-year.

The following table sets forth the sales volume, average realised prices and respective changes of the segment’s four major refined oil products in the first half of 2021 and 2020, including the detailed information about the retail, direct sales and distribution of gasoline and diesel.

 
Sales volume
(thousand tonnes)
Average realised price
(RMB/tonne)
Six-month period
ended 30 June
Change
Six-month period
ended 30 June
Change
2021
2020
(%)
2021
2020
(%)
             
Gasoline
45,606
39,807
14.6
7,307
6,523
12.0
Retail
32,383
28,322
14.3
7,807
7,128
9.5
Direct sales and distribution
13,222
11,485
15.1
6,082
5,031
20.9
Diesel
34,742
36,098
(3.8)
5,388
5,019
7.4
Retail
15,065
17,137
(12.1)
6,079
5,500
10.5
Direct sales and distribution
19,677
18,961
3.8
4,860
4,584
6.0
Kerosene
11,016
9,519
15.7
3,397
2,891
17.5
Fuel oil
12,751
11,548
10.4
3,103
2,736
13.4

In the first half of 2021, the operating expenses of this segment were RMB619.1 billion, representing an increase of RMB98.0 billion, up by 18.8% year-on-year. This was mainly due to the year-on-year increase of procurement cost as a result of an increase of sales volume and prices.

In the first half of 2021, the segment’s marketing cash operating cost (defined as the operating expenses less the purchase costs, taxed other than income tax, depreciation and amortization, divided by sales volume) was RMB175.86 per tonne, down by 0.1% year-on-year.

In the first half of 2021, the operating revenues of non-fuel business of this segment were RMB18.0 billion, representing an increase of RMB1.4 billion year-on-year, and the profit of non-fuel business was RMB2.3 billion, representing an increase of RMB300 million year-on-year. This was mainly because the Company proactively promoted the company-owned brands and expanded emerging business models resulting in an increase of volume and profit of non-fuel business.

In the first half of 2021, the segment seized the opportunity of demand recovery, integrated and coordinated production and marketing to expand market and achieved the increase of sales volume of refined oil products year-on-year, realising an operating profit of RMB16.1 billion, representing an increase of RMB7.4 billion year-on-year, up by 85.5% year-on-year.


(4)
Chemicals
The business activities of the chemicals segment include purchasing chemical feedstock from the refining segment and third parties and producing, marketing and distributing petrochemical and inorganic chemical products.

In the first half of 2021, the operating revenues of this segment were RMB233.2 billion, increased by 30.5% year-on-year. This was mainly due to the increase of chemical products prices and increase of sales volume of some products as a result of the rise of international oil prices and strong demand of chemical market.

In the first half of 2021, the operating revenue generated by the segment’s six major categories of chemical products (namely basic organic chemicals, synthetic resin, synthetic fiber monomer and polymer, synthetics fibre, synthetic rubber and chemical fertiliser) was RMB221.5 billion, increased by 35.8% year-on-year, accounting for 95.0% of the operating revenues of the segment.


16


The following table sets forth the sales volume, average realised prices and respective changes of each of the segment’s six categories of chemical products in the first half of 2021 and 2020.

 
Sales volume
(thousand tonnes)
Average realised price
(VAT excluded, RMB/tonne)
Six-month period
ended 30 June
Change
Six-month period
ended 30 June
Change
2021
2020
(%)
2021
2020
(%)
             
Basic organic chemicals
23,377
21,928
6.6
4,968
3,541
40.3
Synthetic fibre monomer and polymer
3,432
4,572
(24.9)
6,253
4,354
43.6
Synthetic resin
8,652
8,312
4.1
8,174
6,661
22.7
Synthetics fibre
714
602
18.5
7,356
6,771
8.6
Synthetic rubber
624
649
(3.8)
10,589
7,747
36.7
Chemical fertiliser
505
592
(14.7)
2,666
1,928
38.3

In the first half of 2021, the operating expenses of this segment were RMB220.2 billion, increased by 25.3% year-on-year, mainly due to the year-on-year increase in the price of externally purchased feedstock.

In the first half of 2021, the segment seized the opportunity of strong market demand and high prices of chemical products, vigorously optimised the feedstock, the product slate and the maintenance plan, focused on the technologies research and development and industrial upgrading, and increased the production of high value-added and profitable products, realising an operating profit of RMB13.0 billion, representing an increase of RMB10.0 billion year-on-year, up by 328.4% year-on-year.


(5)
Corporate and others
The business activities of corporate and others mainly consists of import and export business activities of Sinopec Corp.’s subsidiaries, research and development activities of the Company, and managerial activities of the headquarters.

In the first half of 2021, the operating revenue generated from the corporate and others was RMB614.3 billion, increased by 26.8% year-on-year, mainly due to the increase in the trading prices of crude oil and refined oil.

In the first half of 2021, the operating expenses for corporate and others were RMB618.1 billion, increased by 27.5% year-on-year.

In the first half of 2021, the segment’s operating loss was RMB3.7 billion.

3
ASSETS, LIABILITIES, EQUITY AND CASH FLOWS
The major funding resources of the Company are its operating activities, short-term and long-term loans. The major use of funds includes operating expenses, capital expenditures, and repayment of short-term and long-term debts.


(1)           Assets, Liabilities and Equity           Unit:RMB million

 
As of
30 June
2021
As of
31 December
2020
Change
       
Total assets
1,852,964
1,733,805
119,159
Current assets
553,436
455,395
98,041
Non-current assets
1,299,528
1,278,410
21,118
Total liabilities
946,656
850,947
95,709
Current liabilities
623,995
522,190
101,805
Non-current liabilities
322,661
328,757
(6,096)
Total equity attributable to the shareholders of the Company
764,208
741,494
22,714
Share capital
121,071
121,071
Reserves
643,137
620,423
22,714
Non-controlling interests
142,100
141,364
736
Total equity
906,308
882,858
23,450


17


As of 30 June 2021, the Company’s total assets were RMB1,853.0 billion, representing an increase of RMB119.2 billion compared with the beginning of 2021, of which:

Current assets were RMB553.4 billion, representing an increase of RMB98.0 billion compared with that as of the beginning of 2021, mainly because inventories increased by RMB47.3 billion, accounts receivable increased by RMB36.3 billion, cash and cash equivalents decreased by RMB9.4 billion, the time deposits with financial institutions increased by RMB11.9 billion.

Non-current assets were RMB1,299.5 billion, representing an increase of RMB21.1 billion compared with that as of the beginning of 2021, mainly because construction in progress increased by RMB13.0 billion, property, plant and equipment net decreased by RMB8.6 billion, interest in associates increased by RMB4.7 billion, interest in joint ventures increased by RMB6.6 billion.

As of 30 June 2021, the Company’s total liabilities were 946.7 billion, representing an increase of RMB95.7 billion, of which:

Current liabilities were RMB624.0 billion, representing an increase of RMB101.8 billion compared with that as of the beginning of 2021, mainly because short-term debts increased by RMB45.1 billion, accounts payable and bills payable increased by RMB65.9 billion, and other payables decreased by RMB18.4 billion.

Non-current liabilities were RMB322.7 billion, representing a decrease of RMB6.1 billion compared with that as the beginning of 2021, mainly because long-term debts decreased by RMB9.4 billion, and deferred tax liabilities increased by RMB2.4 billion.

As of 30 June 2021, total equity attributable to shareholders of the Company was RMB764.2 billion, representing an increase of RMB22.7 billion compared with that as of the beginning of 2021.


(2)
Cash Flows
The following table sets forth the major items in the consolidated cash flow statements for the first half of 2021 and of 2020:

Unit:RMB million

Major items of cash flows
Six-month period ended 30 June
Change
2021
2020
       
Net cash generated from operating activities
47,736
40,365
7,371
Net cash used in investing activities
(65,791)
(75,605)
9,814
Net cash generated from financing activities
9,062
61,224
(52,162)
Net (decrease)/increase in cash and cash equivalents
(8,993)
25,984
(34,977)

In the first half of 2021, net cash generated from operating activities was RMB47.7 billion, representing an increase of RMB7.4 billion year-on-year, mainly because profit before taxation increased by RMB91.3 billion, share of profits from associates and joint ventures increased by RMB11.1 billion, impairment losses on assets decreased by RMB10.7 billion, net change of inventories decreased by RMB48.6 billion, income tax paid increased by RMB11.1 billion.

In the first half of 2021, the Company’s net cash used in investing activities was RMB65.8 billion, representing a decrease of RMB9.8 billion year-on-year, mainly because time deposits with maturities over three months decreased by RMB9.6 billion year-on-year.

In the first half of 2021, the Company’s net cash generated from financing activities was RMB9.1 billion, representing a decrease of RMB52.2 billion year-on-year, mainly because proceeds from bank and other loans decreased by RMB232.9 billion, repayments of bank and other loans decreased by RMB178.1 billion.

In the first half of 2021 the Company’s cash and cash equivalents were RMB78.1 billion.


(3)
Contingent Liabilities
Please refer to “Material Guarantee Contracts and Their Performance” in the “Significant Events” section of this report.


(4)
Capital Expenditure
Please refer to “Capital Expenditures” in the “Business Review and Prospects” section of this report.


(5)
Research & Development and Environmental Expenditure
Research and Development expenditures referred to fees incurred in the period and recognised as expenses. In the first half of 2021, the Company’s research and development expenditure amounted to RMB8.85 billion, of which expensed was RMB5.36 billion and capital expenditure was RMB3.49 billion.

Environmental expenditures refer to the normal routine pollutant cleaning fees paid by the Company, excluding capitalised cost of pollutant treatment facilities. In the first half of 2021, the environmental expenditures amounted to RMB4.21 billion.


18



(6)
Measurement of Fair Values of Derivatives and Relevant System
The Company has established sound decision-making mechanism, business process and internal control systems relevant to financial instrument accounting and information disclosure. The following table sets forth items relevant to measurement of fair values.

Items relevant to measurement of fair values          Unit: RMB million

     
Profits and
losses from
variation of fair
Accumulated
variation
Impairment
loss provision
 
 
Beginning of
End of the
values in the
of fair values
of the current
 
Items
the reporting
period
reporting
period
current reporting
period
recorded as
equity
reporting
period
Funding
source
             
Financial assets at fair value through profit or loss of the reporting period
1
3,988
23
Self-owned fund
Structured deposit
3,988
23
Self-owned fund
Stock
1
Self-owned fund
Derivative financial instruments
157
(1,598)
(5,936)
 
Cash flow hedges
7,545
19,205
(303)
5,214
 
Other equity instruments
1,525
1,534
(11)
 
Total
9,228
23,129
(6,216)
5,203
 

4
ANALYSIS OF FINANCIAL STATEMENTS PREPARED UNDER CASs
The major differences between the Company’s financial statements prepared under CASs and IFRS are set out in Section C of the financial statements of the Company on page 135 of this report.


(1)
Under CASs, the operating income and operating profit or loss by reportable segments were as follows:

 
Six-month period ended 30 June
 
2021
2020
 
RMB million
RMB million
     
Operating income
   
Exploration and Production Segment
109,526
78,929
Refining Segment
626,009
438,358
Marketing and Distribution Segment
635,170
529,801
Chemicals Segment
233,183
178,692
Corporate and Others
614,339
484,625
Elimination of inter-segment sales
(956,624)
(677,341)
Consolidated operating income
1,261,603
1,033,064
Operating profit/(loss)
   
Exploration and Production Segment
5,218
(8,044)
Refining Segment
39,177
(32,548)
Marketing and Distribution Segment
16,583
6,807
Chemicals Segment
12,468
2,699
Corporate and Others
1,646
(4,388)
Elimination of inter-segment sales
(12,860)
4,500
Financial expenses, losses/gains from changes in fair value, investment income and disposal income
386
582
Other income
1,244
2,467
Consolidated operating profit/(loss)
63,862
(27,925)
Net profit/(loss) attributable to equity shareholders of the Company
39,153
(23,001)

Operating profit: In the first half of 2021, the operating profit of the Company was RMB63.9 billion, representing an increase of RMB91.8 billion year-on-year.

Net profit: In the first half of 2021, net profit attributable to the equity shareholders of the Company was RMB39.2 billion, representing an increase of 62.2 billion year-on-year.


19



(2)
Financial data prepared under CASs:

 
At 30 June
At 31 December
 
 
2021
2020
Changes
 
RMB million
RMB million
RMB million
       
Total assets
1,852,964
1,733,805
119,159
Non-current liabilities
321,668
327,739
(6,071)
Shareholders’ equity
907,301
883,876
23,425

Changes analysis:

Total assets: As of 30 June 2021, the Company’s total assets were RMB1,853.0 billion, representing an increase of RMB119.2 billion compared with the beginning of 2021. This was mainly due to the increase in the accounts receivable of RMB36.3 billion, inventories increased by RMB47.3 billion, long-term equity investment increased by RMB11.3 billion, fixed assets decreased by RMB8.4 billion and construction projects increased by RMB13.0 billion.

Non-current liabilities: As of 30 June 2021, the Company’s non-current liabilities were RMB321.7 billion, representing an decrease of RMB6.1 billion compared with the beginning of 2021. This was mainly due to the decrease in the bond payable of RMB7.1 billion.

Shareholders’ equity: As of 30 June 2021, total shareholders’ equity of the Company was RMB907.3 billion, representing an increase of RMB23.4 billion compared with the beginning of 2021.


(3)
The results of the principal operations by segments

           
Increase of
           
gross profit
       
Increase of
Increase of
margin on
       
operating
operating
a year-on-year
 
Operating
 
Gross profit
income on
cost on
basis
 
income
Operating cost
margin*
a year-on-year
a year-on-year
(percentage
Segments
(RMB million)
(RMB million)
(%)
basis (%)
basis (%)
points)
             
Exploration and Production
109,526
87,795
15.5
38.8
21.4
11.8
Refining
626,009
461,307
8.2
42.8
31.6
11.4
Marketing and Distribution
635,170
585,264
7.6
19.9
18.9
0.7
Chemicals
233,183
205,184
11.4
30.5
33.5
2.2
Corporate and Others
614,339
604,198
1.6
26.8
26.0
0.5
Elimination of inter-segment sales
(956,624)
(943,765)
N/A
N/A
N/A
N/A
Total
1,261,603
999,983
11.2
22.1
14.4
6.3


*
Gross profit margin = (Operating income – Operating cost, taxes and surcharges)/Operating income

20


CORPORATE GOVERNANCE

1.
IMPROVEMENTS IN CORPORATE GOVERNANCE
During the reporting period, Sinopec Corp. was in full compliance with the articles of association of Sinopec Corp. (Articles of Association) as well as domestic and overseas laws and regulations on securities, adhered to the standard operation, and improved the corporate governance capabilities and levels. The Company completed the change of terms of the Board and the Board of Supervisors, elected the eighth session of the Board and the eighth session of the Board of Supervisors, adjusted the composition of all special committees, renamed the Social Responsibility Management Committee as the Sustainable Development Committee and refined its working rules, appointed senior management, all of which further enhanced the professional and gender backgrounds diversification of the Board and improved the corporate governance structure. The Board and its special committees fulfilled their duties with due diligence and reasonable care and were committed to better integrating environmental protection, social responsibility, and corporate governance into the Company’s development strategy and operations. The Party organisation also participated in corporate governance to promote scientific decision-making. The Company continued deepening the campaign of promoting the execution effectiveness of internal control to strengthen the internal control and risk management, enhancing the communication with stakeholders, and further perfecting the information disclosure and investor relations work.

2.
GENERAL MEETINGS
During the reporting period, Sinopec Corp. convened the 2020 Annual General Meeting on 25 May 2021 in Beijing, China, strictly in compliance with the relevant laws, regulations, and the required notice, convening and holding procedures under the Articles of Association, whereby the proposals in relation to the following matters were approved: (i) Report of the seventh session of the Board (including the Report of the Board for 2020); (ii) Report of the seventh session of the Board of Supervisors (including the Report of the Board of Supervisors for 2020); (iii) The audited financial reports of Sinopec Corp. for the year ended 31 December 2020 prepared by PricewaterhouseCoopers Zhong Tian LLP and PricewaterhouseCoopers; (iv) The profit distribution plan for 2020; (v) To authorise the Board to determine the interim profit distribution plan for 2021; (vi) To appoint KPMG Huazhen LLP (special general partnership) and KPMG as external auditors of Sinopec Corp. for 2021 and to authorise the Board to decide on their remunerations; (vii) To authorise the Board to determine the proposed plan for issuance of debt financing instrument(s); (viii) To grant the Board a general mandate to issue new domestic shares and/or overseas-listed foreign shares of Sinopec Corp.; (ix) The service contracts for the directors of the eighth session of the Board and the supervisors of the eighth session of the Board of Supervisors of Sinopec Corp. (including the remuneration terms); (x) Bills on the election of Directors (excluding independent Non-executive Directors); (xi) Bills on the election of independent Non-executive Directors; and (xii) Bills on the election of supervisors (excluding employee representative supervisors). For details of the meetings, please refer to the poll results announcements published in China Securities Journal, Shanghai Securities News, and Securities Times and on the websites of Shanghai Stock Exchange and Hong Kong Stock Exchange after the meetings.

3.
DIRECTORS, SUPERVISORS AND OTHER SENIOR MANAGEMENT

(1)
Information On Appointment Or Termination
On January 11, 2021, Mr. Yu Renming and Mr. Sun Huanquan resigned as employee’s representative supervisor due to change of working arrangement. After performing the democratic procedure, Mr. Lv Dapeng and Mr. Chen Yaohuan were elected as employee’s representative supervisors of Sinopec Corp. from January 11, 2021 to the expiration date of the term of the seventh session of the Board of Supervisors.

On January 28, 2021, Mr. Zou Huiping resigned as supervisor of Sinopec Corp. due to his age.

On May 25, 2021, the 2020 Annual General Meeting elected members of the eighth session of the Board and the eighth session of the Board of Supervisors. On the same day, the first meeting of the eighth session of the Board elected the Chairman of the Board and appointed senior management; the first meeting of the eighth session of the Board of Supervisors elected the Chairman of the Board of Supervisors. Changes in directors, supervisors and senior management were as follows:

The eighth session of the Board: Mr. Zhang Yuzhuo as Non-executive Director and Chairman of the Board; Mr. Ma Yongsheng as Executive Director and President; Mr. Zhao Dong as Non-executive Director; Mr. Yu Baocai, Mr. Liu Hongbin, Mr. Ling Yiqun, and Mr. Li Yonglin as Executive Director and Senior Vice President; Mr. Cai Hongbin, Mr. Ng, Kar Ling Johnny, Ms. Shi Dan, and Mr. Bi Mingjian as the Independent Non-executive Director. Mr. Tang Min is no longer the Independent Non-executive Director.

The eighth session of the Board of Supervisors: Mr. Zhang Shaofeng as the Chairman of the Board of Supervisors; Mr. Jiang Zhenying, Mr. Zhang Zhiguo, Mr. Yin Zhaolin and Mr. Guo Hongjin as the supervisors; Mr. Li Defang, Mr. Lv Dapeng and Mr. Chen Yaohuan as employee’s representative supervisors. Mr. Zhao Dong is no longer the Chairman of the Board of Supervisors.

Other senior management: Mr. Chen Ge as the Senior Vice President; Mr. Yu Xizhi, Mr. Zhao Rifeng and Mr. Huang Wensheng as the Vice Presidents; Ms. Shou Donghua as the Chief Financial Officer; and Mr. Huang Wensheng as the Secretary to the Board.

On August 2, 2021, Mr. Zhang Yuzhuo resigned as Chairman of the Board, Non-executive Director, Chairman of each of the Strategy Committee and the Sustainable Development Committee, the member of Nomination Committee of the Board of Sinopec Corp. due to change of working arrangement.


21



(2)
Equity Interests of Directors, Supervisors, and Other Senior Management
As of June 30, 2021, Mr. Ling Yiqun, Director, Senior Vice President, held 13,000 A shares of Sinopec Corp., and Mr. Li Defang, supervisor, held 40,000 A shares of Sinopec Corp. (held as interest of spouse).

Save as disclosed above, as of June 30, 2021, none of the directors, supervisors and senior management of Sinopec Corp. and their respective associates had any interests or short positions (including any interests or short positions that are regarded or treated as being held in accordance with the SFO) in any shares, underlying shares or debentures of Sinopec Corp. or any associated corporations (as defined in Part XV of SFO), as recorded in the registry pursuant to Section 352 of the SFO or as otherwise notified to Sinopec Corp. and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (Model Code) contained in the Hong Kong Listing Rules.

As required under the Hong Kong Listing Rules, Sinopec Corp. has formulated the Rules Governing Shares and Changes in Shares Held by Company Directors, Supervisors and Senior Management and the Model Code of Securities Transactions by Company Employees (the Rules and the Code) to stipulate securities transactions by relevant employees. The standards of the Rules and the Code are no less strict than those set out in the Model Code. Upon the specific inquiries made by Sinopec Corp., all the directors confirmed that they had complied with the required standards in the Model Code as well as those set out in the Rules and the Code during the reporting period.

4
DIVIDEND

(1)
Dividend distribution for the year ended 31 December 2020
Upon the approval at its annual general meeting for 2020, Sinopec Corp. distributed the final cash dividend of RMB0.13 per share (tax inclusive) for 2020. The final dividend for 2020 has been distributed to shareholders on or before 28 June 2021 whose names appeared on the register of members of Sinopec Corp. on 16 June 2021. Combined with the 2020 special interim dividend of RMB0.07 per share (tax inclusive), the total cash dividend for the whole year of 2020 amounted to RMB0.20 per share (tax inclusive).


(2)
Interim dividend distribution plan for the six months ended 30 June 2021
As approved at the second meeting of the eighth session of the Board, the interim dividend for the six months ended 30 June 2021 of RMB0.16 per share (tax inclusive) will be distributed based on the total number of shares as of 16 September 2021 (record date) in cash.

The 2021 interim dividend distribution plan of Sinopec Corp., with the consideration of interest of shareholders and development of the Company, is in compliance with the Articles of Association and relevant procedures. The independent Non-executive Directors have issued independent opinions on it. The interim dividend will be distributed on or before 30 September 2021 to all shareholders whose names appear on the register of members of Sinopec Corp. on the record date of 16 September 2021. In order to be qualified for the interim dividend, holders of H shares shall lodge their share certificates and transfer documents with Hong Kong Registrars Limited at 1712-1716, 17th floor, Hopewell Centre, No. 183 Queen’s Road East, Wanchai, Hong Kong, for registration, no later than 4:30 p.m. on 10 September 2021. The register of members of H shares of Sinopec Corp. will be closed from 11 September 2021 to 16 September 2021 (both days inclusive).

The dividend will be denominated and declared in RMB and distributed to domestic shareholders and Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect Program in RMB and to the foreign shareholders in Hong Kong Dollars. The exchange rate for dividend to be paid in Hong Kong dollars is based on the average benchmark exchange rate of RMB against Hong Kong Dollar as published by the People’s Bank of China one week ahead of the date of declaration of the interim dividend (1 Hong Kong dollar=RMB0.83259).

In accordance with the Enterprise Income Tax Law of the People’s Republic of China and its implementation regulations which came into effect on 1 January 2008, Sinopec Corp. is required to withhold and pay enterprise income tax at the rate of 10% on behalf of the non-resident enterprise shareholders whose names appear on the register of members for H Shares of Sinopec Corp. when distributing the cash dividends or issuing bonus shares by way of capitalisation from retained earnings. Any H Shares of the Sinopec Corp. which is not registered under the name of an individual shareholder, including those registered under HKSCC Nominees Limited, other nominees, agents or trustees, or other organisations or groups, shall be deemed as shares held by non-resident enterprise shareholders. Therefore, on this basis, enterprise income tax shall be withheld from dividends payable to such shareholders. If holders of H Shares intend to change their shareholder status, please enquire about the relevant procedures with your agents or trustees. Sinopec Corp. will strictly comply with the law or the requirements of the relevant government authority to withhold and pay enterprise income tax on behalf of the relevant shareholders based on the registration of members for H shares of Sinopec Corp. as at the record date.


22


If the individual holders of H shares are residents of Hong Kong, Macau or countries which had an agreed tax rate of 10% for cash dividends or bonus shares by way of capitalisation form retained earnings with China under the relevant tax agreement, Sinopec Corp. should withhold and pay individual income tax on behalf of the relevant shareholders at a rate of 10%. Should the individual holders of H Shares are residents of countries which had an agreed tax rate of less than 10% with China under relevant tax agreement, Sinopec Corp. shall withhold and pay individual income tax on behalf of the relevant shareholders at a rate of 10%. In that case, if the relevant individual holders of H Shares wish to reclaim the extra amount withheld (Extra Amount) due to the application of 10% tax rate, Sinopec Corp. would apply for the relevant agreed preferential tax treatment provided that the relevant shareholders submit the evidence required by the notice of the tax agreement to the share register of Sinopec Corp. in a timely manner. Sinopec Corp. will assist with the tax refund after the approval of the competent tax authority. Should the individual holders of H Shares are residents of countries which had an agreed tax rate of over 10% but less than 20% with China under the tax agreement, Sinopec Corp. shall withhold and pay the individual income tax at the agreed actual rate in accordance with the relevant tax agreements. In the case that the individual holders of H Shares are residents of countries which had an agreed tax rate of 20% with China, or which had not entered into any tax agreement with China, or otherwise, Sinopec Corp. shall withhold and pay the individual income tax at a rate of 20%.

Pursuant to the Notice on the Tax Policies Related to the Pilot Program of the Shanghai-Hong Kong Stock Connect (關於滬港股票市場交易互聯互通機制試點有關稅收政策的通知) (Caishui [2014] No. 81) and the Notice on the Tax Policies Related to the Pilot Program of the Shenzhen-Hong Kong Stock Connect (《關於深港股票市場交易互聯互通機制試點有關稅收政策的通知》) (Caishui[2016] No.127):

For domestic investors investing in the H Shares of Sinopec Corp. through Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect Program, the Company shall withhold and pay income tax at the rate of 20% on behalf of individual investors and securities investment funds. The Company will not withhold or pay the income tax of dividends for domestic enterprise investors and those domestic enterprise investors shall report and pay the relevant tax by themselves.

For dividends of investors of the Hong Kong Stock Exchange (including enterprises and individuals) investing in the A Shares of Sinopec Corp. through Shanghai-Hong Kong Stock Connect Program, the Company will withhold and pay income taxes at the rate of 10% on behalf of those investors and will report to the competent tax authorities for the withholding. For investors who are tax residents of other countries which have entered into a tax treaty with the PRC stipulating a dividend tax rate of lower than 10%, the enterprises and individuals may, or may entrust a withholding agent to, apply to the competent tax authorities for the entitlement of the rate under such tax treaty. Upon approval by the tax authorities, the amount paid in excess of the tax payable based on the tax rate according to such tax treaty will be refunded.

5.
DETAILED IMPLEMENTATION OF THE SHARE INCENTIVE SCHEME DURING THE REPORTING PERIOD
Sinopec Corp. and its subsidiaries did not implement any share incentive scheme during the reporting period.

6.
COMPLY WITH CORPORATE GOVERNANCE CODE
In the reporting period, Sinopec Corp. has complied with the rules stipulated in Corporate Governance Code in Appendix 14 to the Hong Kong Listing Rules.

7.
REVIEW THE INTERIM REPORT
The Audit Committee of Sinopec Corp. has reviewed and confirmed this interim report.

23


ENVIRONMENT AND SOCIAL RESPONSIBILITIES

1
ECOLOGICAL PROTECTION, POLLUTION PREVENTION AND CONTROL, AND ENVIRONMENTAL RESPONSIBILITY DURING THE REPORTING PERIOD
During the reporting period, the Company actively implemented green and clean development strategy, comprehensively promoted “Green Enterprise Campaign”, revised and released the handbook of HSE management system, continuously improved construction and operation of HSE management system and strengthened management responsibility for energy and environment. The Company enhanced ecological environment protection of enterprises in key river basins such as the Yangtze River and Yellow River, further promoted management of solid waste and hazardous waste, launched a three-year environment management promotion campaign to continuously strengthen pollution prevention and control. Compared with the first half of 2020, COD of discharged water decreased by 2.0%, SO2 emissions decreased by 4.2% and all solid waste were properly treated.

2
MEASURES AND EFFECTS TAKEN BY THE COMPANY TO REDUCE CARBON EMISSIONS DURING THE REPORTING PERIOD
During the reporting period, the Company reinforced the strategic studies on pathway to carbon emissions peak and carbon neutrality, issued the Guidance on pathway to carbon peaking and carbon neutrality, jointly launched China Oil and Gas Methane Alliance, launched million-tonne CCUS project of Qilu Petrochemical-Shengli Oil Field and actively implemented emissions reduction measures of GHG, such as CO2 and methane, and continuously promoted the clean utilisation of fossil energy, scaling up of clean energy, and low-carbon of production process and accelerated the new energy development. In the first half of 2021, the Company continuously promoted energy conservation and consumption reduction and GHG emissions decreased by 2.304 million tonnes of CO2 equivalent, 716 thousand tonnes of CO2 were recycled, 155 thousand tonnes of CO2 were injected for oil displacement and 320 million cubic meters of methane were recovered, equivalent to reducing 4.8 million tonnes of CO2 emissions.

3
ENVIRONMENTAL PROTECTION STATEMENTS OF COMPANIES AND THEIR SUBSIDIARIES AS KEY POLLUTANT DISCHARGE UNITS RECOGNISED BY ENVIRONMENTAL PROTECTION DEPARTMENTS

(1)
Information of pollutant discharging
During the reporting period, certain subsidiaries of Sinopec Corp. which are listed as major pollutant discharge units have acquired discharge permit according to the national pollution permit and disclosed environmental information as required by the relevant authorities and local government. The details of such information were published on national pollutant discharge license management information platform (http://permit.mee.gov.cn/permitExt/defaults/default-index!getInformation.action) and the relevant websites of the local government.


(2)
Construction and operation of prevention and control facilities
During the reporting period, Sinopec Corp. built prevention and control facilities for sewage, flue gas, solid waste and noise in accordance with the requirements of the national and local pollution prevention and environmental protection standards, kept effective and stable operation of pollution prevention and control facilities, and realised standardised discharges and emissions of sewage, flue gas, solid waste and factory noise.


(3)
Environmental impact assessment of construction projects and other environmental protection administrative permits
During the reporting period, the Company further regulated and enhanced the environmental management of construction projects, in the whole production and operation cycle, and implemented “three-simultaneity” management (environmental facilities shall be designed, constructed and put into operation simultaneously with the main construction). All of the newly-built projects have obtained approvals from the environment authorities.


(4)
Emergency response plan for environmental emergencies
During the reporting period, Sinopec Corp. strictly complied with relevant national requirements on environment emergency plan management and continuously improved the emergency plans for environmental emergencies and heavy pollution weather.


(5)
Environmental self-monitoring programme
During the reporting period, according to the national pollution permit and self-monitoring technology guidelines in relevant industries, we modified the self-monitoring plan, implemented new national requirements of sewage, flue gas and noise monitory, and disclosed the environmental monitoring results as instructed by relevant requirements.


24



(6)
Administrative penalties imposed for environmental problems during the reporting period

Company
Time
Penalty document
Penalty amount/
RMB thousand
Penalty reason
Rectification measures
           
Sinopec Nanjing Catalyst Co. LTD
2021 January
寧新區管環罰
[2020]117
272
In some periods of 2019 and 2020, the average online monitoring data of total non-methane hydrocarbons exceeded standard for 3 hours within 24 hours.
The Company has taken rectification measures and established mechanism of abnormal environmental protection online data, strengthened the management of environmental protection facilities and online monitoring facilities, and conducted assessment of relevant contractors.


(7)
Other environmental information required to be disclosed
During the reporting period, for other subsidiaries that are not listed as major pollutant discharge units, the Company also completed relevant environmental protection formalities in accordance with the national and local requirements, and implemented relevant environmental protection measures. According to the requirements of national and local ecological environment departments, these companies do not need to disclose relevant information.

4
PERFORMANCE OF POVERTY ALLEVIATION AND RURAL REVITALISATION DURING THE REPORTING PERIOD
During the reporting period the Company earnestly implemented the decisions and plans of the state, kept our support of capital and personnel stable. The Company has regarded the eight designated targeted poverty alleviation counties that have been lifted out of poverty as the priority counties for rural revitalisation. According to the general requirements of “Thriving businesses, Pleasant living environment, Social etiquette and civility, Effective governance and Prosperity”, the Company focused on the three themes of industry and education development, education promotion and consumption support to effectively consolidate and expand the achievements in poverty alleviation in coordination with rural revitalisation.

On 1 March 2021, the Company released “14th five-year plan for supporting rural revitalisation” and made plans for continuously consolidating poverty alleviation achievements, supporting industry development, improving education quality, supporting consumption of products from poor areas to increase farmers’ income and building beautiful counties.

5
RENDERING ASSISTANCE TO FLOOD CONTROL AND DISASTER RELIEF AND POST-DISASTER RECONSTRUCTION IN HENAN PROVINCE
In July 2021, Henan province was hit by a rare rainstorm and the Company immediately mobilised enterprises and resources in the disaster-stricken areas and fully cooperated with the flood control and disaster relief, secured the supply of refined oil products in the disaster areas, actively participated in the emergency rescue and donated RMB50 million to the Henan Charity Federation, earnestly fulfilling the social responsibilities.

6
SUPPORTING BEIJING 2022 WINTER OLYMPICS AND PARALYMPICS
As the official partner of the Beijing 2022 Winter Olympics and Paralympics, the Company actively practiced the concept the “Clean Energy for Winter Olympics”, promoted the construction of integrated energy supply station of refined oil products, gas and hydrogen to prepare for the clean energy supply and provided carbon fiber and composite materials for the 2022 Olympic torch named “Flying”.

25


SIGNIFICANT EVENTS

1.
MAJOR PROJECTS

(1)
Zhenhai Refining & Chemical expansion project (phase 1)
Zhenhai Refining & Chemical expansion project (phase 1) consists of a 4,000,000 tpa crude oil modification project and a 1,200,000 tpa ethylene project in the mature oil refinery region. The project was approved in June 2018, the construction started in October 2018.The mechanical completion was achieved in June 2021. The Company’s self-owned fund accounts for 30% of the project investment, and bank loan is the main source of the remaining 70%. As of 30 June 2021, the aggregate investment was RMB19.4 billion.


(2)
Zhenhai Refining & Chemical expansion project (phase 2)
Zhenhai Refining & Chemical expansion project (phase 2) consists of building a 11,000,000 tpa refinery project and a 600,000 tpa propane dehydrogenatin and downstream projects. The refinery project is expected to begin construction in October 2021 and to be put into operation by the end of 2024. The Company’s self-owned fund accounts for 30% of the project investment, and bank loan is the main source of the remaining 70%. As of 30 June 2021, the aggregate investment was RMB0.3 billion.


(3)
Tianjin Nanggang ethylene and downstream high-end new material industry cluster project
Tianjin Nanggang ethylene and downstream high-end new material industry cluster project consists of a 1,200,000 tpa ethylene project and downstream processing units. The project began construction in May 2021 and is expected to be put into operation in the end of 2023. The Company’s self-owned fund accounts for approximately 30% of the project investment and bank loan is the main source of the remaining 70%. As of 30 June 2021, the aggregate investment was RMB0.1 billion.


(4)
Wuhan ethylene de-bottleneck project
Wuhan ethylene de-bottleneck project mainly consists of an 800,000 tpa to 1,100,000 tpa ethylene capacity expansion project. The project started construction at the end of October 2018. The mechanical completion was achieved in June 2021. The Company’s self-owned fund accounts for approximately 30% of the project investment and bank loan is the main source of the remaining 70%. As of 30 June 2021, the aggregate investment was RMB3.6 billion.


(5)
Hainan Refining 1,000,000 tpa ethylene and refinery revamping and expansion project
Hainan Refining 1,000,000 tpa ethylene and refinery revamping and expansion project mainly consists of the construction of 1,000,000 tpa ethylene and auxiliary units. The project started in December 2018 and is expected to achieve the mechanical completion in June 2022. The Company’s self-owned fund accounts for approximately 30% of the project investment and bank loan is the main source of the remaining 70%. As of 30 June 2021, the aggregate investment was RMB10.4 billion.


(6)
Weirong shale gas project (phase 1 and phase 2)
Under the guidance of the principle of “overall deployment, stage-wise implementation and fully consideration”, the capacity construction was promoted comprehensively from August 2018. The construction of phase 1 project with a production capacity of 1 billion cubic meters per year was completed and put into operation in December 2020. The phase 2 project with a production capacity of 2 billion cubic meters per year is expected to be completed and put into operation in December 2022. The Company’s self-owned fund accounts for 30% of the project investment and bank loan is the main source of the remaining 70%. As of 30 June 2021, the aggregate investment was RMB5.3 billion.


(7)
Tianjin LNG project (phase 2)
Tianjin LNG project (phase 2) mainly consists of a new wharf, five new 220,000-cubic-meter storage tanks etc. LNG processing capacity will reach 11,000,000 tpa after phase 2 expansion project is completed. The project started in January 2019 and is expected to be put into operation in August 2023. The Company’s self-owned fund accounts for approximately 30% of the project investment and bank loan is the main source of the remaining 70%. As of 30 June 2021, the aggregate investment was RMB2.2 billion.

2.
CORE COMPETITIVENESS ANALYSIS
The Company is a large scale integrated energy and petrochemical company with upstream, mid-stream and downstream operations. The Company is a large oil and gas producer in China with the largest refining capacity in China. The Company is equipped with a well-developed refined oil products sales network, being the largest supplier of refined oil products in China. The Company ranks first in terms of ethylene production and marketing capacity and has a well-established marketing network for chemical products.

The integrated business structure of the Company carries strong advantages in synergy among its various business segments, enabling the Company to continuously tap onto potentials in attaining an efficient and comprehensive utilisation of its resources, and endowed the Company with strong resistance against risks, as well as remarkable capabilities in sustaining profitability.

The Company enjoys a favourable positioning with its operations located close to the consumer markets. The steady growth in the Chinese economy is helpful to the development of both refined oil business and chemical business of the Company; through continuous and specialised marketing efforts, the Company’s capability in international operations and market expansion has been further enhanced.


26


The Company owns a team of professionals with expertise in the production of oil and gas, operation of refineries and chemical plants, as well as marketing activities. The Company applies outstanding fine management measures with its remarkable capabilities in management of operations, and enjoys a favourable operational cost advantage in its downstream businesses.

The Company has formulated a well-established technology system and mechanism, and owns competent teams specialised in R&D covering a wide range of subjects; the four platforms for technology advancement is taking shape, which includes exploration and development of oil and gas, refining, petrochemicals and strategic emerging technology. With its overall technologies reaching state of the art level in the global arena, and some of the subsidiaries taking the lead globally, the Company enjoys a strong technical strength.

The Company always attaches great importance to the fulfilment of social responsibilities, and carries out the green and low carbon development strategy to pursue a sustainable development. Moreover, the Company enjoys an outstanding “Sinopec” brand name, plays an important role in the national economy and is a renowned and reputable company in China.

3.
ACTUAL CONTINUING CONNECTED TRANSACTIONS ENTERED INTO BY THE COMPANY DURING THE REPORTING PERIOD
Sinopec Corp. and China Petrochemical Corporation entered into a number of continuing connected transactions agreements, including the mutual supply agreement, the cultural, educational, hygiene and auxiliary agreement, the land use rights leasing agreement, the properties leasing agreement, the intellectual property licensing agreement and safety production insurance fund document.

In the reporting period, pursuant to the above-mentioned continuing connected transactions agreements, the aggregate amount of the continuing connected transactions of the Company during the reporting period was RMB202.595 billion. Among which, purchases expenses amounted to RMB137.166 billion, representing 10.75% of the total amount of this type of transaction for the reporting period, including purchases of products and services (procurement, storage, transportation, exploration and production services, and production-related services) of RMB130.653 billion, purchases of auxiliary and community services of RMB642 million, payment of property rent of RMB272 million, payment of land use rights of RMB5.402 billion, and interest expenses of RMB196 million. The sales income amounted to RMB65.429 billion, representing 4.93% of the total amount of this type of transaction for the reporting period, including sales of products of RMB64.977 billion, agency commission income of RMB69 million, and interest income of RMB381 million.

The amounts of the above continuing connected transactions between the Company and Sinopec Group did not exceed the relevant caps for the continuing connected transactions as approved by the general meeting of shareholders and the Board.

4.
FUNDS PROVIDED BETWEEN RELATED PARTIES
Unit: RMB million
   
Funds to related parties
Funds from related parties
Related Parties
Relations
Balance
at the
beginning
of the reporting
period
Amount incurred
Balance
at the end
of the reporting
 period
Balance
at the
beginning
of the reporting
 period
Amount incurred
Balance at
the end
of the reporting
period
               
Sinopec Group
Parent company and affiliated companies*
10,523
 
179
 
10,702
 
9,027
 
19,645
 
28,672
 
Other related parties
Associates and joint ventures
11,328
(6,172)
5,156
6,087
(2,083)
4,004
Total
 
21,851
(5,993)
15,858
15,114
17,562
32,676
Reason for provision of funds between related parties
Loans and accounts receivable and payable
Impacts of the provision of funds on the Company
No material negative impact

*: Affiliated companies include subsidiaries, associates and joint ventures.

5.
ACTUAL DAILY RELATED TRANSACTIONS ENTERED INTO BY THE COMPANY AND CHINA OIL & GAS PIPELINE NETWORK CORPORATION (PIPECHINA) DURING THE REPORTING PERIOD
On 28 January 2021, the Board of Sinopec Corp. approved the daily related transaction cap in relation to refined oil pipeline transportation services between Sinopec Marketing and PipeChina, within the period from 1 October 2020 to 31 December 2021. The actual executed amount of the daily related transaction of the Company and PipeChina regarding refined oil pipeline transportation services from 1 January 2021 to 30 June 2021 was RMB2.438 billion.

6.
ACQUISITION OF EQUITY AND NON-EQUITY ASSETS
On 26 March 2021, Sinopec Corp. and Assets Company of Sinopec Group entered into acquisition agreements to purchase the equity interest in Cangzhou Toray and the polypropylene and utilities assets, Sinopec Corp. and Orient Petrochemical entered into agreement to purchase equipment and related assets. On the same day, Overseas Investment Company of Sinopec Corp. and Century Bright Company entered into agreement to purchase equity interest in Hainan Refining and Chemical, Beihai Refining & Chemical of Sinopec Corp. and Beihai Petrochemical entered in agreement to purchase the non-equity assets including the pier operation platform held by Beihai Petrochemical. The above agreements have been entered on purchase of equity and non-equity assets by Sinopec Corp. or its subsidiaries. As of 1 July 2021, conditions precedent for above agreements have been met, the ownership, obligations, responsibilities and risks of targeted assets have been transferred to Sinopec Corp. or its subsidiaries.


27


For details, please refer to the announcements published by Sinopec Corp. on China Securities Journal, Shanghai Securities News, Securities Times, and on the website of Shanghai Stock Exchange on 29 March 2021, 2 July 2021 and on the website of Hong Kong Stock Exchange on 28 March 2021, 1 July 2021.

7.
SIGNIFICANT LITIGATION, ARBITRATION RELATING TO THE COMPANY
No significant litigation, arbitration relating to the Company occurred during the reporting period.

8.
CREDIBILITY FOR THE COMPANY, CONTROLLING SHAREHOLDERS AND DE FACTO CONTROLLER
During the reporting period, the Company and its controlling shareholder did not have any unperformed court’s effective judgments which should be performed or any large amount of debt which should be repaid.

9.
MATERIAL CONTRACTS AND THEIR PERFORMANCE
During the reporting period, the Company did not enter into any material contracts subject to disclosure obligations during the reporting period.

10.
SIGNIFICANT EQUITY INVESTMENT
In the reporting period, no significant equity investment occurred by the Company.

11.
SIGNIFICANT SALE OF ASSETS OR EQUITY
In the reporting period, no significant sale of assets or equity occurred by the Company.

12.
BUSINESS WITH SINOPEC FINANCE CO. AND CENTURY BRIGHT

(1)
DEPOSIT BUSINESS
Unit: RMB Million
Related Parties
Relations
Daily Deposit Cap
Deposit Interest Rate Range
Balance at the
Beginning of the
Reporting Period
Amount
Incurred
Balance at the
end of the
Reporting Period
 
 
 
       
Sinopec Finance Co.
51% by China Petrochemical Corporation, 49% by Sinopec Corp.
Cap RMB80.0 billion by Sinopec Finance Co. and Century Bright
current deposit 0.35%-
1.725%; time deposit
1.62%-7.4%
23,953

 
6,868

 
17,964

 
Century Bright
100% by China Petrochemical Corporation
 
current deposit 0%-0.25%;
time deposit 0.08%-1.23%
29,464
 
113,512
 
36,186
 
Total
/
/
/
53,417
120,380
54,150


Note 1:
In general, the deposit interest rate in Sinopec Finance Co. and Century Bright by Sinopec Corp. is no lower than the same kind and same period deposit interest rate of major commercial banks.


Note 2:
The amount incurred in the reporting period is in the calibre of time deposits (new deposits and mature deposits), of which the time deposit of the Sinopec Finance Co. increased by RMB3.986 billion in the first half of the 2021 and due by RMB2.882 billion; the time deposit of Century Bright increased by RMB60.811 billion in the first half of the 2021, and due by RMB52.701 billion.


(2)
LOAN BUSINESS
Unit: RMB Million
Related Parties
Relations
Loan Cap
Loan Interest Rate Range
Balance at the
Beginning of the
Reporting Period
Amount
Incurred
Balance at the
end of the
Reporting Period
 
 
 
       
Century Bright
100% by China Petrochemical Corporation
120,956
0.62%-4.25%
 
6,614
 
115,407
 
9,999
 
Sinopec Finance Co.
51% by China Petrochemical Corporation, 49% by Sinopec Corp.
10,400
1.08%-5.23%

 
10,428

 
22,860

 
10,400

 
Total
/
/
/
17,042
138,267
20,399


Note 1:
In general, the loan interest rate by Sinopec Finance Co. and Century Bright to Sinopec Corp. is no higher than the same kind and same period loan interest rate of major commercial banks.


Note 2:
Among the amounts incurred in the reporting period, that of Century Bright increased by RMB59.396 billion and decreased by RMB56.011 billion, and that of Sinopec Finance Co. increased by RMB11.416 billion and decreased by RMB11.444 billion.


28



(3)
CREDIT BUSINESS AND OTHER FINANCE BUSINESS
Unit: RMB Million
Related Parties
Relations
Business Type
Balance at the end
of the Reporting Period
Amount Incurred
         
Sinopec Finance Co.
51% by China Petrochemical Corporation, 49% by Sinopec Corp.
Acceptance bill
9,735
10,318
Discounted bill
/
2,884

Note:     the amount incurred is that of the newly-issued bill in the reporting period

13.
MATERIAL GUARANTEE CONTRACTS AND THEIR PERFORMANCE
Unit: RMB million
Major external guarantees (excluding guarantees for controlled subsidiaries)
Guarantor
Relationship with
the Company
Name of guaranteed
company
Amount
Transaction date
(date of signing)
Period of guarantee
Type
Main Debts
Guarantees
Whether
completed
or not
Whether
overdue
or not
Amount of
overdue
guarantee
Counter-
guaranteed
Whether
guaranteed
for connected
parties*1
                           
Sinopec Corp.
The listed company itself
Zhongtian Hechuang Energy Co., Ltd.
6,760
 
25 May 2016
25 May 2016-31 December 2023 (the mature date is estimated)
Joint liability guarantee
Normal performance
None
 
No
No
 
None
 
No
 
No
 
Sinopec Corp.
The listed company itself
Zhong An United Coal Chemical Co., Ltd.
6,035
 
18 April 2018
18 April 2018-31 December 2031
Joint liability guarantee
Normal performance
None
 
No
 
No
 
None
 
No
 
No
 
Total amount of guarantees provided during the reporting period*2
0
Total balance amount of guarantee at the end of reporting period*2 (A)
12,795
Guarantees by the Company to the controlled subsidiaries
 
Total amount of guarantee provided to controlled subsidiaries during the reporting period
0
Total balance amount of guarantee for controlled subsidiaries at the end of the reporting period (B)
11,305
Total amount of guarantees by the Company (including those provided for controlled subsidiaries)
 
Total amount of guarantees (A+B)
24,100
The proportion of the total amount of guarantees attribute to the Sinopec Corp.’s net assets (%)
3.15%
Among which:
 
Guarantees provided for shareholder, de facto controller and its related parties (C)
0
Amount of debt guarantees provided directly or indirectly to the companies with liabilities to assets ratio over 70% (D)
6,035
The amount of guarantees in excess of 50% of the net assets (E)
0
Total amount of the above three guarantee items (C+D+E)
6,035
Explanation of guarantee undue that might involve joint and several liabilities
None
Explanation of guarantee status
None


*1:
As defined in the Rules Governing the Listing of Stocks on Shanghai Stock Exchange.


*2:
The amount of guarantees provided during the reporting period and the outstanding balance of guarantees amount at the end of the reporting period include the guarantees provided by the controlled subsidiaries to external parties. The amount of the guarantees provided by these subsidiaries is derived from multiplying the guarantees provided by Sinopec Corp.’s subsidiaries by the percentage of shareholding of Sinopec Corp. in such subsidiaries.


29


14.
PERFORMANCE OF THE UNDERTAKINGS BY CHINA PETROCHEMICAL CORPORATION

Background
Type of
Undertaking
Party
Contents
Term for performance
Whether bears
deadline or not
Whether strictly
performed or not
             
Undertakings related to Initial Public Offerings (IPOs)
IPOs
China Petrochemical Corporation
1  Compliance with the connected transaction agreements;
2  Solving the issues regarding the legality of land-use rights certificates and property ownership rights certificates within a specified period of time;
3  Implementation of the Reorganisation Agreement (please refer to the definition of Reorganisation Agreement in the H share prospectus of Sinopec Corp.);
4  Granting licenses for intellectual property rights;
5  Avoiding competition within the same industry;
6   Abandonment of business competition and conflicts of interest with Sinopec Corp.
From 22 June 2001
No
Yes
Other undertakings
Other
China Petrochemical Corporation
Given that China Petrochemical Corporation engages in the same or similar businesses as Sinopec Corp. with regard to the exploration and production of overseas petroleum and natural gas, China Petrochemical Corporation hereby grants a 10-year option to Sinopec Corp. with the following provisions: (i) within ten years from the issuance date of this undertaking, after a thorough analysis from political, economic and other perspectives, Sinopec Corp. is entitled to require China Petrochemical Corporation to sell its overseas oil and gas assets owned as of the date of the undertaking and still in its possession upon Sinopec Corp.’s exercise of the option to Sinopec Corp.; (ii) in relation to the overseas oil and gas assets acquired by China Petrochemical Corporation after the issuance of the undertaking, within 10 years of the completion of such acquisition, after a thorough analysis from political, economic and other perspectives, Sinopec Corp. is entitled to require China Petrochemical Corporation to sell these assets to Sinopec Corp. China Petrochemical Corporation undertakes to transfer the assets as required by Sinopec Corp. under aforesaid items (i) and (ii) to Sinopec Corp., provided that the exercise of such option complies with applicable laws and regulations, contractual obligations and other procedural requirements.
Within 10 years after 29 April 2014 or the date when China Petrochemical Corporation acquires the assets
Yes
Yes

As of the date of this report, Sinopec Corp. had no undertakings in respect of financial performance, asset injections or asset restructuring that had not been fulfilled, nor did Sinopec Corp. make any profit forecast in relation to any asset or project.

15.
STRUCTURED ENTITY CONTROLLED BY THE COMPANY
None

16.
REPURCHASE, SALES AND REDEMPTION OF SHARES
During this reporting period, neither Sinopec Corp. nor any of its subsidiaries repurchased, sold or redeemed any listed securities of Sinopec Corp..

17.
INFORMATION ON MAJOR SUBSIDIARIES OR THE ASSOCIATES OR JOINT VENTURES
The net profit from the subsidiary or investment income from the associate or joint venture accounts for more than 10% of the Company’s net profit:


30


Unit: RMB million
   
Percentage of
share held by
     
Revenue of
Profit of
 
Company name
Registered
capital
Sinopec Corp.
(%)
Total asset
Net Assets
Net Profit
primary
business
primary
business
Primary Activities
                 
Sinopec Marketing Co., Ltd.
28,403
70.42
521,709
245,930
12,969
615,076
44,145
Sales of refined oill products

18.
CHANGE OF AUDITORS
As PricewaterhouseCoopers Zhong Tian LLP (Special general partnership) and PricewaterhouseCoopers have been auditors of Sinopec Corp. for eight consecutive years, according to domestic regulation, Sinopec Corp. needs to change its auditors in 2021. The 21st meeting of the 7th session of the Board has approved to appoint KPMG Huazhen LLP (Special general partnership) and KPMG as the domestic and overseas auditors of Sinopec Corp. for 2021. The appointment has been approved by the 2020 Annual General Meeting of Sinopec Corp. held on 25 May 2021.

19.
RISK FACTORS
In the course of its production and operations, Sinopec Corp. will actively take various measures to circumvent operational risks. However, in practice, it may not be possible to prevent the occurrence of all risks and uncertainties described below.

Risks with regard to the variations from macroeconomic situation: The business results of the Company are closely related to China’s and global economic situation. As the Covid-19 situation has been effectively controlled, the domestic economy is recovering steadily. With expanded vaccination and developed countries such as the US, European countries and Japan continuing their loose currency and fiscal stimulus policy, the world economy is recovering gradually, but with an uneven trend. The economic development is more and more constrained by climate change and environmental problems. The Company’s business could also be adversely affected by other factors such as the impact on export due to trade protectionism from certain countries and negative impact on the investment of overseas oil and gas exploration and development and refining and chemical storage projects which results from the uncertainty of geopolitics, international crude oil price and etc.

Risks with regard to the cyclical effects from the industry: The majority of the Company’s operating income comes from the sales of refined oil products and petrochemical products, and part of those businesses and their related products are cyclic and are sensitive to macro-economy, cyclic changes of regional and global economy, the changes of the production capacity and output, demand of consumers, prices and supply of the raw materials, as well as prices and supply of the alternative products etc. Although the Company is an integrated company with upstream, midstream and downstream operations, it can only counteract the adverse influences of industry cycle to a certain extent.

Risks from the macroeconomic policies and government regulation: Although the Chinese government is gradually liberalizing the market entry regulations on petroleum and petrochemicals sector, the petroleum and petrochemical industries in China are still subject to entry regulations to a certain degree, which include: issuing licenses in relation to exploration and development of crude oil and natural gas, issuing business licenses for trading crude oil and refined oil, setting caps for retail prices of gasoline, diesel and other oil products, the imposition of the special oil income levy; the formulation of refined oil import and export quotas and procedures; the formulation of safety, quality and environmental protection standards and the formulation of energy conservation policies. In addition, the changes which have occurred or might occur in macroeconomic and industry policies such as the opening up of crude oil import licenses and the right of tenure; reforming and improvement in pricing mechanism of natural gas, cost supervision of gas pipeline and access to third party; cancellation of qualification approval of the wholesale and storage of refined oil business, decentralisation of retail business authorisation of refined oil products to regional and city level government, further improvement in pricing mechanism of refined oil products, gas stations investment being fully opened to foreign investment; and reforming in resource tax and environmental tax, etc. Such changes might further intensify market competition and have certain effects on the operations and profitability of the Company.

Risks with regard to the changes from environmental legislation requirements: Our production activities generate waste liquids, gases and solids. The Company has built up the supporting effluent treatment systems to prevent and reduce the pollution to the environment. However, the relevant government authorities may issue and implement much stricter environmental protection laws and regulations, adopt much stricter environment protection standards. Under such situations, the Company may increase expenses in relation to the environment protection accordingly.

Risks from the uncertainties of obtaining additional oil and gas resources: The future sustainable development of the Company is partly dependent to a certain extent on our abilities in continuously discovering or acquiring additional oil and natural gas resources. To obtain additional oil and natural gas resources, the Company faces some inherent risks associated with exploration and development and/or with acquisition activities, and the Company has to invest a large amount of money with no guarantee of certainty. If the Company fails to acquire additional resources through further exploration, development and acquisition to increase the reserves of crude oil and natural gas, the oil and natural gas reserves and production of the Company may decline over time which may adversely affect the Company’s financial situation and operation performance.


31


Risks with regard to the external purchase of crude oil: A significant amount of crude oil as needed by the Company is satisfied through external purchases. In recent years, especially influenced by the mismatch between supply and demand of crude oil, geopolitics, global economic growth and other factors, the prices of crude oil fluctuate sharply. Additionally, the supply of crude oil may even be interrupted due to some extreme major incidents in certain regions. Although the Company has taken flexible countermeasures, it may not fully avoid risks associated with any significant fluctuation of international crude oil prices and sudden disruption of supply of crude oil from certain regions.

Risks with regard to the operation and natural disasters: The process of petroleum chemical production is exposed to the high risks of inflammation, explosion and environmental pollution and is vulnerable to extreme natural disasters. Such contingencies may cause serious impacts to the society, major financial losses to the Company and grievous injuries to people. The Company has always been laying great emphasis on the safety production, and has implemented a strict HSE management system as an effort to avoid such risks as far as possible. Meanwhile, the main assets and inventories of the Company as well as the possibility of damage to a third party have been insured. However, such measures may not shield the Company from financial losses or adverse impact resulting from such contingencies.

Investment risks: Petroleum and chemical sector is a capital intensive industry. Although the Company has adopted a prudent investment strategy, as stipulated and enforced by the new investment decision-making procedures and rules in 2020, conducted rigorous feasibility study on each investment project, which consists of special verifications in raw material market, technical scheme, profitability, safety and environmental protection, legal compliance, etc., certain investment risks will still exist and expected returns may not be achieved due to major changes in factors such as market environment, prices of equipment and raw materials, and construction period during the implementation of the projects.

Risks with regard to overseas business development and management: The Company engages in oil and gas exploration, refining and chemical, warehouse logistics and international trading businesses in some regions outside China. The Company’s overseas businesses and assets are subject to the jurisdiction of the host country’s laws and regulations. In light of the complicated factors such as imbalance of global economy, competitiveness of industry and trade structure, exclusiveness of regional trading blocs, polarisation of benefits distribution in trade, and politicisation of economic and trade issues, including pandemic, sanctions, barriers to entry, instability in the financial and taxation policies, contract defaults, tax dispute, the Company’s risks with regard to overseas business development and management could be increased.

Currency risks: At present, China implements an administered floating exchange rate regime based on market supply and demand which is regulated with reference to a basket of currencies in terms of the exchange rate of Renminbi. As the Company purchases a significant portion of crude oil in foreign currency which is based on US dollar-denominated prices, the realised price of crude oil is based on international crude oil price. Despite the fact that, the price of the domestic refined oil products will change as the exchange rate of the Renminbi changes according to the pricing mechanism for the domestic refined oil products, and the price of other domestic petrochemical products will also be influenced by the price of the imported products, which to a large extent, smooths the impact of the Renminbi exchange rate on the processing and sales of the Company’s crude oil refined products. However, the fluctuation of the Renminbi exchange rate will still have an effect on the income of the upstream sector.

Cyber-security risks: the Company has a well-established network safety system, information infrastructure and operation system, and network safety information platform, devotes significant resources to protecting our digital infrastructure and data against cyber-attacks. However, if our systems against cyber-security risk are proved to be ineffective, we could be adversely affected by, among other things, disruptions to our business operations, and loss of proprietary information, including intellectual property, financial information and employer and customer data, thus causing harm to our personnel, property, environment and reputation. As cyber-security attacks continue to evolve, we may be required to expend additional resources to enhance our protective measures against cyber-security breaches.

32


CHANGES IN SHARE CAPITAL AND SHAREHOLDINGS OF SHAREHOLDERS

1
CHANGES IN THE SHARE CAPITAL
During the reporting period, there was no change in the number and nature of issued shares of Sinopec Corp.

2
NUMBER OF SHAREHOLDERS AND THEIR SHAREHOLDINGS
As at 30 June 2021, there were a total of 507,150 shareholders of Sinopec Corp., of which 501,507 were holders of A shares and 5,643 were holders of H shares. Sinopec Corp. has complied with requirement for minimum public float under the Hong Kong Listing Rules.


(1)
Top ten shareholders as of 30 June 2021
Unit: share
Name of Shareholders
Nature of shareholders
Percentage of shareholdings
%
Total number of shares held
Changes of shareholding1
Number of shares subject to pledges or lock up
           
China Petrochemical Corporation
State-owned share
68.31
82,709,227,393
0
0
HKSCC (Nominees) Limited2
H share
20.97
25,385,923,845
643,437
unknown
中國證券金融股份有限公司
A share
1.92
2,325,374,407
(283,937,650)
0
香港中央結算有限公司
A share
0.93
1,122,299,922
281,227,640
0
中國人壽保險股份有限公司-傳統-普通保險產品-005LCT001
A share
0.67
 
813,500,331
 
(1,105,700)
 
0
 
中國人壽保險股份有限公司-分紅-個人分紅-005LFH002
A share
0.27
 
323,077,505
 
(492,592,663)
 
0
 
中中央匯金資產管理有限責任公司
A share
0.27
322,037,900
0
0
國信證券股份有限公司
A share
0.16
196,977,796
177,793,001
0
黃長富
A share
0.13
160,000,087
160,000,087
0
全國社保基金一一三組合
A share
0.09
107,387,897
107,387,897
0


1.
As compared with the number of shares as at 31 December 2020.


2.
Sinopec Century Bright Capital Investment Limited, a wholly-owned overseas subsidiary of China Petrochemical Corporation, holds 553,150,000 H shares, accounting for 0.46% of the total share capital of Sinopec Corp. Such shareholdings are included in the total number of shares held by HKSCC Nominees Limited.

Statement on the connected relationship or acting in concert among the aforementioned shareholders:

Apart from 中國人壽保險股份有限公司-傳統-普通保險產品-005L-CT001 and 中國人壽保險股份有限公司-分紅-個人分紅-005L-FH002which are both managed by 中國人壽保險股份有限公司, Sinopec Corp. is not aware of any connected relationship or acting in concert among or between the above-mentioned shareholders.


(2)
Information disclosed by the holders of H shares in accordance with the Securities and Futures Ordinance (SFO) as of 30 June 2021
Name of shareholders
Status of shareholders
Number of
shares
interests held
or regarded as
held
Approximate
percentage
of Sinopec Corp.’s
issued share
capital
(H share) (%)
       
Citigroup Inc.
Person having a security interest in shares
7,771,000(L)
0.03(L)
 
Interests of corporation controlled by the
127,810,267(L)
0.50(L)
 
substantial shareholder
124,137,279(S)
0.49(S)
 
Approved lending agent
1,901,979,079(L)
7.45(L)
BlackRock, Inc.
Interests of corporation controlled by the
1,968,236,873(L)
7.71(L)
 
substantial shareholder
5,529,900(S)
0.02(S)
GIC Private Limited
Investment manager
1,523,751,125(L)
5.97(L)

Note: (L) Long position, (S) Short position

3
CHANGES IN THE CONTROLLING SHAREHOLDERS AND THE DE FACTO CONTROLLER
There was no change in the controlling shareholder or the de facto controller of Sinopec Corp. during the reporting period.


33


BOND GENERAL INFORMATION

1.
CORPORATE BOND

Bond name
 
Sinopec Corp.2012 Corporate bond
Abbreviation
 
12石化02
Code
 
122150
Issuance date
 
1 June 2012
Interest commencement date
 
1 June 2012
Maturity date
 
1 June 2022
Amount issued (RMB billion)
 
7
Outstanding balance (RMB billion)
 
7
Interest rate (%)
 
4.90
Principal and interest repayment
 
Simple interest is calculated and paid on an annual basis without compounding interests. Interest is paid once a year. The principal will be paid at maturity with last instalment of interest.
Investor Qualification Arrangement
 
12石化02 was publicly offered to qualified investors in accordance with Administration of the Issuance and Trading of Corporate Bonds.
Applicable trading mechanism
 
floor trading at Shanghai Stock Exchange, in line with pledge repurchase requirement
Risk of suspension for listed trading, and countermeasures
 
N/A
Listing exchange
 
Shanghai Stock Exchange
Use of proceeds
 
Proceeds from the above-mentioned corporate bonds have been used for their designated purpose as disclosed. All the proceeds have been completely used.
Credit rating agency
 
During the reporting period, United Credit Ratings Co., Ltd. tracked and provided credit rating for 12石化02 and reaffirmed AAA credit rating in the continuing credit rating report. The credit rating of Sinopec Corp. remained AAA with its outlook being stable. Pursuant to relevant regulations, the latest credit rating results have been published through media designated by regulators within two months commencing from the disclosure of annual report for 2020.
Special terms for Issuer or investor option or investor protection, whether triggered or executed
 
No special terms for Issuer or investor option or investor protection, thus not applicable
Guarantee and repayment scheme and other relative events in the reporting period
 
China Petrochemical Corporation bears non-irrevocable joint liability guarantee. Interest is paid as usual in the reporting period without triggering any guarantee.
Convening of corporate bond holders’ meeting
 
During the reporting period, the bondholders’ meeting was not convened.
Performance of corporate bonds trustee
 
During the durations of the above-mentioned bonds, the bond trustee, China International Capital Corporation Limited, has strictly followed the Bond Trustee Management Agreement and continuously tracked the Company’s credit status, utilisation of bond proceeds and repayment of principals and interests of the bond. The bond trustee has also advised the Company to fulfil obligations as described in the corporate bond prospectus and exercised its duty to protect the bondholders’ legitimate rights and interests. The bond trustee has disclosed the Trustee Management Affairs Report of last year. The full disclosure is available on the website of Shanghai Stock Exchange (http://www.sse.com.cn).

2.
NON-FINANCIAL ENTERPRISE DEBT FINANCING TOOL IN INTER-BANK BOND MARKET
In 2020, the Company issued RMB20 billion medium-term notes with 3-year term as follows: On 31 March 2020 the first and the second phase RMB5 billion medium-term notes were issued (bond abbreviation 20中石化MTN001 and MTN002, code 102000568 and 102000569) with coupon rate 2.7%; On 27 May 2020, the third phase RMB10 billion medium-term note was issued (bond abbreviation 20中石化MTN003, code102001109) with coupon rate 2.2%.

On 4 February 2021, the Company issued RMB5 billion super short-term commercial paper with 180-day term (bond abbreviation 21中石化SCP001, code 012100565) with annual interest rate 2.50%; On 4 March 2021, RMB11.0 billion super short-term commercial paper with 119-day term (bond abbreviation 21中石化SCP002, code 012100810) with annual interest rate 2.65%; On 25 March 2021, RMB3.0 billion super short-term commercial paper with 180-day term (bond abbreviation 21中石化SCP003, code 012101228) with annual interest rate 2.64%; On 29 March 2021, RMB8.0 billion super short-term commercial paper with 120-day term (bond abbreviation 21中石化SCP005, code 012101281) with annual interest rate 2.45%


34


The abovementioned bonds were issued to institutional investors of domestic inter-bank bond market. The key issuance factors such as listing, circulation and transfer, interest commencement date and maturity date were disclosed in the announcements at Shanghai Clearing House and China Currency Web. For super short-term commercial paper, it’s one-off repayment with principal and interest. For medium-term notes, interest is paid annually with repayment of principal at maturity. The Company uses proceeds according to the prospectus. All bonds credit were rated by United Credit Ratings Co., Ltd. in terms of company and bond, with company long-term credit of the Company rated AAA and outlook stable, medium-term notes credit rated AAA. There exists no risk of suspension of listing for above bonds and no guarantee is arranged.

Shanghai Petrochemical Co., Ltd., the subsidiary of Sinopec Corp., issued its super short-term commercial paper, which was disclosed in its interim report for 2021 on the web of Shanghai Stock Exchange.

Principal accounting data and financial indicators at the end of reporting period

Principal data
At the end of the
reporting period
At the end of
last year
Change
Reason for change
         
Current ratio
0.89
0.87
0.02
Due to increase of current assets
Quick ratio
0.57
0.58
(0.01)
Due to slightly increase of other current liabilities
Liability-to-asset ratio
51.04%
49.02%
2.02 percentage points
Due to increase of liabilities
Loan repayment rate
100%
100%

 
The reporting
period for 2021
(January-June)
The reporting
period for 2020
(January-June)
Change
Reason for change
         
Net profit/(loss) attributable to equity shareholders of the Company excluding extraordinary gains and losses
38,420


 
(24,404)


 
62,824


 
Due to increase of net profit
Net profit/(loss) excluding extraordinary gains and losses
47,618
 
(23,836)
 
71,454
 
Due to increase of net profit
EBITDA-to-total debt ratio
0.77
0.18
0.59
Due to increase of EBITDA
EBITDA-to-interest coverage ratio
16.17
2.99
13.18
Due to increase of EBITDA
Interest coverage ratio
9.68
(2.46)
12.14
Due to increase of profit before tax
Cash interest coverage ratio
29.29
13.88
15.41
Due to increase of operating cash flow
Interest payment rate
100%
100%
 

note: Liability-to-asset ratio = total liability/total assets

During the reporting period, the Company paid in full the interest accrued for the other bonds and debt financing instruments. As at 30 June 2021, the standby credit line provided by several domestic financial institutions to the Company was RMB444.0 billion in total, facilitating the Company to get such amount of unsecured loans. The Company has fulfilled all the relevant undertakings in the offering circular of corporate bonds and had no significant matters which could influence the Company’s operation and debt paying ability.

On 18 April 2013, Sinopec Capital (2013) Limited, a wholly-owned overseas subsidiary of Sinopec Corp., issued senior notes guaranteed by the Company with four different maturities, namely 3 years, 5 years, 10 years and 30 years. The 3-year notes principal totalled USD750 million, with an annual interest rate of 1.250% and had been repaid and delisted; the 5-year notes principal totalled USD1.0 billion, with an annual interest rate of 1.875% and had been repaid and delisted; the 10-year notes principal totalled USD1.25 billion, with an annual interest rate of 3.125%; and the 30-year notes principal totalled USD500 million, with an annual interest rate of 4.250%. These notes were listed on the Hong Kong Stock Exchange on 25 April 2013, with interest payable semi-annually. The first payment of interest was made on 24 October 2013. During the reporting period, the Company has paid in full the current-period interests of all notes with maturity of 10 years and 30 years.

35


AUDITOR’S REPORT

To the Shareholders of China Petroleum & Chemical Corporation,

We have reviewed the accompanying interim financial statements of China Petroleum & Chemical Corporation (“Sinopec Corp.”), which comprise the consolidated and company balance sheets as of 30 June 2021, and the consolidated and company income statements, the consolidated and company cash flow statements and the consolidated and company statements of changes in shareholders’ equity for the period from 1 January 2021 to 30 June 2021, and the notes to the financial statements. Management of Sinopec Corp. is responsible for the preparation of these financial statements. Our responsibility is to issue a report on these financial statements based on our review.

We conducted our review in accordance with China Standard on Review No. 2101—Engagements to Review Financial Statements. This standard requires that we plan and perform the review to obtain limited assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements of Sinopec Corp. are not prepared in accordance with the requirements of Accounting Standards for Business Enterprises (“CASs”), and do not present fairly, in all material respects, the consolidated and the company’s financial position of Sinopec Corp. as at 30 June 2021, and the consolidated and the company’s financial performance and cash flows for the period from 1 January 2021 to 30 June 2021.











KPMG Huazhen LLP
Certified Public Accountants
 
Registered in the People’s Republic of China
   
   
 
Yang Jie (Engagement Partner)
   
   
Beijing, China
He Shu
   
 
27 August 2021


36


(A)
FINANCIAL STATEMENTS PREPARED UNDER CHINA ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES
UNAUDITED CONSOLIDATED BALANCE SHEET
As at 30 June 2021

 
Notes
At 30 June
At 31 December
   
2021
2020
   
RMB million
RMB million
Assets
     
Current assets
     
Cash at bank and on hand
5
190,482
184,412
Financial assets held for trading
6
3,988
1
Derivative financial assets
7
24,554
12,528
Accounts receivable
8
71,843
35,587
Receivables financing
9
9,686
8,735
Prepayments
10
8,317
4,862
Other receivables
11
28,605
33,602
Inventories
12
199,234
151,895
Other current assets
 
16,727
23,773
Total current assets
 
553,436
455,395
Non-current assets
     
Long-term equity investments
13
199,652
188,342
Other equity instrument investments
 
1,534
1,525
Fixed assets
14
580,846
589,285
Construction in progress
15
137,799
124,765
Right-of-use assets
16
189,103
189,583
Intangible assets
17
115,425
114,066
Goodwill
18
8,609
8,620
Long-term deferred expenses
19
9,689
9,535
Deferred tax assets
20
29,989
25,054
Other non-current assets
21
26,882
27,635
Total non-current assets
 
1,299,528
1,278,410
Total assets
 
1,852,964
1,733,805
Liabilities and shareholders’ equity
     
Current liabilities
     
Short-term loans
23
37,649
20,756
Derivative financial liabilities
7
6,947
4,826
Bills payable
24
11,260
10,394
Accounts payable
25
216,268
151,262
Contract liabilities
26
127,920
126,160
Employee benefits payable
27
15,826
7,081
Taxes payable
28
36,897
76,843
Other payables
29
101,977
84,600
Non-current liabilities due within one year
30
29,397
22,493
Other current liabilities
31
39,854
17,775
Total current liabilities
 
623,995
522,190
Non-current liabilities
     
Long-term loans
32
43,149
45,459
Debentures payable
33
31,251
38,356
Lease liabilities
34
171,945
172,306
Provisions
35
45,947
45,552
Deferred tax liabilities
20
10,572
8,124
Other non-current liabilities
36
18,804
17,942
Total non-current liabilities
 
321,668
327,739
Total liabilities
 
945,663
849,929
Shareholders’ equity
     
Share capital
37
121,071
121,071
Capital reserve
38
121,194
122,558
Other comprehensive income
39
901
1,038
Specific reserve
 
2,719
1,941
Surplus reserves
40
209,280
209,280
Undistributed profits
 
309,989
286,575
Total equity attributable to shareholders of the Company
 
765,154
742,463
Minority interests
 
142,147
141,413
Total shareholders’ equity
 
907,301
883,876
Total liabilities and shareholders’ equity
 
1,852,964
1,733,805

These financial statements have been approved for issue by the board of directors on 27 August 2021.


Ma Yongsheng
Shou Donghua
 
Director and President
Chief Financial Officer
 

The accompanying notes form part of these financial statements.


37


UNAUDITED BALANCE SHEET
As at 30 June 2021

 
Notes
At 30 June
At 31 December
   
2021
2020
   
RMB million
RMB million
Assets
     
Current assets
     
Cash at bank and on hand
 
95,080
99,188
Derivative financial assets
 
6,858
7,776
Accounts receivable
8
26,060
21,763
Receivables financing
 
656
707
Prepayments
10
4,588
2,626
Other receivables
11
39,507
37,938
Inventories
 
47,429
39,034
Other current assets
 
13,380
14,048
Total current assets
 
233,558
223,080
Non-current assets
     
Long-term equity investments
13
348,233
343,356
Other equity instrument investments
 
428
428
Fixed assets
14
278,692
283,695
Construction in progress
15
63,373
59,880
Right-of-use assets
16
107,899
108,737
Intangible assets
 
8,558
8,779
Long-term deferred expenses
 
2,485
2,499
Deferred tax assets
 
17,324
12,661
Other non-current assets
 
33,769
26,828
Total non-current assets
 
860,761
846,863
Total assets
 
1,094,319
1,069,943
Liabilities and shareholders’ equity
     
Current liabilities
     
Short-term loans
 
20,180
20,669
Derivative financial liabilities
 
175
362
Bills payable
 
6,557
6,061
Accounts payable
 
84,884
65,779
Contract liabilities
 
5,162
5,840
Employee benefits payable
 
6,779
1,673
Taxes payable
 
21,237
43,500
Other payables
 
192,810
188,568
Non-current liabilities due within one year
 
18,867
12,026
Other current liabilities
 
27,342
439
Total current liabilities
 
383,993
344,917
Non-current liabilities
     
Long-term loans
 
29,832
30,413
Debentures payable
 
19,982
26,977
Lease liabilities
 
105,573
105,691
Provisions
 
36,644
36,089
Other non-current liabilities
 
3,452
3,581
Total non-current liabilities
 
195,483
202,751
Total liabilities
 
579,476
547,668
Shareholders’ equity
     
Share capital
 
121,071
121,071
Capital reserve
 
69,012
68,976
Other comprehensive income
 
5,819
5,910
Specific reserve
 
1,467
1,189
Surplus reserves
 
209,280
209,280
Undistributed profits
 
108,194
115,849
Total shareholders’ equity
 
514,843
522,275
Total liabilities and shareholders’ equity
 
1,094,319
1,069,943

These financial statements have been approved for issue by the board of directors on 27 August 2021.





Ma Yongsheng
Shou Donghua
 
Director and President
Chief Financial Officer
 

The accompanying notes form part of these financial statements.

38


UNAUDITED CONSOLIDATED INCOME STATEMENT
For the six-month period ended 30 June 2021

 
Notes
Six-month period ended 30 June
   
2021
2020
   
RMB million
RMB million
Operating income
41
1,261,603
1,033,064
Less: Operating costs
41
999,983
873,735
Taxes and surcharges
42
120,866
108,711
Selling and distribution expenses
 
31,700
29,510
General and administrative expenses
 
35,746
31,530
Research and development expenses
45
5,359
4,319
Financial expenses
43
4,901
5,263
Including: Interest expenses
 
7,658
8,083
Interest income
 
2,662
2,267
Exploration expenses, including dry holes
46
4,846
4,465
Add: Other income
47
1,244
2,467
Investment income
48
4,890
5,631
Including: Income from investment in associates and joint ventures
 
11,133
8
Gains from changes in fair value
49
116
110
Credit impairment reversals/(losses)
 
55
(101)
Impairment losses