Sinopec's quarterly profit plunges 76% after strong 2018

Fall in fourth quarter results comes after its oil trading unit Unipec posted a net loss of 4.02bn yuan last year

A Sinopec employee at a company fuel station in Hong Kong. The fim has been hit by Unipec loss. Bloomberg

Sinopec, the the world’s largest refiner, posted its smallest quarterly net profit since the third quarter of 2016, after its oil trading unit Unipec registered one of China's largest derivatives trading losses in nearly a decade.

China Petroleum & Chemical Corporation, better known as Sinopec, said its fourth-quarter net profit plunged 76 per cent from a year ago to 3.1 billion yuan (Dh1.69bn). Its revenues increased 33 per cent to 818bn yuan during the same period, according to Reuters' calculations.

Sinopec said Unipec posted a net loss of 4.02bn yuan last year. The unit lost 4.65bn yuan on crude oil hedging in the fourth quarter.

For the full year of 2018, the state-owned company still managed robust growth. Net earnings of the company rose 23 per cent to 63bn yuan, the best annual results since 2013, and its total revenue of 2.89 trillion yuan compared with 2.36tn yuan a year earlier.

The strong growth in 2018 was mainly due to higher sales prices and volume of refined products and chemicals, the company said in a filing to the Shanghai Stock Exchange on Sunday.

The company also issued a dividend of 0.26 yuan per share.

Sinopec aims to raise spending to the highest since 2014, joining state-owned peers in their mission to churn out more domestic oil and gas to ease China's reliance on imports, according to Bloomberg. Capital expenditure is budgeted at 136.3bn yuan this year, the refiner said in a statement to the Shanghai Stock Exchange. Spending was 118bn yuan in 2018, above the 117bn yuan estimated by Sinopec.

The refiner allocated a larger portion of spending on exploration and production this year, which will account for 44 per cent of capital expenditure from 36 per cent in 2018.

Sinopec has focused its upstream efforts in recent years on expanding natural gas output. The strategy is in line with a state drive to use more of the cleaner-burning fuel and is crucial in helping to offset crude output declines from its ageing, high-cost fields.

Its exploration and production business remains in the red, even as the segment is less of a drag on earnings. Operating losses narrowed to 10.1bn yuan in 2018 from 45.9bn yuan the previous year.