Sluggish oil prices drag down performance: Sinopec’s Q3 revenue down 10.9% year-on-year, profit basically flat year-on-year | Earnings Report Snapshot

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On Wednesday, Sinopec released its third-quarter results. The key highlights are as follows:

Q3 operating income was 704.4 billion yuan, down 10.9% year-on-year; net profit attributable to shareholders of the parent company was 8.501 billion yuan, down 0.5% year-on-year;For the first three quarters, operating income was 2.11 trillion yuan, down 10.7% year-on-year; net profit attributable to shareholders of the parent company was 29.984 billion yuan, down 32.2% year-on-year;Operating cash flow was 114.8 billion yuan, up 13.0% year-on-year

Performance by business segment:

Exploration and Production: EBIT was 38.1 billion yuan, oil and gas equivalent production increased by 2.2%

Refining: EBIT was 7 billion yuan, crude oil processing volume decreased by 2.2%

Marketing and Distribution: EBIT was 12.8 billion yuan, refined oil sales volume decreased by 5.7%

Chemicals: EBIT loss of 8.2 billion yuan, with significant pressure from industry overcapacity

Decline in oil prices drags on performance, Q3 barely maintains last year's level

Sinopec's performance in the first three quarters fully reflects the cyclical challenges of the energy industry. Net profit attributable to shareholders of the parent company was 29.984 billion yuan, a year-on-year plunge of 32.2%, far exceeding the 10.7% decline in operating income.

On a single-quarter basis, net profit in the third quarter was 8.501 billion yuan, down only 0.5% year-on-year, basically flat compared to the same period last year. The average spot price of Brent crude oil in the first three quarters was $70.9/barrel, down 14.4% year-on-year. The company's realized price for self-produced crude oil was $66.38/barrel, down 13.3% year-on-year.

Mixed performance across segments: upstream holds the line, chemicals bear the brunt

The exploration and production segment was one of the few highlights. Despite oil price pressures, this segment still achieved EBIT of 38.085 billion yuan in the first three quarters, becoming the company's largest source of profit. Oil and gas equivalent production reached 394.48 million barrels, up 2.2% year-on-year, with natural gas production at 1,099.31 billion cubic feet, up 4.9% year-on-year. The company's breakthroughs in shale oil in Jiyang and ultra-deep shale gas in the Sichuan Basin indicate that its continued investment in resources is beginning to pay off.

The refining segment faced relatively tough times. Crude oil processing volume in the first three quarters was 186.41 million tons, down 2.2% year-on-year. According to company statistics, domestic refined oil consumption fell by 4.0% year-on-year.

The marketing and distribution segment was also under pressure. The total refined oil sales volume in the first three quarters was 171.4 million tons, down 5.7% year-on-year, of which domestic retail sales were 82.67 million tons, down 3.7% year-on-year.

The biggest problem was in the chemicals segment. In the first three quarters, this segment recorded an EBIT loss of 8.223 billion yuan, becoming the main drag on overall performance. Although ethylene output reached 11.588 million tons, up 15.4% year-on-year, the continuous release of new domestic chemical capacity led to sluggish product prices. The segment's single-quarter loss in Q3 expanded from 5.6 billion yuan in the same period last year to 7.4 billion.

Cash flow remains solid, but rising debt pressure warrants caution

With profits falling sharply, Sinopec's cash flow performance remained relatively stable. Net cash flow from operating activities in the first three quarters was 114.8 billion yuan, up 13.0% year-on-year, mainly thanks to improved working capital management — inventories dropped from 256.6 billion yuan to 239.2 billion yuan, releasing some cash.

However, changes on the balance sheet reveal some concerns. Non-current liabilities due within one year soared from 64.6 billion yuan to 106.2 billion yuan, an increase of 64.5%. At the same time, the company increased bond financing, with bonds payable rising from 25.6 billion yuan to 52.6 billion yuan, an increase of over 100%. The total asset-liability ratio was kept at a reasonable 54.7%.

In terms of investment, the company's capital expenditure for the first three quarters was 71.6 billion yuan, of which 41.6 billion was in the exploration and production segment, maintaining a high level of upstream investment. Notably, exploration expenses (including dry well costs) reached 8.4 billion yuan, up 31.9% year-on-year.

Additionally, the company made a strategic investment in shares of CATL, with other equity instrument investments soaring from 416 million yuan to 8.114 billion yuan, showing its layout in the transition to new energy.

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