Sinopec Corp, Asia's top oil refiner, unveiled a better-than-expected 21 percent jump in quarterly earnings thanks to higher prices for fuel and crude oil, and expects Beijing to hike fuel rates again in coming months.
Sinopec, China's number two oil firm and the nation's top refiner, has suffered from a government cap which keeps fuel prices well below market levels, but Beijing has allowed two increases this year.
In addition, the company's crude oil producing division enjoyed selling prices that were more than 40 percent higher than a year ago.
State-run Sinopec said the price hikes, applied to both ex-refinery prices and prices at the pump, still did not reflect the true cost of doing business.
It wants to be able to pass on still more of the costs of surging crude prices.
"Our product prices still lagged behind the oil price. It's important that consumers psychologically absorb the increase," Chairman Chen Tonghai told reporters on Monday.
"As crude prices keep climbing in the second half, we expect further price increases this year."
Sinopec, which with rivals PetroChina Co Ltd and CNOOC Ltd form China's ruling oil triumvirate, posted a second-quarter net profit of 12.11 billion yuan ($1.52 billion), versus 10.01 billion yuan a year ago, based on Reuters calculations using official interim earnings. That beat a forecast for 10.9 billion yuan, based on Reuters' calculations off half-year estimates from four analysts.
Sinopec, which processes about 2.9 million barrels of oil per day, saw its refining losses jump several-fold to 8.7 billion yuan in the second quarter, because despite the price increases, margins in that part of the business remained negative.
It was in the marketing division that the price hikes showed up, with profits more than doubling to 7.43 billion yuan.
Operating income from exploration and production surged 47 percent to 16.72 billion yuan as Sinopec's average oil selling price climbed nearly 43 percent to 3,309.71 yuan per tonne in the first six months and production rose 3.1 percent.
Sinopec said it plans to raise output to 148 million barrels in the second half from 141 million in the first. It sees its 2008 oil output at about 309 million barrels.
FOR A TABLE ON FIRST-HALF OPERATIONS CLICK: Shares in Sinopec gained 16 percent in the first half, lagging CNOOC's 18 percent climb, PetroChina's 31 percent rally and a 27 percent rally in the index of Chinese companies listed in Hong Kong
Its Hong Kong shares held steady on Monday to end at HK$4.50. It plans capital spending of up to 70 billion yuan annually in coming years, and plans to spend up to 65 billion yuan developing the Puguang Gas field - one of China's largest - in the years up to 2009. It wants to boost refining capacity to 187 million tonnes by 2008, versus a targeted 145 million tonnes this year.
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