SEG Announces 2016 Annual Results Achieving Hard-won Operation Results amid Complicated and Grave Business Environment

HONG KONG, March 20, 2017 /PRNewswire/ -- SINOPEC Engineering (Group) Co., Ltd. ("SEG", together with its subsidiaries known as the "Company") (stock code: 2386) today announces its annual results for the twelve months period ended 31 December 2016 (the "Reporting Period").

Results Highlights

Achieving hard-won operation results amid complicated and grave business situation. For the year 2016, the Company's revenue was RMB39.375 billion, its net profit was RMB1.663 billion, and the total value of its new contracts was RMB27.564 billion. As at the end of 2016, the Group's backlog was RMB88.173 billion. The Board recommended a final dividend of RMB0.078 per Share for the year 2016. Total dividend for the year will be RMB0.150 per Share.

Successful implementation of major projects and overseas revenue increased significantly. Domestically, the handover of the major devices of the Zhongtian Hechuang Coal Chemical Project have been delivered for use during the Reporting period. Intermediate handover of Guangxi LNG Project was also completed. The overall progress of the Tianjin LNG Project and Dongjiakou crude oil commercial reservation base project was conducting smoothly. Overseas, all works of the Malaysia RAPID Oil Refining Project, the Kuwait Oil Refining Project and the FCC Project of Kazakhstan Atyrau Refinery had been carried out in sequence as planned. During the Reporting Period, the overseas revenue of the Group was RMB14.483 billion, representing an increase of 59.3% on a year-on-year basis.

Efficient receivables and inventory management and achieved strong operating cash flow. During the Reporting Period, the Company continued to strengthen its inventory, settlement of projects and receivables management. Net cash generated from operating activities was RMB4.522 billion which insure an adequate working capital.

Operating Highlights

Chairman of SEG, Mr. LING Yiqun said, "2016 was a year in which the global energy and chemical engineering industries encountered exceptional difficulties in operations. Faced with the complicated and grave business situation, the management of the Company led all employees in achieving the hard-won production and operation results through early planning and active response. The Company continued to guide its reform and development with the four strategies, promoted Cost-cutting and Benefit-enhancing Actions, and steadily promoted production and operation. In the implementation of projects, we strove to reduce operating cost through delicacy management; in market development, we remained market-oriented and customer-focused in the efforts made to enhance our competitive advantages in the market; in our overseas business, we seized the strategic opportunity of "one belt and one road" and fastened our steps of going global; in scientific and technological innovations, we worked hard to successfully organize the cooperation in major technologies and the implementation of technological innovation projects, made full use of the distinctive advantages of the R&D Center in the development of engineering technology and continuously strengthened the collaboration with world famous licensors."

Business Review and Highlights

Successful Implementation of Major Projects

• The world's largest coal-based methanol-to-olefins project: As at the end of the Reporting Period, the major devices of the Zhongtian Hechuang Coal Chemical Project had been delivered for use.
• Large-scale LNG storage and receiving station projects using the Company's patented design and construction technologies: Intermediate handover of the Guangxi LNG Project was completed. As at the end of the Reporting Period, approximately eight tenths of the overall progress of the Tianjin LNG Project had been completed.
• Large crude oil commercial reserve base project：As at the end of the Reporting Period, design work of the Dongjiakou crude oil commercial reservation base project had been carried out in an overall manner. The project The project aims to alleviate the shortage of domestic strategic and commercial crude oil reserve capacity situation, meeting the demand of crude oil imports.
• Eastern China 's largest coal - based methanol to olefins project: In January 2017, the Company received a notice from the owner of the Zhong'An Joint Coalification complex project for resumption of work. As of the date of publication of the annual results, the project was conducted smoothly in every aspect.
• The Company's largest project by contract value in the Middle East: As at the end of the Reporting Period, more than half of the Kuwait Oil Refining Project (total contract value of US$1.69 billion) design work process, purchase of key equipment and materials had been completed, and all works of the project had been carried out in sequence as planned.
• The Company's largest project in the southeast Asian region: As at the end of the Reporting Period, six tenths of the overall progress of the Malaysia RAPID Oil Refining Project (total contract value of US$1.33 billion) had been completed, design work had been completed basically, purchase work had been completed by approximately seven tenths and onsite construction had entered the peak period.
• The Company's large-scale oil refining projects in Central Asia: As at the end of the Reporting Period, design work of the FCC Project of Kazakhstan Atyrau Refinery had been completed, purchase work had been completed by over nine thenths, construction had been completed by over six tenths, and approximately eight tenths of the overall progress had been completed.

Project support capability being strengthened continuously

During the Reporting Period, in order to ensure the efficient, orderly and safe implementation of projects, the Group has improved the project coordination management mechanism, established a subcontracting management system to standardize subcontracting activities and enhance subcontracting management capability; established and released the Group's subcontractor resources database, thus laying a solid foundation for the affiliates of the Group to select high-quality subcontractors and lower subcontracting cost; improved the project settlement and inventory management mechanism, thus achieving remarkable results in reducing stocks; took initiative in establishing the project management system which is benchmarked against the world-class systems, taking into account of both domestic and overseas projects, unified project management process and improved the operation efficiency of projects based on EPC project management mode.

Market development in defiance of difficulties

During the Reporting Period, facing extremely difficult market condition, the Group exploited its overall advantage of its industry, business and technical chains, transformed challenges into momentum; sought opportunities in difficult situations; proactively explored domestic and overseas markets with full efforts. During the Reporting Period, the value of new contracts signed by the Group was RMB27.564 billion. Newly signed domestic contracts amounted to RMB17.193 billion, and overseas contracts amounted to approximately USD1.492 billion.

Domestically, during the Reporting Period, the Group signed new contracts for a number of large projects, such as Dongjiakou Crude Oil Commercial Reservation Base Project with a contract value of approximately RMB1.1 billion; Sinopec Chemistry Comprehensive Utilization Project of Light Hydrocarbon with a contract value of approximately RMB666 million; Anqing Catalytic Diesel Hydrogenation Transformation Project with a contract value of approximately RMB540 million; Tianjin Gasoline Quality Upgrade Project with a contract value of approximately RMB523 million.

As for the overseas projects, during the Reporting Period, the Group signed a number of new contracts, such as Iranian Abadan Refinery Product Upgrade Project Phase I EPC Contracting Project with approximately RMB4.081 billion in total contract value; Kuwait AL-Zour New Refinery Project P1 Package Construction Project with a net contract value of approximately RMB2.095 billion; Saudi Fadhili Natural Gas Treatment Project's Machinery and Electrical Instrument Package Construction Works Project with a total contract value of approximately RMB1.738 billion; Malaysian RAPID 3D Automatic Warehouse "EPCC" EPC Contracting Project with a total contract value of approximately RMB1.237 billion.

Continue to promote innovation and technology advancement

Steady progress in the research and development of major technologies developed along with the key projects.

• Yuanba project of technological development for natural gas purification finally passed appraisal after operation inspection. Since the project was launched in December 2011, important breakthroughs have been made in various aspects, e.g. the production of new desulfurizer of high efficiency and the development of heterogeneous separation process and equipment. The project processed 2.6 billion m³ of raw gas in the whole year of 2016, all being class-A gas under national standard GB 17820-2012. As an important clean energy, natural gas has special significance for the country in improving its energy structure and protecting environment. The successful development of natural gas purification technology has important significance for the use of clean energy and the green development of China.
• The packaged technology of syngas to ethylene has got into the calibration stage. In the second half of 2016, the project entered the final stage of correction, with satisfactory results being achieved in such units as glycol absorption rate and dust absorption effect. Syngas to glycol technology is one of the hot technologies for the efficient and clean utilization of coals. The effective research of the technology is of great significance for promoting the clean utilization of coals.
• In the development and industrial testing of solid superacid C5, C6 isomerization technology, the transformation and initial calibration of phase 1 have been completed. The technology is one of the important means of producing quality gasoline blending components and has great significance for improving the quality of China's automobile gas products.
• For purpose of the packaged technology of making propylene oxide with hydrogen peroxide solution, an industrial testing device was completed in August 2016, which is now undergoing rectification of problems and trial production.
• Engineering design was completed for the development of the packaged technology of ethylene oxide, and the project proceeded to full-scale construction in 2016.

Significant progress in the research and development of environmental protection and energy saving technologies

• In the construction of soil repair platform and optimization of thermal desorption integration technology, the tasks that have been fulfilled by now include the election of a testing platform and construction of test devices. The platform set up for the analysis and testing of polluted soils includes ultrasonic extraction method, gas chromatography-mass spectrometry method, gas chromatography method, UV-Vis spectrophotometry, moisture content and organic matter analysis method for the analysis of organic pollutants in soils. The TPD-MS test devices uses the quick-simulation method of thermal desorption process to simulate the effect of different process parameters (temperature, dwell time, atmosphere and gas velocity) on the efficiency of removing the PAHs in polluted soils.
• Relevant researches have been completed for a number of environmental protection projects, e.g. development of boiler flue gas - CO2 trapping system -DEA chemical absorption process package, researches on the process of using the ammonia obtained through urea hydrolysis for denitration of flue gas, which have got into the stage of result review.
• In the development of the technology and process package for treatment of 1,3-propylene glycol wastewater through biological method, small-scale tests have been completed for the improvement test of replacing calcium process with sodium process to address the problem of the difficult treatment of wastewater and large quantity. The tasks to be fulfilled at the next stage will include the analysis of the quality of sewage and small-scale laboratory tests based on the wastewater of sodium process.
• Develop pilot plant test devices and process package for the catalytic treatment of wastewater with high ammonia nitrogen; complete the small-scale testing of catalyst wastewater; design the plan of pilot plant test devices, which is underway.

Good momentum persisted in patent applications

During the Reporting Period, the Group completed 453 new patent applications (including 236 invention patents) and licensing of 429 patents (including 219 invention patents which accounted for 51%).

Continuously Achieving Numerous Fruitful Results in Technology Innovation

During the Reporting Period, the Group was awarded with 114 items (times) of various prizes for scientific and technological advancement above provincial/ministerial levels, including one special prize for scientific and technological advancement at each of national level and provincial/ministerial level, six first-class prizes for scientific and technological advancement at provincial/ministerial level, one gold prize for national outstanding engineering design, one special prize and five first-class prizes for outstanding engineering design at provincial/ministerial level, and six gold prizes for national outstanding engineering design.

Continuous expansion of the environmental protection and energy saving business

Attaching great importance to the exploration of the environmental protection and energy saving market, the Group has integrated its own technical advantages and cooperated with well-known domestic and international technology patent licensors. The scope of the Group's business now covers multiple fields such as flue gas desulfurisation and denitration, VOCs control, sewage treatment, slurry reduction and drying, soil remediation, CO2 recovery and low temperature waste heat power generation, etc. The Group was actively involved in Sinopec's "Clear Water & Blue Sky Plan" and "Energy Efficiency Doubling Plan", and explored to implement new business models for contractual energy management and contractual environmental protection management, providing energy saving diagnosis and optimisation services for enterprises, further developing the Group's environmental protection and energy saving business. During the Reporting Period, the Group signed new environmental protection business contracts valued at approximately RMB162 million, which was mainly from flue gas desulfurisation and denitrification projects, and new energy saving business contracts valued at approximately RMB44.00 million, which was mainly from energy saving reform projects.

Smooth construction and implementation of ERP system

During the Reporting Period, the Group built and successfully implemented its ERP system together with an integrated management information system that matches with the ERP system, thereby improving the informatization of management and the integration of the information system. Such efforts have led to the overall enhancement of the application of the Group's informationization, promoting innovations in management and technologies, fully ensuring the fulfillment of the indicators for production, operation, reform and development, providing support for building the ecosphere of technology-based, innovative and service-oriented engineering industry. The Group's ERP system is an integrated management information system that covers the entire industrial chain of design, procurement construction and manufacturing. It is designed to intensify the synergy of its own business and sharing of services by establishing a new mode of production and operation that is digital, internet-based and intelligent, as well as a new way of intensified, integrated and refined operation and management.

Market Outlook and Business Prospects

Chairman of SEG, Mr. LING Yiqun continued, "In 2017, coexistence of opportunities and challenges, along with the synchronous development of China's industrialisation, urbanisation, informatisation and agricultural modernisation will maintain the increasing market demands for energy and chemical products, and will provide room for the sustainable development of the Company in the market. The implementation of the industrial plans for seven national petrochemical bases and four world-class refining bases of Sinopec will bring a new round of development opportunities to the Company. The progress of the "Belt and Road" initiative has injected new momentum into the economic development of the countries along the route and also brought a strong boost to the Company in the expansion of its overseas business. In 2017, the Group will proactively deal with adverse situations, make full use of its advantages such as collectivisation, integration and economies of scale, continuously enhance its core competition edge, propel its sustainable and healthy development and make efforts to become a "national business card" of the Chinese oil refinery and chemical engineering industry."

Continuously Promote In-depth Reform and Accelerate the Optimisation of Internal Resources

In 2017, the Group will follow the development trend of the industry and the principle of marketization, and promote the reform and innovation of its operating system and mechanisms; continuously push forward the optimized configuration of internal resources; become a more successful and advanced engineering company, continue to drive the transformation and development of construction enterprises, strengthen integrated coordination, create synergistic advantages and expand its business in a balanced way.

Explore Transformational Development to Expand New Market Scope and Business Modes

In 2017, based on the strategic philosophy of technology-led market, the Group will actively promote its own technologies and will, at the same time, enter into strategic cooperation with world famous technology patent licensors to explore transformational development, open up new business fields and models, and enhance its overall competitiveness. The Group will continue to study new business models, including the management of energy and environment through contract, assistance in financing, summarise and promote the experience in contract-based environmental management, and launch new pilot projects on the condition that the risks are under control. Several such projects and the projects for utilisation of low-temperature heat are currently making steady progress.

Strengthen Process Management and Project Control, Take Multiple Measures Simultaneously, and Increase Cost Efficiency

In 2017, the Group will make every effort to ensure the smooth implementation of the in-progress projects; improve process control over newly launched large projects, diligently review the commencement report and major plans for the projects, pay more attention to the risk assessment of the projects, make quantitative analysis of their overall progress, take corrective measures promptly and conduct dynamic analysis of project cost; further propel the building of its project management system, closely monitor the Company's project management and make necessary improvements; further improve design management, optimize design plan, enhance design precision and strengthen the EPC capability through design optimization; strengthen the management of man hours, optimize the balance of the human resources of projects and provide more accurate basis for subsequent bidding and quotations.

Seize the Strategic Opportunity of the "One Belt and One Road" and Endeavor to Create the Third "National Business Card"

In 2017, the Group will hold fast to the "One Belt and One Road" strategic opportunity, give play to the internal integration advantages of the Group, unify strategies and brands, set up a market development system that features the joint actions taken by its headquarters, subsidiaries and overseas institutions, step up the analysis and studies of the international market, consolidate the traditional markets in the Middle East, Southeast Asia and Central Asia, implement the strategy of opening up the markets in Russia, South Asia and Africa, pursue global development in a steady manner, expand the export of SINOPEC technology, engineering and equipment in a bid to create the "third national business card".

Focus on Technology Progression to Maintain and Enhance Technology Leading Advantages

In 2017, the Group will establish an innovation platform that fits into its own features by focusing on market orientation, building innovation teams, promoting innovative culture and establishing learning organizations; attach more importance to intellectual property protection, intensify protection awareness, improve protection mechanism and enhance the Group's capability of protecting technologies; implement technical source searching under the development strategy and the development requirements for building a company that is oriented toward technology, innovation and services; increase its efforts in seeking technical cooperation in the technologies used extensively in the petrochemical industry, the technologies for environmental protection and energy conservation, strategic, forward-looking and cutting-edge technologies to create conditions for opening up market via technology. At the same time, the Group will strengthen its cooperation with scientific research institutes and make good use of external resources to create a win-win situation.

Vigorously Exploit Environmental Protection and Energy Saving Sectors to Create New Business Growth

In 2017, the Group will continue to give play to the advantages of the platform, maintain and intensify the cooperation and exchanges with some world famous licensors in the fields of energy conservation and environmental protection; establish the necessary incentive mechanism for the model projects already launched in such fields as energy conservation, environmental protection, soil repair and disposal of garbage to provide support for the quick formation of competitiveness in these fields; excel in the collaborative market development for alkylation technology, promotion of energy saving contracts and energy management projects, construction of the demonstration devices for CO2 utilizing technology, development of the commercialized projects in the treatment of polluted soils; continue to intensify the market exploitation in relation to the control of the VOCs of enterprises, ultra-clean emission of flue gas, up-to-standard discharge of sewage, gasification fermentation of garbage and disposal of solid industrial wastes to form new growth points of business.

Promote the Establishment of Modern Human Resource Management System

In 2017, the Group will continue to optimize its employment position management system and set up a position-based passage for the growth of talents in light of the business features of engineering construction enterprises and, taking into consideration the capability and competence of talents; implement market-oriented optimization of the staff salary structure, establish the all-member performance examination system, intensify management by objectives (MBO) and incentive constrain so that the income of employees is closely linked up to their personal performance and the performance of the enterprise; set up the mechanism under which the cost of labor is determined based on the market trends, performance and value to enhance the sustainable development capability of the enterprise.

Comprehensively Develop the Application Effects of ERP System

In 2017, the Group will focus on "ERP" and "digitalized delivery" as its primary orientation for the overall enhancement of the application and results; accelerate the construction of the operation management platform that has ERP at the center, fully draw on and rapidly spread trial experience. The Group will carry out the application of the pilot project of digitalized delivery, revolve around the construction of digitalized factories and implementation of key projects to deepen 3D multi-professional collaborative design and the management and application of integrated projects, strengthen the promotion of modular design, integrated procurement, visualized construction and standardized coding. The Group will endeavor to create digitalized engineering production lines that meet the needs of different owners and improve the quality and level of engineering design.

Summary of Financial Data and Indicators Prepared in Accordance with International Financial Reporting Standards ("IFRS")

Unit: RMB '000

Unit: RMB '000

About SINOPEC Engineering (Group) Co., Ltd.

SINOPEC Engineering (Group) Co., Ltd. is an international engineering corporation, with the leading edge in the PRC. The Company provides engineering services for a broad range of industries including oil refining, petrochemicals, new coal chemicals, inorganic chemicals, pharmaceutical chemicals, clean energy, storage and transportation engineering, environmental protection and energy saving engineering, with a complete service chain involving research, development and licensing, preliminary consultation, financing assistance, design, procurement, construction, large equipment lifting and transportation, and pre-commissioning/start-up services. With its industry experience of more than 60 years and continual innovation in technical expertise, the Company has achieved great success in the design and construction of large-scale and complex oil refining, petrochemical, new coal chemical, natural gas processing and storage and transportation engineering projects, and possesses strong competitiveness.

Disclaimer

This press release includes "forward-looking statements". All statements, other than statements of historical facts that address activities, events or developments that the Company expects or anticipates will or may occur in the future (including but not limited to projections, targets, other estimates and business plans) are forward-looking statements. The Company's actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties, including but not limited to the price fluctuation, possible changes in actual demand, foreign exchange rate, market shares, competition, environmental risks, possible changes to laws, finance and regulations, conditions of the global economy and financial markets, political risks, possible delay of projects, government approval of projects, cost estimates and other factors beyond the Company's control. In addition, the Company makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements.

Investor and Media Enquiries:

SINOPEC Engineering (Group) Co., Ltd. - Office of the Board
Shan Kai / Liu Jingjing / Yang Yue
Tel: (86) 10 6499 8019 / (86) 10 6499 8020 / (86) 10 6499 8017
Fax: (86) 10 6499 8193
Email: [email protected]

PRChina Limited
Emma Liang / Charles Chan / Brandi Mo
Tel: (852) 2522 1838 / (852) 2522 1368
Fax: (852) 2521 9955
Email: [email protected]/[email protected]/[email protected]   

SOURCE China Petroleum & Chemical Corporation