SEG Announces 2018 Annual Results

Seized Opportunities, Overcame Challenges and Achieved High Performance

HONG KONG, March 11, 2019 /PRNewswire/ -- SINOPEC Engineering (Group) Co., Ltd. ("SEG" or the "Company", together with its subsidiaries collectively known as the "Group") (stock code: 2386) today announces its annual results for the twelve months period ended 31 December 2018 (the "Reporting Period").

In 2018, in the face of complicated and ever-changing political and economic trends at home and abroad, the Company seized opportunities, worked hard against challenges and acted proactively and thus achieved optimal business performance with its major economic indicators all realizing significant growth. For the year 2018, the Company's revenue was RM47.019 billion, representing an increase of 29.9% year-on-year. Gross profit margin was 11.0%, maintaining a stable level as compared to last year. Net profit was RMB1.680 billion, representing an increase of 48.6% on a year-on-year basis. Cash flow performance remained strong. Net cash generated from operating activities was RMB6.104 billion. After due consideration of the Company's earnings, return to shareholders and the needs for future sustainable development as a whole, the Board recommended a final dividend of RMB0.124 per share for the year 2018. After taking into account the interim dividend of RMB0.100 per share, total dividend for the year will be RMB0.224 per share, representing an increase of 12.0% on a year-on-year basis and a dividend payout ratio of 59%.

Significant increase in newly signed contracts by proactively seizing market opportunities. As the successive commencement of construction of certain projects in relation to the "seven major national petrochemical industry bases" and "Sinopec's world-class refining bases in China", the Company seized possible opportunities in the market and exerted its competitive advantages to maintain and expand its market share. The Company has concluded a series of new contracts with Saudi Arabia, Kuwait and Malaysia during the year. Meanwhile, the Company still closely tracked market opportunities in other countries along the Belt & Road, so as to lay foundation for exploiting new overseas markets. The total value of new contracts was RMB50.92 billion, representing a significant increase of 30.4% on a year-on-year basis.

Strengthening project process management to ensure projects were implemented steadily. During the Reporting Period, to ensure projects were implemented at a higher efficiency, steadily and safely, the Company optimized allocation of resources and worked hard to control the cost of subcontracting and procurement, ensuring that ongoing projects are carried out smoothly and safely, quality, progress and the like are fully controlled. As at the end of the Reporting Period, the backlog of the Company amounted to RMB94.935 billion, representing an increase of 4.3% year-on-year, and 2 times of the total revenue in 2018.

Continuous promotion of innovation and technological advancement and achieved fruitful results. During the Reporting Period, the Company worked hard to successfully organize the collaboration of 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 famous licensors in the world. The Company has created new accomplishments, among which, "high efficiency methanol to olefins whole process technology" and "coal-based oil/olefin large-scale modern coal chemical industry complete technology development and application" were awarded the first prize of national science and technology progress; "deep delayed coking technology to improve the yield of light oil" won second prize of national science and technology progress.

Chairman of SEG, Mr. YU Baocai, said, "In 2018, in the face of the complicated and ever-changing political and economic trends at home and abroad, the Company seized opportunities, worked hard against challenges and acted proactively. The management of the Company led all employees to expand market, control cost, consolidate foundation, prevent risks, push forward optimization and improvement, and thus achieved optimal business performance and stable development trend with its major economic indicators all realizing significant growth. In 2019, the Company will actively ride the reform waves, follow development requirements, improve development quality, accelerate new market exploration and new business development, and spare no efforts to promote quality reform, efficiency reform and drive reform. Also the Company will stride towards comprehensively sustainable development and high quality development, and thus make contributions to the society, to shareholders and to employees by our exceptional performance."

Business Review and Highlights 

Significant results in market development

During the Reporting Period, the Company grasped market recovery opportunity, exploited its overall advantages in its industry, business and technical chains, and increased market development efforts. During the Reporting Period, the value of new contracts entered into by the Company was RMB50.927 billion, representing an increase of 30.4% year-on-year. Among which, the value of newly signed domestic contracts amounted to RMB45.925 billion, representing an increase of 58.0% year-on-year. The value of newly signed overseas contracts amounted to approximately RMB5.002 billion, representing a decrease of 49.9% year-on-year.

In the PRC, during the Reporting Period, the Company entered into new contracts for a number of large projects, such as Sinopec-KNPC Project (oil refining, chemical industry and power station part) with a total contract value of approximately RMB19.644 billion; Sinopec Sabic Project with a total contract value of approximately RMB4.586 billion;

Luoyang Residual Oil Hydrotreating Project with a total contract value of approximately RMB1.842 billion; Sinochem Quanzhou Project with a total contract value of approximately RMB1.506 billion.

Overseas, during the Reporting Period, the Company entered into new contracts for a number of large projects, such as Saudi SABIC GAS Phase-9 Air Separation Project with a total contract value of approximately RMB1.756 billion; Kuwait New Collection Center (GC-32) Project with a total contract value of approximately RMB867 million; Saudi

Arabia IBB Ammonia Project with a total contract value of approximately RMB666 million; Kuwait heating furnace renovation project with a total contract value of approximately RMB206 million.

In addition to the above projects, the Company has also kept track of some oil refining, petrochemical engineering, new coal chemical, energy saving and environmental protection projects, which are expected to be signed in the future.

Successful Implementation of Major Projects

• One of Sinopec Group's "four world-class refining bases": the design development of the Zhongke Guangdong Integrated Project is almost completed, the civil works are completed and equipment installation is comprehensively started. Overall progress of this project is completed by 40%.
• Eastern China's largest coal-based methanol to olefins project: Zhong'An Joint Coalification Complex Project is in the stage of interim handover and preparation for start-up. Overall progress has exceeded 90%, and overall quality and safety are under control.
• Sinopec - Saudi Basic Industry Corporation Strategic Cooperation Project: Sinopec-SABIC Polycarbonate Project is currently in the design development stage. At the site, the workers are working on pile foundation and underground pipeline. The overall progress of the project is completed by more than 20%.
• Building a world-class portside petrochemical base: the Sinochem Quanzhou 1 million tons / year ethylene and oil refining expansion project is in the implementation stage and the overall progress is completed by about 30%, and underground pipe and civil work construction are in process onsite.
• Large crude oil commercial reserve base project: Dongjiakou crude oil commercial reservation base project is at end phase onsite, the overall progress has exceeded 90%, the detailed design is fully completed and the procurement and construction is approaching the end.
• The Company's largest project by contract value in the Gulf region: the general progress of the Kuwait Oil Refining Project has exceeded 80%. On the aspect of overall progress, maintained No.1 among contractors. Project HSE, quality, progress, expense and other items are under control.
• The Company's largest project in the Southeast Asian region: the overall progress of the Malaysia RAPID Oil Refining Project is nearly completed, all mechanical work at the site is completed and the devices are about to enter in the start-up and delivery stage.
• The Company's large-scale oil refining projects in Central Asia: the scope of work under the contract for the FCC Project of Kazakhstan Atyrau Refinery mainly covers the engineering, procurement, construction & commissioning of 13 processing units including 2.43 Mtpa FCC units and 47 utilities units. The project successfully completed all aspects of project engineering, procurement, construction and commissioning, all devices were successfully ramped up and delivered to owners successively.

Continuous enhancement of project assurance capability

Fully improving project management and meeting global standards. The Company gave full play to its overall synergy and strengthened organizational coordination by leveraging the organizational support force of the Company. The Company tightened its project monitoring and, ensured early planning and overall coordination of key projects, and ensured internal resource integration and optimization, so as to ensure the quality and safety of projects.

To enhance subcontracting management capability, reducing cost and ensuring profitability of projects, the Company established a unified subcontracting resource library for projects. As a result, the Company has reduced subcontracting cost and fully improved project management. The Company increased its input in cultivating Level A subcontractors, as a way to maintain its market share. The Company triggered the activity of quality subcontractors in long-term cooperation and increased their stickiness. In addition, the Company also helped them to better their familiarity to the Company's management system, so as to ensure smooth progress of projects.

To continuously strengthen risk management system, the Company closely monitored and discussed the implementation of settlement plans, analyzed problems existing in project settlement and project inventory management, and based on which, put forward corresponding policies and measures. The Company strengthened its process management in project implementation and timely confirmed project progress and contract changes.

All engineering technology R&D has been steadily promoted.

The Company carried out various researches and development centering its main businesses: during the Reporting Period. Second, the Company activated 201 key scientific research projects, which involved its conventional advantageous businesses such as petroleum refining, petrochemical, inorganic chemical, construction and manufacturing businesses and also environment-friendly technologies such as CO2 utilization, solid waste recycling, and fiber bio-catalytic preparation of bio-based aviation fuel. These researches reflected the development demands of the technical market and embodied the overall guiding ideas of "taking energy and chemical as its basis and seeking innovation driving, global development and value focusing".

Key scientific research projects saw major progress: the research tasks of a batch of key research projects such as such as large size liquefied natural gas (LNG) receiving station engineering complete set technology are completed; seven key research projects such as complete set of technology for production of premium hydroisomerization dewax base oil and new complete set of sulfuric acid alkylation technology realized industrialized application; the projects such as coal chemical sewage comprehensive treatment and near-zero emission technology have stepped into the practical application stage. The application of the second generation of aromatics technology and water-coal slurry gasification technology has entered the site construction stage.

A group of scientific research findings were practically applied and promoted in engineering projects. The technical certification concerning ethylene and relevant technologies for Gulei refining-chemical integration was completed. A batch of scientific research results, including the fixed weld seam automatic welding technology, were applied in Sinopec Group and Anhui Province Joint Coalification Complex and Sinopec-KNPC projects and helped to substantially improve the work efficiency and guarantee engineering quality.

Continuing to achieve fruitful results in technology innovation: During the Reporting Period, the Company also won various awards in scientific innovation and engineering construction at the provincial level and above, in which, total 39 prizes for scientific and technological advancement. There were 3 national scientific advancement awards, two projects of the "coal-based oil/olefin large-scale modern coal chemical industry complete technology development and application" and the "high efficiency methanol to olefins whole process technology" were awarded the first prize of national science and technology progress; 19 projects obtained the Sinopec Science and Technology Progress Award (6 awards of first prize, 4 awards of second prize and 9 awards of third prize); and there were also 15 provincial and ministerial scientific advancement awards (8 awards of first prize, 3 awards of second prize and 4 awards of third prize), 8 excellent design awards, which include 1 national award and 7 provincial and ministerial awards; 30 quality engineering awards, including 2 national gold awards and 5 silver awards and 23 other provincial and ministerial awards.

Digital engineering application saw first results

During the Reporting Period, the Company has been stably promoting the construction of digital factories. In this regard, the publishing of the national standard, the Standard of Digital Delivery for Oil Refining and Petrochemical Project ; digital archives being listed as a national pilot project; further application of engineering design and production line for overseas projects, such as Malaysia RAPID Oil Refining Project, Kuwait Oil Refining Project, and US Formosa Plastics Project; promotion of intelligent P&ID application for key projects, such as Sinopec-KNPC Project, Sinopec-SABIC Project and Zhenhai Project; the improvement of the digital delivery platform; independent innovation in professional 3D design for equipment and structures; integrated application of standardized design, electronic archiving, digitalized publishing; and reform in the modes of digitalized, networked and intelligent engineering design: all of them promoted the engineering service ability and providing powerful support for the construction of intelligent factories.

Market and Business Outlook

Looking ahead to 2019, it is expected that as the global industrial production will speed down and the trade environment will become tensioned, there will be more uncertain factors affecting the recovery of the world economy. At the same time, China's economy will operate steadily with certain changes and worries. It faces both complex and severe external environment and domestic downward pressure, economic growth rate will be maintained in reasonable interval. The international oil market is accelerating rebalancing in 2019, and the extension of the reduction agreement has injected more confidence into the recovery and rebalancing of the oil market, but oil demand and non-OPEC supply uncertainties have increased and international oil prices have remained volatile. In 2019, it is expected that the global industrial investment will continue to grow, some projects in the national seven petrochemical industry base and Sinopec Group's four world-class refining bases will have substantial progress, production and management situation in the domestic refining, chemical engineering industry will be significantly improved, while resource competition will be more intense, and engineering companies still face great cost control pressure.

In 2019, the Company will actively grasp the improvement of the domestic market situation, make full use of its advantages such as collectivization, integration and economies of scale, continuously enhance its core competitive 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. In 2019, the target domestic new contract value of the Company is RMB45 billion, and the target overseas new contract value is USD1.5 billion. 

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

About SINOPEC Engineering (Group) Co., Ltd. 

The Group is a leading Chinese energy and chemical engineering company with strong international competitiveness. The Group can provide domestic and overseas clients with overall solutions for petrol refining, chemical engineering, aromatics, coal chemicals, inorganic chemicals, pharmaceutical chemicals, clean energy, storage and transportation facilities, environmental protection and energy saving and other sectors, including engineering consulting, technology licensing, project management contractor, financing assistance, EPC contracting, as well as design, procurement, construction and installation, lifting and transportation of large equipment, pre-commissioning, start-up and other industrial chain services.

After more than 60 years of continuous development, the Group currently has an academician of the Chinese Academy of Sciences, two academicians of the Chinese Academy of Engineering and nearly 10,000 high-quality professionals with extensive project management and implementation experience, and owns and cooperatively owns advanced patents and know-how in core business areas. The Group has delivered on schedule hundreds of modern factories with enormous investment, advanced technology, complicated process and high quality to clients in more than 20 countries and regions around the world, established long-term and steady cooperative relationships with large energy and chemical enterprises at home and abroad, established an extensive and stable client base, and enjoys remarkable industrial influence and social reputation.

In the future, the Group will continue to focus on the development strategies of "energy and petrochemical-oriented, innovation-driven, globalization-targeted and value-focused", enhance exploration and development in the fields of hydrogen energy, renewable energy and new materials, and create a new momentum in achieving the vision of "building a world-class engineering company".

Disclaimer 

This press release includes "forward-looking statements". All statements, other than statements of historical facts that address activities, events or developments that the Group 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 Group'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 Group's control. In addition, the Group 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: seg.ir@sinopec.com

PRChina Limited
David Shiu / Doris Au-Yeung / Ray Sun 
Tel: (852) 2522 1838 / (852) 2522 1368 
Fax: (852) 2521 9955 
Email: dshiu@prchina.com.hk / dauyeung@prchina.com.hk / rsun@prchina.com.hk