SINOPEC Engineering : SEG Announces 2019 Interim Results——Strengthened Management, Steadily Improved Operat..

(19August 2019, Hong Kong) SINOPEC Engineering (Group) Co., Ltd. ('SEG' or the 'Company', together withits subsidiaries collectively known as the 'Group') (stock code: 2386) todayannounces its interim results for the six months ended 30 June 2019 (the'Reporting Period').

In thefirst half of 2019, facing the complicated and ever-changingmarcosituation at home and abroad, the Group has obtainedgoodoperation performance by making energetic efforts to develop domesticand overseas markets, strengthening its management and control of projects andimproving the level of elaborate management. During the Reporting Period, the Group recognized arevenue of RMB22.682 billion, representing an increase of 23.7% on aperiod-on-period basis. The Group's gross profit margin was 10.5%, whichremained stable as compared with that as at 30 June 2018. The Company's profitsattributable to equity holders was RMB1.199 billion, representing an increaseof 8.2% on a period-on-period basis. After due consideration of the Company'searnings, return to shareholders and the needs for future sustainabledevelopment as a whole,the Board recommended an interim dividend of RMB0.108 per share, representingan increase of 8% on a period-on-period basis and a dividend payout ratio of40%.

Steadygrowth in newly signed contracts by proactively seizing market opportunities: As the successive commencement of constructionof certain projects in relation to the 'seven major national petrochemicalindustry bases' and 'Sinopec's world-class refining and chemical bases' inChina, the Company seized marketopportunities and exerted its competitive advantages to maintain its marketshare. The Company has newly inked contracts with clients such as Oman DUQM,Saudi Aramco and BASF. Meanwhile,the Company also closely tracked market opportunities in countries along theBelt & Road, so as to lay foundation for overseas market developing. Duringthe Reporting Period, the total value of newly signed contracts amounted toRMB33.22 billion.

Strengtheningproject process management to ensure projects were implemented steadily: During the Reporting Period, to ensureprojects were implemented at a higher efficiency, steadily and safely, theCompany optimized allocation of resources and worked hard to control the costof subcontracting and procurement, ensuring that ongoing projects are carriedout smoothly and safety, quality,progress are fully controlled. As at the end of the Reporting Period, thebacklog of the Group amounted to RMB105.473 billion, representing an increaseof 11.1% as compared with that as at 30 June 2018, and 2.2 times of the totalrevenue in 2018.

Continuouspromotion of innovation and technological advancement. The Company continued toachieve fruitful results in technological innovation:During the Reporting Period, the Company worked hardto successfully organize the collaboration of major technologies and theimplementation of technological innovation projects, made full use of thedistinctive advantages of the R&D center in the development of engineeringtechnology, continuously strengthened the collaboration with famous licensorsin the world and created new accomplishments. During theReporting Period, the Group received a total of 41 scientific advancementawards in scientific innovation and engineering construction fields at theprovincial and above level. Among these awards, there was 1 national scienceand technology advancement award; 1 national excellent design award; 3 nationalhigh-quality projects awards.Chairman of SEG, Mr. YUBaocai, said,'In the first half of 2019, in the face of thecomplicated and ever-changing marco situation at home and abroad, the Company seized opportunities, strengthenedmanagement and improved steadily. The management of the Companyled all employees to expand market, control cost, push forward optimization andimprovement, and thus achieved optimal business performance and stabledevelopment trend with its major economic indicators all realizing significantgrowth. In 2019, the Company will actively ride the reform waves, followdevelopment requirements, improve development quality, accelerate new marketexploration and new business development, and spare no efforts to promotequality reform, efficiency reform and drive reform. Also the Company willstride towards comprehensively sustainable development and high qualitydevelopment, and thus make contributions to the society, to shareholders and toemployees by our exceptional performance.'

Business Reviewand Highlights

Significantresults in market development

During theReporting Period, the new contracts value was RMB33.220 billion, accounting forapproximately 60.4% of the annual target; among them, the value of newly signeddomestic contracts amounted to RMB31.043 billion, and the value of newly signedoverseas contracts amounted to approximately RMB2.177 billion

In the PRCmarkets, during the Reporting Period, the Group entered into new contracts fora number of large projects, such as Fujian Gulei Refining and PetrochemicalIntegrated Project with a total contract value of approximately RMB12.513billion; Sinopec Tianjin Oil Products Upgrading Project with a total contractvalue of approximately RMB2.601 billion; Sinochem Quanzhou Refinery Revampingand Expansion Project with a total contract value of approximately RMB1.913billion; and Shaanxi Yanchang Coal and Oil Resources Comprehensive UtilisationProject with a total contract value of approximately RMB1.570 billion. Inoverseas markets, during the Reporting Period, the Group entered into newcontracts for a number of projects, such as Oman DUQM Refinery P2 ConstructionProject with a total contract value of approximately RMB376 million; Saudi AramcoOverhaul and Renovation Project with a total contract value of approximatelyRMB376 million; and BASF USA Pipeline Prefabrication Project with a totalcontract value of approximately RMB826 million.

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

Successful Implementation ofMajor Projects

• Oneof Sinopec Group's 'four world-class refining and chemical bases': ZhongkeRefining and Chemical Complex Project was at the final detailed design phase.Civil construction, equipment acquisition and steel structure installation werefully implemented. The overall progress has exceeded 60%;

• Thelargest petrochemical industry cooperation project on both sides of the TaiwanStraits: Fujian Gulei Refining and Petrochemical Integrated Project was atstartup phase. The overall progress is approximately 10%;

• Eastern China 's largest coal-basedmethanol to olefins project:the main equipments of Zhong'An Joint Coalification Complex Project was at the mechanical-completionstage;

• Sinopec - Saudi BasicIndustry Corporation Strategic Cooperation Project: Sinopec-SABIC Project wasin the detailed design stage. At the site, the workers were working on pilefoundation and underground pipeline. The overall progress is more than 20%;

• Building a world-classportside petrochemical base: the Sinochem Quanzhou 1 million tons / yearethylene and oil refining expansion project was in the implementation stage andthe overall progress is more than 60%;

• The Company's largest projectby contract value in the Gulf region: the overall progress of the Kuwait OilRefining Project has exceeded 90%. On the aspect of overall progress,maintained No.1 among contractors. HSE, quality, progress, expense and otheritems are under control;

• The Company's largest projectin Southeast Asia: Malaysia RAPID Oil Refining Project had been completed anddelivered to the owner;

• The overall progress of SaudiArabia SABIC GAS Phase-9 Air Separation Project is approximately 40%, amongthem, the design progress exceeded 80%, the procurement progress exceeded 60%,and the construction progress was approximately 20%. The overall progress,cost, quality and safety are under control.
  

Continuous enhancement of projectassurance capability

Leveraging theorganisational support, the Company has established a number of coordinationgroups for key projects based on their respective characteristics andconstruction needs. The Company gave a full play to the overall synergy andcollectivization advantages, established a project grading managementmechanism, published a list of key projects of the Group on a regular basis,comprehensively monitored the progress of key projects, ensured advancedplanning and overall coordination of the key projects, implemented processassurance, and integrated and optimised internal resources, so as to warrantthe quality and safety of the projects. The Company tightened its projectmonitoring system and established a triple warning mechanism to promote projectefficiency and progress, which corrected errors in a timely manner andguaranteed smooth projects execution.

The Companyhas set up and put into use a subcontracting management information platform,which improved the level of informationisation on subcontracting management.The Group has introduced the management rules and regulations for strategicsubcontractors, intensified the cultivation of strategic subcontractors,further optimised subcontractor resources, maintained the long-term cooperationenthusiasm and viscosity of high-quality subcontractors; meanwhile, the Groupdeepened the subcontracting management, strengthened supervision, and ensuredthe implementation of the subcontracting management system, so as to ensuresmooth projects execution.

The Companyclosely monitored and analysed the implementation of settlement plans,thoroughly analysed issues in project settlement and inventory management,carried out corresponding actions and measures to strengthen process managementduring the execution, and timely confirm the progress and contractualadjustments.

Allengineering technology R&D activities have been steadily advanced

The Companycarried out various research and development activities focusing its mainbusinesses. Technological innovation work was closely centered on the demand ofpetrochemical engineering market needs, and a number of technological researchand development activities that around the market product demand were steadilyadvanced: equipment with the second generation of highly efficientenvironmental friendly aromatic hydrocarbon technology has been constructed andinterim handed over, and was currently at the production preparation stage; thedevelopment of low-cost ethane cracking gas to styrene technology progressedsmoothly, and was expected to complete the basic engineering design of theplant in the second half of the year; process package preparation work of thekey technologies for hydrogenation of crude oil to produce low-carbon olefinsand BTX has been completed.

A number ofenergy saving and emission reduction technologies have entered the stage ofproject implementation: zero-discharge treatment technology for high-saltwastewater of the coal chemical project has completed design and been at thestage of construction; integration and development of catalytic crackingtechnology for heavy oil with high residue and low emission has completeddesign and been at the stage of construction; and the technology development ofVOC removal process for gas-phase polypropylene products was expected tocomplete all design work by the end of this year. The development of energysaving and emission reduction technology fully reflects the long-term- andfuture-oriented vision of the Company.

Significant technological breakthroughs havebeen made in the treatment of coal chemical wastewater by large-scalebiologicalfluidised beds. The construction and operation of the industrial sewagetreatment plant applying such technology overturned thetraditional sewagebiochemical treatment model and revolutionised the sewage treatment plant andclosed treatment. Comparedwith the traditional technology, this technology has thecharacteristics of less floor area, lower operation costs and less investmentdemand. It can reduce thedischarge of waste gas by 80% and the excess sludge by over 40%, which is atthe advanced levelinternationally.

LuoyangTechnological Research and Development Center of the Group continuously exertedits own advantages, promoted key technological innovations and efficiency, andconstantly strengthened the cooperation with other engineering companies.Leveraging the strength of the Group's subsidiaries in the field of sewagetreatment engineering, Luoyang Technological Research and Development Centermade collaborative innovation and key breakthroughs, successfullyindustrialised the large-scale biological fluidised bed sewage treatmenttechnology in Hubei Province, and passed the technical appraisal organised byauthoritative organizations. The successful industrialisation of thisenvironmental protection technology marked a historic breakthrough in achievingthe high efficiency, installation, sealing and intelligence of sewage treatmentin China.

Continued to achievenumerous fruitful results in technological innovation：During the Reporting Period, the Group received a total of 41scientific advancement awards in scientific innovation and engineeringconstruction fields at the provincial and above level. Among these awards,there was 1 national science and technology advancement award; 25 provincialand ministerial scientific advancement awards; 1 provincial and ministerialinvention award; 1 national excellent design award, 3 high quality projectsawards; and 10 provincial and ministerial high-quality projects awards.

Preliminary achievement in digital engineeringapplication

During the Reporting Period, the Group continued to steadily promotethe construction of digital factories, furthered the application of engineeringdesign and production line in overseas projects, such as Kuwait Oil RefiningProject. The Group promoted the intelligent P&ID application for keyprojects, such as Zhongke Refining and Chemical Complex Project andSinopec-SABIC Project. It also improved the digital delivery platform, theindependent innovation in professional 3D design for equipment and structures,the integrated application of standardised design, electronic archiving,digitalised publishing and reform in the modes of digitalised, networked andintelligent engineering design, all of which promoted the engineering servicecapability and provided powerful support for the construction of intelligentfactories.

Industry and BusinessProspects

Lookingforward to the second half of 2019, it is expected that the global industrialproduction will slow down and trade tensions will persist, and there are stilluncertain factors affecting the recovery of the world economy. The externalenvironment of Chinese economic operation is still complex, uncertain factorsare increasing, and the economy is under greater downward pressure.International oil price is still full of change. The global industrialinvestment will continue to grow, and certain project from the 'Seven MajorNational Petrochemical Industry Bases' and Sinopec Group's'Four World-class Refining Bases' continue to advance. It is also expectedthat the production and operation of Chinese refining, chemical engineeringindustry will be constantly improved, while resource competition will be moreintense, and engineering companies will still face great cost control pressure.In the second half of 2019, the Group will actively seize the opportunity,exert the advantages of collectivisation, integration and large scale,persistently enhance core competition advantage, propel sustainable and healthydevelopment,optimise the overall management and the resources allocation.