( A joint stock limited company incorporated in the People's Republic of China ) Stock code: 00338 Hong Kong 600688 Shanghai SHI New York
INTERIM REPORT 2020
CONTENTS
- Important Message
- Definitions
-
Major Financial Data and Indicators
7 Report of the Directors
28 Major Events
37 Change in Share Capital of Ordinary Shares and Shareholders
44 Directors, Supervisors, Senior Management and Others
49 Documents for Inspection
- Report on Review of Interim Financial Information
- Condensed Consolidated Interim Financial Information Prepared under International Financial Reporting Standards (unaudited)
- Interim Condensed Consolidated Income Statement
- Interim Condensed Consolidated Statement of Comprehensive Income
- Interim Condensed Consolidated Balance Sheet
- Interim Condensed Consolidated Statement of Changes in Equity
- Interim Condensed Consolidated Statement of Cash Flows
- Notes to the Condensed Consolidated Interim Financial Information
- Interim Financial Statements Prepared under China Accounting Standards for Business Enterprises (unaudited)
97 Consolidated and Company Balance Sheets
- Consolidated and Company Income Statements
- Consolidated and Company Cash Flow Statements
- Consolidated Statement of Changes in Shareholders' Equity
- Statement of Changes in Shareholders' Equity
- Notes to the Financial Statements
- Supplementary Information to the Financial Statements
- Written Confirmation on the 2020 Interim Report Issued by Directors, Supervisors and Senior Management
- Corporate Information
2020 Interim Report | 1 |
IMPORTANT MESSAGE
- The Board, the Supervisory Committee of Sinopec Shanghai Petrochemical Company Limited (the "Company" or "Shanghai Sinopec") and the Directors, Supervisors and senior management warrant the truthfulness, accuracy and completeness of the information contained in this 2020 interim report, and warrant that there are no false representations or misleading statements contained in, or material omissions from, the 2020 interim report of the Company, and severally and jointly accept responsibility.
- All the Directors attended the second meeting of the Tenth Session of the Board for approving the 2020 interim report of the Company.
- The interim financial report for the six months ended 30 June 2020 (the "Reporting Period") is unaudited.
- Mr. Wu Haijun, Chairman of the Company; Mr. Zhou Meiyun, Executive Director, Vice President and Chief Financial Officer overseeing the Accounting Department; and Ms. Yang Yating, person in charge of the Accounting Department (Accounting Chief) and General Manager of Finance Department hereby warrant the truthfulness, accuracy and completeness of the financial statements contained in the 2020 interim report.
- The Company did not distribute half-year profit for 2020 nor was there any capitalization of capital reserves.
- The statements regarding the Company's plans for future development and operation are forward-looking statements and do not constitute any commitments to investors. Investors should pay attention to the relevant investment risks.
- There was no incident of appropriation of funds by the controlling shareholder of the Company and its connected persons for non-operational purposes.
- The Company did not provide external guarantees in violation of the required decision-making procedures.
- Reminder on Major Risks
Potential risks are elaborated in this interim report. Please refer to "Management Discussion and Analysis" in section 2 of the "Report of the Directors" in chapter 3 for details of the potential risks arising from the future development of the Company. - The 2020 interim report is published in both Chinese and English. In the event of any discrepancy between the English and Chinese versions, the Chinese version shall prevail.
- Sinopec Shanghai Petrochemical Company Limited
DEFINITIONS
In this report, unless the context otherwise specifies, the following terms shall have the following meanings:
"Company" or "Sinopec Shanghai" | refers to | Sinopec Shanghai Petrochemical Company Limited |
"Board" | refers to | the Board of Directors of the Company |
"Director(s)" | refers to | the Director(s) of the Company |
"Supervisory Committee" | refers to | the Supervisory Committee of the Company |
"Supervisor(s)" | refers to | the Supervisor(s) of the Company |
"PRC" or "China" | refers to | the People's Republic of China |
"Reporting Period" | refers to | the six months ended 30 June 2020 |
"Hong Kong Stock Exchange" | refers to | The Stock Exchange of Hong Kong Limited |
"Shanghai Stock Exchange" | refers to | The Shanghai Stock Exchange |
"Group" | refers to | the Company and its subsidiaries |
"Sinopec Group" | refers to | China Petrochemical Corporation |
"Sinopec Corp." | refers to | China Petroleum & Chemical Corporation |
"Hong Kong Listing Rules" | refers to | The Rules Governing the Listing of Securities on the Hong Kong |
Stock Exchange | ||
"Shanghai Listing Rules" | refers to | The Rules Governing the Listing of Securities on the Shanghai |
Stock Exchange | ||
"Model Code for | refers to | the Model Code for Securities Transactions by Directors of Listed |
Securities Transactions" | Issuers set out in Appendix 10 to the Hong Kong Listing Rules | |
"Securities Law" | refers to | the PRC Securities Law |
"Company Law" | refers to | the PRC Company Law |
"CSRC" | refers to | China Securities Regulatory Commission |
"Articles of Association" | refers to | the articles of association of the Company |
"Hong Kong Stock Exchange website" | refers to | www.hkexnews.hk |
"Shanghai Stock Exchange website" | refers to | www.sse.com.cn |
"website of the Company" | refers to | www.spc.com.cn |
"HSSE" | refers to | Health, Safety, Security and Environment |
"COD" | refers to | Chemical Oxygen Demand |
"VOCs" | refers to | Volatile Organic Compounds |
"LDAR" | refers to | Leak Detection and Repair |
"SFO" | refers to | the Securities and Futures Ordinance of Hong Kong (Chapter 571 |
of the Laws of Hong Kong) | ||
"Corporate Governance Code" | refers to | the Corporate Governance Code set out in Appendix 14 to the |
Hong Kong Listing Rules | ||
"Share Option Incentive Scheme" | refers to | the A Share Share Option Incentive Scheme of the Company |
2020 Interim Report | 3 |
MAJOR FINANCIAL DATA AND INDICATORS
- Major Accounting Data and Financial Indicators (Prepared under China Accounting Standards for Business Enterprises ("CAS"))
Unit: RMB'000 | |||
Increase/decrease | |||
The Reporting | as compared to | ||
Period | Corresponding | the corresponding | |
(January to | period of the | period of the | |
Major accounting data | June) | previous year | previous year (%) |
Operating income | 35,663,352 | 51,992,583 | -31.41 |
Total (loss)/profit | -2,354,618 | 1,359,243 | -273.23 |
Net (loss)/profit attributable to equity | |||
shareholders of the Company | -1,716,072 | 1,137,241 | -250.90 |
Net (loss)/profit attributable to equity | |||
shareholders of the Company | |||
excluding non-recurring items | -1,788,160 | 1,137,729 | -257.17 |
Net cash (used in)/generated from operating | |||
activities | -2,904,221 | 245,974 | -1,280.70 |
Increase/decrease | |||
at the end of the | |||
As at the | Reporting Period | ||
end of the | As at the end | as compared to | |
Reporting | of the | the end of the | |
Period | previous year | previous year (%) | |
Net assets attributable to equity | |||
shareholders of the Company | 26,905,393 | 29,885,341 | -9.97 |
Total assets | 42, 307,625 | 45,636,128 | -7.29 |
- Sinopec Shanghai Petrochemical Company Limited
MAJOR FINANCIAL DATA AND INDICATORS (continued)
Increase/decrease | |||
The Reporting | as compared to | ||
Period | Corresponding | the corresponding | |
(January to | period of the | period of the | |
Major financial indicators | June) | previous year | previous year (%) |
Basic (losses)/earnings per share (RMB/ | |||
Share) | -0.159 | 0.105 | -251.43 |
Diluted (losses)/earnings per share (RMB/ | |||
Share) | -0.159 | 0.105 | -251.43 |
Basic (losses)/earnings per share after non- | |||
recurring items (RMB/Share) | -0.164 | 0.106 | -254.72 |
(Loss)/return on net assets (weighted | Decrease by 10.26 | ||
average) (%)* | -6.588 | 3.676 | percentage points |
(Loss)/return on net assets after non- | Decrease by 10.53 | ||
recurring items (weighted average) (%)* | -6.835 | 3.698 | percentage points |
* The above-mentioned net assets do not include minority shareholders' interests.
- Differences between Financial Statements Prepared under CAS and International Financial Reporting Standards ("IFRS")
Unit: RMB'000 | ||||
Net (loss)/profit attributable | Net assets attributable to | |||
to equity shareholders | equity shareholders | |||
of the holding company | of the holding company | |||
At the | ||||
Corresponding | At the end of | beginning of | ||
The Reporting | period of the | the Reporting | the Reporting | |
Period | previous year | Period | Period | |
Prepared under CAS | -1,716,072 | 1,137,241 | 26,905,393 | 29,885,341 |
Prepared under IFRS | -1,670,829 | 1,143,560 | 26,884,345 | 29,863,288 |
For a detailed description of the differences between financial statements prepared under CAS and those prepared under IFRS, please refer to the Supplementary Information to the Financial Statements prepared under CAS.
2020 Interim Report | 5 |
MAJOR FINANCIAL DATA AND INDICATORS (continued)
- Non-recurringProfit and Loss Items (Prepared under China Accounting Standards for Business Enterprises ("CAS"))
Unit: RMB'000 | |
Non-recurring profit and loss items | Amount |
Gains on disposal of non-current assets | 2,186 |
Government grants recorded in profit and loss | 21,495 |
Employee reduction expenses | -11,554 |
Profits from changes in fair value of derivative financial assets and liabilities | 9,281 |
Gains from structured deposits | 73,170 |
Gains on foreign exchange options | 1,031 |
Loss on selling of fair value through other comprehensive income | -13,185 |
Other non-operating income and expenses other than those mentioned above | -10,438 |
Income tax effect | 131 |
Effect attributable to minority interests (after tax) | -29 |
Total | 72,088 |
- Sinopec Shanghai Petrochemical Company Limited
REPORT OF THE DIRECTORS
Section 1: Business Overview
- Description of the Principal Business, Operating Model and Industry in which the Company Operated during the Reporting Period
Located at Jinshanwei in the southwest of Shanghai, the Company is a highly integrated petrochemical enterprise which mainly processes crude oil into a broad range of petroleum products, intermediate petrochemicals, resins and plastics, and synthetic fibres. The Company sells most of its products within the PRC domestic market and derives most of its revenue from customers in Eastern China, one of the fastest growing regions in the PRC.
The Company's rapid development is supported by the ever-increasing demand in the PRC for high-quality petrochemical products. Relying on the competitive advantage of its high degree of integration, the Company is optimizing its product structure, improving the quality and variety of its existing products, upgrading technology and increasing the capacity of its key upstream plants.
In the first half of 2020, affected by the sudden outbreak of the Coronavirus disease 2019 ("COVID-19") around the world, the petrochemical industry suffered disruption in supply chain, significant decline in market demand, stagnation of international trade and, disturbance to the normal production and sales. Furthermore, crude oil prices plummeted (on March 6, oil prices hit the biggest single-day drop in 20 years, and then fell below US$20/barrel at a low level), and the chemical market experienced drastic drop and rebound. In such context, enterprises were faced with greater difficulties in operation and obvious decline in profitability. The chemical raw materials related to pandemic prevention and control became the "highlights" in the special times.
According to the statistics of the China Petroleum and Chemical Industry Federation ("CPCIF"), in the first half of 2019, China's petroleum and chemical industry achieved RMB5.07 trillion of operating income, a decrease of 11.9% year-on-year; the total profit was RMB141.6 billion, a decrease of 58.8% year-on-year. The profit of the oil and gas exploitation industry was RMB28.0 billion, a decrease of 72.2% year-on-year. The loss of the refinery industry was RMB24.4 billion. The profit of the chemical industry was RMB133.44 billion, a decrease of 32.6% year-on-year. The total import and export volume was USD305.47 billion, a decrease of 14.8% year on year.
February and March were hit hard by the COVID-19 pandemic. In March, guided by the government's policy to promote the resumption of work and production, chemical production quickly recovered, and demand for energy and raw materials also gradually recovered. In April, the operating rate of domestic refineries returned to the level of the same period last year, and the production and sales of chemical products returned to normal, indicating that the negative impact of the pandemic gradually subsided. Statistics show that the growth rates of domestic crude oil and natural gas production were both higher than last year's 0.8% and 9.8% respectively; crude oil processing capacity was 319 million tons, a year-on-year increase of 0.6% and apparent consumption was 366 million tons, a year-on-year increase of 7.6%; and the apparent consumption of natural gas was 159.42 billion cubic meters, an increase of 6.9%. The increase in the consumption of crude oil and natural gas showed that the market demand for energy and raw materials was gradually recovering.
2020 Interim Report | 7 |
REPORT OF THE DIRECTORS (continued)
Looking into the second half of 2020, China's economy has first taken on a V-shape rebound and kept its recovery momentum. Exports are expected to improve, and the production and sales of petrochemical industry are projected to be better than the same period last year. However, the disruption of international travel and the stagnation of global trade resulting from the spread of COVID-19 continue. In the months before the U.S. election, the tension between China and the U.S. and the uncertainty revolving around the pandemic relief measures of the U.S. government may hinder the recovery of economic and energy demand, triggering another sharp fluctuation in crude oil prices. New production capacity characterized by large-scale oil refining, large production of ethylene and large production of aromatic hydrocarbons will enter into the market and intensify market competition in the petrochemical industry. It is expected that the profitability of the petrochemical industry for the whole year will be at a low level.
- Analysis of Core Competitiveness during the Reporting Period
As one of the largest integrated petrochemical enterprises in China with an integrated refinery and petrochemical capacity, the Company possesses strong operating scale and strength, which made it a major manufacturer of refined oil, intermediate petrochemicals, synthetic resins and synthetic fibres in China. The Company also has self-owned utilities and environmental protection systems, as well as sea transport, inland navigation, rail transport and road transport ancillary facilities.
The Company's major competitive advantages include quality, geographical location and its vertically integrated production. The Company has over 40 years of petrochemical production and management experience, and has accumulated extensive resources in the petrochemical industry. The Company has won several quality product awards from the national and local governments. Located at the core region of Yangtze River Delta, the most economically active region in China with a strong demand for petrochemical products, the Company has built a comprehensive logistics system and supporting facilities with close geographic proximity with most of its clients. The geographic proximity enables the Company to enjoy the convenience of coastal and inland shipping, giving the Company a competitive edge in terms of transportation costs and timely delivery. The Company has leveraged its advantages in integrated refinery and petrochemical capacity to actively strengthen product structure, while continuously improving products quality and variety. The Company has also improved production technology and boosted capacity of key upstream units to maximize the use and the efficiency in the integrated utilisation of its corporate resources, and is therefore able to achieve strong and sustainable development.
- Sinopec Shanghai Petrochemical Company Limited
REPORT OF THE DIRECTORS (continued)
Section 2: Management Discussion and Analysis
- Management Discussion and Analysis of the Overall Operations during the Reporting Period
(The following discussion and analysis should be read in conjunction with the unaudited financial report of the Group and the notes in this interim report. Unless otherwise specified, certain financial data involved hereinafter are extracted from the unaudited interim financial report prepared in accordance with IFRS.)
1. Review of the Company's operations during the Reporting Period
In the first half of 2020, world economic growth has slowed down sharply, and COVID-19 has brought the most severe challenge to the global economy since the 2008 financial crisis. The U.S. economy has entered into recession since the first quarter. Even though there were signs of recovery afterwards, there are still huge uncertainties for economic recovery. The growth in Gross Domestic Product ("GDP") of major economies in the Eurozone and Japan declined significantly, industrial production capacity has reduced, and unemployment rates in many countries substantially increased. Facing the severe challenges brought by COVID-19, as well as the complicated and ever-changing domestic and foreign environment, China's GDP fell by 1.6% year-on-year in the first half of the year. Through nationwide efforts in pandemic prevention and, promotion of economic performance and social development, China's economy started to improve after the worsening situation in the first half of the year. GDP in the second quarter increased by 3.2% year on year, and a steady economic recovery could be seen as well. The petroleum and chemical industries in China face grave challenges: continuous decline in product prices, historical declines in production and sales, and pressure of additional production and import capacity, coupled with uncertainties brought by COVID-19, global trade policies and crude oil prices, have resulted in sharp fall of profits of the petroleum and chemical industries.
In the first half of 2020, despite the severe and complicated domestic and international economic and industrial situations, the Group spared no efforts to ease away the pressure caused by COVID-19 and low oil prices by highly focusing on epidemic prevention and control, safety and environmental protection, production and operation, the 100-Day Breakthroughs, reform and development, etc., resulting in stable and orderly production and operation. The Company's annual target is well achieved, with most of the indicators having met the time schedule or other control requirements. As of 30 June 2020, the Group's turnover reached RMB35,627.6 million, representing a decrease of RMB16,327.6 million, or 31.43% from the same period last year. Pre-tax loss of RMB2,309.4 million was recorded (pre-tax profit of RMB1,365.6 million in the same period last year), representing a year-on-year decrease of RMB3,674.9 million. Loss after tax and non-controlling shareholders' equity was RMB1,670.8 million (a profit of RMB1,143.6 million in the same period last year), representing a year-on-year decrease of RMB2,814.4 million.
2020 Interim Report | 9 |
REPORT OF THE DIRECTORS (continued)
In the first half of 2020, the total amount of commodities produced by the Group was 6,653,100 tons, representing a decrease of 3.27% from the same period of last year. From January to June, 7.0183 million tons of crude oil were processed (including 211,700 tons of crude oil processing on given materials), a decrease of 6.08% over the same period last year. The production of refined oil was 3.9475 million tons,
- year-on-yeardecrease of 11.58%, of which gasoline was 1,473,900 tons, a year-on-year decrease of 12.69%; diesel was 1,836,100 tons, a year-on-year decrease of 0.82%; jet fuel was 637,600 tons,
- year-on-yeardecrease of 31.08%; LPG was 430,500 tons, a year-on-year decrease of 5.58%. The production of ethylene was 409,000 tons, a year-on-year decrease of 3.06%; para-xylene was 320,200 tons, a year-on-year decrease of 2.82%. Production of synthetic resins and plastics (excluding polyester and polyvinyl alcohol) was 531,400 tons, an increase of 4.83% year-on-year. The production of synthetic fibre raw materials was 273,600 tons, a year-on-year decrease of 9.19%; the production of synthetic fibre polymers was 165,600 tons, a year-on-year decrease of 13.62%; the production of synthetic fibres was 72,600 tons, a year-on-year decrease of 22.93%. In the first half of the year, the product sales rate and payment return rate of the Group were 100.45% and 100.00% respectively.
The epidemic prevention and control achieved phased success. Since the outbreak of COVID-19, the Group has immediately taken action to respond and carry out orderly pandemic control measures on Company staff and contractors, guaranteed material supply for pandemic control, and cooperated with local communities to prevent and control the pandemic, etc. Meanwhile, the Group prioritized the production of medical-grade polypropylene, as well as successfully developed and produced raw materials of melt-blown nonwovens for mask manufacturing. As a result, the Group produced in total 10,452 tons of Y2600T polymer chips base material, 5,728 tons of Y2600T-F polypropylene and 3,289 tons of specialized materials for melt-blown nonwovens. The Group vigorously promoted information technology applications, optimized daily routines and working arrangements to achieve "no imported, no spread, no fade area, no blind spot, no infection", and therefore ensured the stability of the team and the Group.
Safety and environmental protection situations were under control. In the first half of the year, the Group fully implemented process safety management measures, strengthened fundamental environmental protection management and LDAR (leak detection and repair) which basically achieved full coverage. In order to enhance safety management ability, the Group formulated and implemented a special rectification plan, and carried out a series of educational promotion and emergency drills in "Safe Production Month". From January to June, the Group achieved 100% wastewater discharge compliance rate, while the total emissions of COD, ammonia nitrogen, SO2, and NOX decreased by 10.69%, 8.16%, 10.76% and 11.61% year-on- year, respectively. The average concentration of VOCs at the boundary of the plant decreased by 19.71% year-on-year. The Group's accumulated comprehensive energy consumption was 0.755 tons of standard coal per RMB10,000, representing an increase of 1.29% compared with the annual total of 0.745 tons of standard coal per RMB10,000 last year.
10 Sinopec Shanghai Petrochemical Company Limited
REPORT OF THE DIRECTORS (continued)
Production and operation were generally stable. In the first half of the year, by means of process stability management and equipment integrity management, the Group strengthened process safety management, and strictly controlled the "three small" (i.e. small fluctuations, small anomalies and small deviations) while putting an end to the "three non" (i.e. non-planned shutdown of divisions, non-planned shutdown of machine and non-planned shutdown of furnace), thereby ensuring the smooth operation of equipment. The equipment operation efficiency was improved by implementing limit management, optimizing and upgrading the management platform of technology digitalization, as well as strengthening abnormal production analysis. The safety and environmental protection maintenance of 12 sets of oil refining units was completed and the start-up was successful at one time. There was one unplanned shutdown. The operation of the units remained stable as a whole. Meanwhile, with the release of equipment integrity management system and online operation of the management platform, the management quality of predictive maintenance and full life cycle maintenance were strengthened and thus there was implement of special protection work for large units. According to the market situation, the diesel-gasoline ratio was flexibly adjusted, jet fuel was reduced, the production workflow of refined oil was optimized, and the sales pipeline was expanded. The diesel-gasoline ratio was 1.25, representing an increase of 0.15 year-on-year. A total of 185,000 tons of heavy low-sulfur bunker fuel oil ("LSFO") were exported. The Group optimized the structure of ethylene raw materials and decreased the cost. The Group intensified its market and sales expansion, seized market opportunities and actively aligned with customers, achieving full production and sales of carbon five, polyolefin and ethylene oxide products as well as the expansion of export of vinyl acetate and acrylic and therefore reducing the total inventory of products. Among the 58 major technical and economic indicators listed for monitoring, 34 were better than the level of last year, with a year-on-year progress rate of 58.62%; 19 items reached the advanced level of the industry, and the industry advanced rate has reached 32.76%.
The 100-Day Breakthroughs achieved remarkable results. In the first half of 2020, the Group implemented the concept of "challenge the advanced levels and align with the highest standards" and built excellent teams on the company, regional and management departments levels. In line with market changes, the Group adjusted the types of crude oil purchased in the Middle East and purchased Oman crude oil using reserves, financial derivatives and DME pricing method to reduce the cost of crude oil procurement. The Group tapped the potential of cost reduction of large-scale procurement and vigorously promoted competitive and open procurement. Additionally, the Company strengthened the centralized operation of funds, carried out bidding for structured deposits, low-interest loans, bill discounting and forward exchange rate locking. The Group made good use of national and local anti-pandemicenterprise-benefiting policies and actively strive for tax incentives to ensure the implementation of the relief policies such as natural gas price adjustment and, the reduction of port construction fees, social security expenses and other special expenses.
2020 Interim Report 11
REPORT OF THE DIRECTORS (continued)
The pace of reform and development remained rapid and steady. In the first half of 2020, the Group furthered implemented the new development strategies while persistently putting innovation at a top priority in promoting the construction of "One Leader, One Core and One Base". The Company continued to advance the R&D of scientific research projects such as key technologies of carbon fibre and its composite materials, green and environmentally friendly automobile lightweight materials, and completed 30 patent applications and 17 patent authorizations. The Group adjusted and optimized the organizational structure, implemented classified guidance and management of joint ventures, and carried out standard and comprehensive risk management and internal control management. Moreover, the Group steadily promoted the construction of intelligent chemical plants and doubled efforts to move projects forward despite adverse factors brought by the pandemic. The large tow carbon fibre project completed the environmental assessment; Zhejiang Jinlian Petrochemical Storage and Transportation Co., Ltd. was established; joint venture cooperation projects such as hazardous waste disposal and hydrogen energy utilisation were proceeding in an orderly manner. The 400,000 tons/year clean gasoline components units project was mechanically completed on schedule at the end of June and entered the production preparation stage.
The following table sets forth the Group's sales volume and net sales after business tax and surcharges for the Reporting Period:
For the six months ended 30 June | ||||||||
2020 | 2019 | |||||||
Sales | Net sales | Sales | Net sales | |||||
volume | RMB | volume | RMB | |||||
'000 tons | million | % | '000 tons | million | % | |||
Synthetic fibres | 73.1 | 717.6 | 2.4 | 93.7 | 1,198.6 | 2.6 | ||
Resins and plastics | 655.8 | 4,411.3 | 14.7 | 633.8 | 5,054.2 | 11.0 | ||
Intermediate | ||||||||
petrochemicals | 1,092.7 | 4,094.7 | 13.7 | 1,077.4 | 5,164.4 | 11.2 | ||
Petroleum products | 4,889.4 | 14,680.8 | 49.1 | 5,086.0 | 21,006.9 | 45.5 | ||
Trading of | ||||||||
petrochemical | ||||||||
products | - | 5,693.3 | 19.0 | - | 13,305.5 | 28.8 | ||
Others | - | 328.1 | 1.1 | - | 395.5 | 0.9 | ||
Total | 6,711.0 | 29,925.8 | 100.0 | 6,890.9 | 46,125.1 | 100.0 | ||
12 Sinopec Shanghai Petrochemical Company Limited
REPORT OF THE DIRECTORS (continued)
In the first half of 2020, net sales of the Group amounted to RMB29,925.8 million, representing a decrease of 35.12% over the same period last year. Among which, net sales of synthetic fibres decreased by 40.13%, of resins and plastics by 12.72%, of intermediate petrochemicals by 20.71%, of petroleum products by 30.11% and of trading of petrochemical products by 57.21%. Affected by the fluctuation of crude oil prices and the pandemic, the net sales of products in all sectors dropped significantly. Except for the sales of resins and plastics and intermediate petrochemicals, which increased by 3.47% and 1.42% respectively, the sales of other sectors all declined compared with the same period last year. At the same time, the weighted average sales price of each sector also decreased compared with the same period last year.
In the first half of 2020, the Group's cost of sales decreased by 28.03% year-on-year to RMB32,549.4 million, representing 108.77% of total net sales. The Group's main raw material is crude oil. In the first half of 2020, international crude oil futures prices fluctuated abnormally, and international oil prices fell precipitously in the first quarter. While COVID-19 led to a decline in oil demand, Saudi Arabia and Russia increased production in order to compete for market share, thus exacerbating the already oversupplied market. Since mid-April, as countries have successively lifted lockdowns, global fuel demand has recovered. The Organization of Petroleum Exporting Countries (OPEC) and its allies OPEC + have implemented record production cuts, and international crude oil futures prices have begun to rise gradually. However, by the end of June, concerns of the second wave of pandemic's possible suppression on fuel demand had limited the rise in oil prices. In the first half of the year, Brent crude oil futures closed at a maximum of USD68.91/ barrel, with a minimum of USD19.33/barrel. Half-year average price was approximately USD42.11/barrel, representing a year-on-year decrease of 39.29%. WTI crude oil futures closed at a maximum of USD63.27/ barrel and minimum of USD-37.63/barrel, with the half-year average price of approximately USD36.82/ barrel, representing a year-on-year decrease of 35.79%. Dubai crude oil futures closed at a maximum of USD69.60/barrel and minimum of USD13.55/barrel, with the half-year average price of approximately USD40.59/barrel, a year-on-year decrease of 38.15%.
In the first half of 2020, the average unit cost of crude oil processed by the Group was RMB2,716.99/ ton, representing a decrease of RMB592.35/ton compared to the same period last year, or a decrease of 17.90%. The Group processed a total of 7,018,300 tons of crude oil (including 211,700 tons of crude oil processed on a sub-contract basis), representing a decrease of 454,700 tons (including a decrease of 159,000 tons in self-exploited crude oil processing) compared to the same period last year. From January to June 2020, processing costs decreased by RMB4,558.0 million. Among them, processing costs decreased by RMB526.0 million due to a decrease in the volume of crude oil processed, and the decrease in unit cost of processed crude oil brought costs down by RMB4,032.0 million. In the first half of 2020, the Group's cost of crude oil accounted for 56.82% of the total cost of sales.
In the first half of 2020, the Group's cost for other ancillary materials amounted to RMB3,939.0 million, a decrease of 14.52% compared with the same period of last year, mainly due to the decrease in procurement prices. During the Reporting Period, the Group's depreciation and maintenance expenses amounted to RMB887.8 million and RMB575.4 million, respectively. The depreciation and amortization increased by 2.32% year-on-year, mainly due to the addition of some catalysts during the Reporting Period. The maintenance expenses decreased by 17.49% year-on-year, mainly due to a decrease in actual amount of maintenance work during the Reporting Period, which led to the decrease in maintenance costs.
2020 Interim Report 13
REPORT OF THE DIRECTORS (continued)
In the first half of 2020, sales and administrative expenses of the Group amounted to RMB233.8 million, representing a decrease of 12.07% as compared to RMB265.9 million for the same period last year. This was mainly due to a decrease of RMB13.2 million in agency fees of Sinopec Shanghai's headquarters and a decrease of RMB6.1 million in miscellaneous loading charges.
In the first half of 2020, other operating income of the Group amounted to RMB54.0 million, representing an increase of RMB8.2 million compared to the same period last year. This was mainly due to an increase of RMB13.9 million in government subsidy during the Reporting Period.
In the first half of 2020, the Group's net finance income amounted to RMB151.0 million, compared to the net finance income of RMB213.7 million for the same period last year. This was mainly due to a decrease of RMB55.2 million in interest income and an increase of RMB7.5 million in interest expenditure during the Reporting Period.
In the first half of 2020, the Group's loss after tax and non-controlling shareholder interests was RMB1,670.8 million, representing a decrease of RMB2,814.4 million as compared to the profit of RMB1,143.6 million for the same period last year.
Liquidity and Capital Resources
In the first half of 2020, the Group's net cash outflow generated from operating activities amounted to RMB2,938.9 million and the net cash inflow for the same period last year was RMB220.4 million. This was primarily due to the operating losses during the Reporting Period.
In the first half of 2020, the Group's net cash outflow generated from investing activities amounted to RMB3,120.6 million and the net cash inflow for the same period last year was RMB411.2 million. This was primarily attributable to: 1) the net cash outflow generated by the purchase of fixed deposit and structural deposit during the Reporting Period, which increased by RMB3,100.0 million compared with the previous period; 2) the acquisition of Zhejiang China National Aviation Fuel Petrochemical Storage and Transportation Co., Ltd., which was at RMB340.4 million; 3) the cash used to purchase and build fixed assets and other long-term assets during the Reporting Period increased by RMB130.4 million compared with the previous period.
In the first half of 2020, the Group's net cash inflow generated from financing activities amounted to RMB1,469.2 million and the net cash inflow for the same period last year was RMB561.1 million. This was primarily attributable to the increase of RMB914.3 million in cash received by the Group as loans during the Reporting Period.
14 Sinopec Shanghai Petrochemical Company Limited
REPORT OF THE DIRECTORS (continued)
Borrowings and Debts
The Group's long-term borrowings are mainly used in capital expansion projects. In general, the Group arranges long-term borrowings according to its capital expenditure plans. On the whole, there are no seasonal borrowings. Short-term borrowings are used to replenish the Group's working capital requirements during the normal course of production. During the first half of 2020, the Group's total borrowings increased by RMB1,482.4 million to RMB3,030.0 million as at the end of the Reporting Period as compared to the beginning of the Reporting Period, mainly due to the increase of short-term borrowings by RMB1,482.4 million. As at 30 June 2020, the total borrowings of the Group at fixed interest rates amounted to RMB3,000.0 million.
Capital Expenditures
In the first half of 2020, the Group's capital expenditures amounted to RMB417.0 million, mainly attributable to the preparation and implementation of various projects, including oil cleaning project 400,000 tons/ year clean gasoline components units, improvement of separation improvement of waste and clear water project of the Storage and Transportation Department, function reconstruction of emergency shut-off valve, upgraded factory facilities reconstruction of bunker fuel oil project, T-104 tank security risk management project and drying and reduction of oil sludge project of the Environmental Protection Water Supplies Department.
In the second half of 2020, the Group continues to advance the implementation of projects such as the oil cleaning project 400,000 tons/year clean gasoline components units, second phase of PAN (Polyacrylonitrile) based carbon fibre project with annual production of 1,500 tons, improvement of separation of waste and clear water project in the tank area of the Storage and Transportation Department, function reconstruction of emergency shut-off valve in the tank area of the Storage and Transportation Department and drying and reduction of oil sludge project of the Environmental Protection Water Supplies Department. The Group plans to start various projects, such as 24,000 tons/year precursor, 12,000 tons/year 48k large ton carbon fibre project, the third loop of 220kv power supply engineering, Jinyang spinning process optimization project, security risk rectification project of the central control room of the Olefin Department, No. 5 and No. 6 equipment relocation project of the Thermal Power Department, domestic water pipe network optimization project of Sinopec Shanghai, etc. The Group's planned capital expenditure would be funded from cash generated from operations and from bank financing.
Gearing Ratio
As at 30 June 2020, the Group's gearing ratio was 35.92% (as at 30 June 2019: 34.07%). The ratio was
calculated using the following formula: total liabilities/total assets.
2020 Interim Report 15
REPORT OF THE DIRECTORS (continued)
The Group's Employees
As at 30 June 2020, the total number of enrolled employees of the Group was 8,516, among which the number of production staff was 5,038, the number of sales, financial and other staff was 2,409 and the number of administrative staff was 1,069. 56.34% of the Group's employees were college graduates or above.
The Group's employees and Directors are remunerated with reference to their position, performance, experience and prevailing salary trends in the market. Other benefits include the Share Option Incentive Scheme and the state-managed retirement pension scheme. The Group also provides professional and vocational trainings to employees.
Income Tax
The Enterprise Income Tax Law of the PRC took effect from 1 January 2008, subsequent to which the income tax rate for enterprises was uniformly adjusted to 25%. As of the six months ended 30 June 2020, the income tax rate applicable to the Group is 25%.
Disclosure Required by the Hong Kong Listing Rules
Save as disclosed herein, pursuant to paragraph 40 of Appendix 16 to the Hong Kong Listing Rules, the Company confirms that there were no material differences between the existing information of the Company relating to the matters as set out in paragraph 32 of Appendix 16 to the Hong Kong Listing Rules and the relevant information disclosed in the Company's 2019 annual report.
2. Market Outlook and Work Plans for the Second Half of the Year
Looking forward to the second half of 2020, there is still great uncertainty surrounding the global development of COVID-19. Affected by the pandemic, the global economy may plunge into recession, which will be reflected in global supply chains, international trade and energy prices. The "long-tail effect" of the pandemic and geopolitical games have a profound impact on both ends of supply and demand. It may culminate into fluctuation in international oil prices at a low level, and the uncertainty of oil prices is further highlighted. China is in a critical period for development model transformation, economic structure optimization and growth drivers shift. However, an interlacing of structural, institutional and cyclical problems increases the downward pressure on the economy. The energy and chemical industry ushers in an accelerated period of strategic transformation as competition in the refining industry intensifies and the chemical industry sees more prominent pressure on transformation and upgrading. The Company faces both pressure and risk as well as opportunities and challenges, and therefore the overall production and operation will be more severe and complex.
16 Sinopec Shanghai Petrochemical Company Limited
REPORT OF THE DIRECTORS (continued)
In the second half of 2020, the Group will focus on stable operation, continuous breakthroughs, transformation and upgrading, precision management and talent optimization, and continue to promote innovation and efficiency, striving to create better-than-expected operating results that outperform the market.
- Focus on stable operation and consolidate the foundation for innovation and efficient operation. The Group will highlight the "main theme" of safe and green operation, strictly and practically ensure safe production, effectively operate the HSSE management system, promote special rectification work in key areas and key links of safety production, and address both the symptoms and root causes to ensure stable operation. The Group will also continue to implement the process safety management system and build the equipment integrity management system. The Group will persevere in the construction of green enterprises, actively carry out the comprehensive environmental improvement work in Jinshan area and accelerate the joint venture cooperation regarding hazardous waste projects. While continuously promoting the establishment of green grassroots units to ensure that the Group passes the green enterprise review, the Group will not slacken its efforts to prevent and control the pandemic, by emphasizing regular anti-pandemic response, preventing import of confirmed cases and adjusting work focus and response measures accordingly.
- Focus on continuous breakthroughs and drive the engine of profit generation. The Group will improve the multi-level optimization mechanism, reduce the cost of crude oil procurement, increase the crude oil processing capacity and total product volume, and adjust the product mix in time. The Group will also work to ensure the full operation of 400,000 tons/year clean gasoline components units at the end of August. The Group will optimize and tap the potential of ethylene raw materials, optimize residue processing, and increase the output of asphalt, liquefied gas, propylene and other high value-added products. Moreover, the Group will cooperate with SECCO in the supply of raw materials to maximize regional benefits, focus on market expansion, continuously improve marketing efficiency, reduce costs and fees, and strengthen cost control.
- Focus on transformation and upgrading and accelerate the pace of profit generation. The Group will continue to promote transformation and upgrading with industrial restructuring as the priority, adhere to the development direction of "basic + high-end", deepen efforts to produce new materials, accelerate the R&D of medical and health materials and high-end materials, and expand new areas of product applications to create new drivers for profit generation. In addition, the Group will improve industrial planning for new materials, ensure that the mechanical completion and full production of the second stage of carbon fibre project, and the start of the construction of the large tow carbon fibre project within the year. The Company will explore new projects, new systems and mechanisms adopted by new enterprises and accelerate the establishment of Advanced Materials Innovation Research Institute to provide systematic guarantee for technological innovation. Also, the Company will actively integrate into the "Yangtze River Delta Hydrogen Corridor Construction and Development Plan" and jointly create "hydrogen source and carbon valley" with local governments.
2020 Interim Report 17
REPORT OF THE DIRECTORS (continued)
- Focus on delicate management and improve the efficiency of profit generation. The Group will focus on the refinement of management, adopt the methods of "welcoming in and going out" to learn from advanced overseas experience, and pay attention to internal management, so as to improve the working performance of crude oil procurement, plan optimization, production and operation, and financial value guidance. The Group will continuously improve management efficiency and effectiveness while carrying out actions to increase effectiveness of internal control system and the compliance management system. The Group will continue to explore the application of big data and artificial intelligence to accelerate the construction of intelligent factories.
- Focus on talent optimization and stimulate the vitality of profit generation. The Group will optimize the concept of employment and improve per capita labor efficiency. The Group will also optimize the age structure of the management, comprehensively improve the overall quality and managing ability of management personnel at all levels, and strengthen training and application to improve the professional ability of the staff.
18 Sinopec Shanghai Petrochemical Company Limited
REPORT OF THE DIRECTORS (continued)
- Analysis of the Company's Principal Performance during the Reporting Period (certain of the following financial data is extracted from the unaudited interim report prepared under CAS)
1. Analysis of Changes in the Company's Related Financial Data
Unit: RMB'000 | ||||
As at | As at | |||
30 June | 31 December | Change | ||
Item | 2020 | 2019 | (%) | Reason for change |
Cash at bank | 3,869,936 | 8,958,538 | -56.80 | During the Reporting Period, the gross |
and on hand | profit of product sales decreased | |||
significantly, the balance of operating | ||||
payable items such as taxes and fees | ||||
payable decreased. The reasons above | ||||
together with the net outflow of cash | ||||
from operating activities led to the | ||||
decrease of monetary fund balance. | ||||
Inventories | 4,381,070 | 6,754,434 | -35.14 | Affected by COVID-19 and the decline |
of international crude oil prices, the | ||||
unit cost of crude oil inventory of the | ||||
Company decreased by 50.4%, the | ||||
inventory quantity of products in process | ||||
and finished products decreased by | ||||
11.1%, and the average inventory unit | ||||
cost decreased by 30.1%. | ||||
Construction in | 1,202,594 | 1,815,549 | -33.76 | During the Reporting Period, the oil |
process | cleaning project was mechanically | |||
completed, leading to a transfer of | ||||
capital of RMB650.0 million. | ||||
Accounts | 6,066,658 | 7,664,296 | -20.85 | Affected by the downturn of the industry |
payable | and the pandemic, the unit price of raw | |||
materials procurement of the Company | ||||
decreased, and the purchase payment | ||||
payable decreased. | ||||
Other payable | 2,599,719 | 867,967 | 199.52 | The increase of other payable mainly |
included an increase of RMB1.298 billion | ||||
in dividends payable. | ||||
2020 Interim Report 19
REPORT OF THE DIRECTORS (continued)
Unit: RMB'000 | ||||
For the six months ended 30 June | Change | |||
Item | 2020 | 2019 | (%) | Reason for change |
Revenue | 35,663,352 | 51,992,583 | -31.41 | This is caused by the reduction of downstream market |
demand resulting from the pandemic and the | ||||
sharp drop in products price resulting from the a | ||||
proportionate drop in international crude oil prices. | ||||
Finance income-net | 145,840 | 198,402 | -26.49 | Short term loans increased from RMB1.5 billion to |
RMB3 billion, and interest expenses increased. The | ||||
average balance of bank deposits decreased, interest | ||||
rates decreased, and interest income decreased. | ||||
Asset impairment | -120,928 | -24,786 | 387.89 | Due to the significant decline in prices of refined oil |
losses | in March 2020, the Company made a provision in | |||
impairment losses on inventories. | ||||
Income tax expenses | -646,300 | 215,526 | -399.87 | Affected by the pandemic and the downturn of the |
industry, the company operated at a loss during the | ||||
Reporting Period. | ||||
Net (loss)/profit | -1,716,072 | 1,137,241 | -250.90 | Affected by the pandemic and the downturn of the |
attributable to | industry, the company operated at a loss during the | |||
shareholders of the | Reporting Period. | |||
Company | ||||
Net cash (used in)/ | -2,904,166 | 245,974 | -1,280.68 | During the Reporting Period, the Company's gross |
generated from | profit on product sales decreased significantly, | |||
operating activities | and operating losses occurred. At the same time, | |||
business payable items such as taxes and fees | ||||
decreased significantly, resulting in net cash outflow | ||||
from operating activities. | ||||
Net cash (used in)/ | -3,120,578 | 411,176 | -858.94 | During the Reporting Period, the net cash flow from |
generated from | purchasing structured deposits and time deposits | |||
investment activities | increased by RMB3.1 billion compared with the | |||
previous period, and the cash paid for purchasing | ||||
a new subsidiary in the Reporting Period was | ||||
RMB340.0 million. | ||||
Net cash generated | 1,434,389 | 535,564 | 167.83 | The short-term borrowing during the Reporting Period |
from financing | increased compared with the previous period. | |||
activities | ||||
R&D expenses | 47,528 | 21,379 | 122.31 | During the Reporting Period, The R&D expenditure |
on the industrial test project of carbon fibre quality | ||||
improvement and large tow preparation increased | ||||
year on year. | ||||
20 Sinopec Shanghai Petrochemical Company Limited
REPORT OF THE DIRECTORS (continued)
- Analysis of Business Operations by Industry, Product or Geographical Location Segment
1. Principal Operations by Industry or Product
Unit: RMB'000 | ||||||
Increase/decrease | Increase/decrease | |||||
in revenue | in cost of sales | |||||
compared to | compared to | |||||
corresponding | corresponding | Increase/decrease in gross | ||||
Business Segment/ | Gross profit | period of the | period of the | profit margin compared to | ||
Product Segment | Revenue | Cost of sales | margin(%) | previous year (%) | previous year (%) | last year (percentage point) |
Synthetic fibres | 720,697 | 983,671 | -36.49 | -40.91 | -25.16 | Decrease by 28.71 |
percentage points | ||||||
Resins and plastics | 4,432,141 | 4,276,569 | 3.51 | -13.66 | -0.64 | Decrease by 12.64 |
percentage points | ||||||
Intermediate | 4,112,537 | 4,142,428 | -0.73 | -21.84 | -5.89 | Decrease by 17.07 |
petrochemicals | percentage points | |||||
Petroleum products | 20,334,775 | 15,553,621 | 23.51 | -23.62 | -22.59 | Decrease by 1.02 |
percentage points | ||||||
Trading of petrochemical | 5,697,394 | 5,643,283 | 0.95 | -57.21 | -57.35 | Increase by 0.32 |
products | percentage points | |||||
Others | 207,128 | 195,045 | 5.83 | -2.57 | 12.55 | Decrease by 12.66 |
percentage points | ||||||
Note: This gross profit margin is calculated according to the price of petroleum products which includes consumption tax. Gross profit margin of petroleum products after consumption tax was -1.06%.
2. Revenue by Geographical Location
Unit: RMB'000 | ||
Increase/decrease | ||
in revenue as | ||
compared to the | ||
same period | ||
Geographical location segment | Revenue | last year (%) |
Eastern China | 28,487,627 | -18.64 |
Other regions in the PRC | 2,128,956 | 150.18 |
Exports | 4,888,089 | -69.26 |
2020 Interim Report 21
REPORT OF THE DIRECTORS (continued)
- Analysis of Assets and Liabilities
Unit: RMB'000
As at 30 June 2020 | As at 31 December 2019 | Change of | ||||
amount on | ||||||
30 June | ||||||
2020 | ||||||
compared to | ||||||
31 December | ||||||
Item | Amount | % of total | Amount | % of total | 2019 (%) | Main reason for change |
Cash at bank | 3,869,936 | 9.15 | 8,958,538 | 19.63 | -56.80 | During the Reporting Period, the gross |
and on hand | profit of product sales decreased | |||||
significantly, the balance of operating | ||||||
payable items such as taxes and fees | ||||||
payable decreased, and the net outflow | ||||||
of cash from operating activities led to | ||||||
the decrease of monetary fund balance. | ||||||
Inventories | 4,381,070 | 10.36 | 6,754,434 | 14.8 | -35.14 | Affected by COVID-19 and the decline |
of international crude oil prices, the | ||||||
unit cost of crude oil inventory of | ||||||
the Company decreased by 50.4%, | ||||||
the inventory quantity of products | ||||||
in process and finished products | ||||||
decreased by 11.1%, and the average | ||||||
inventory unit cost decreased by | ||||||
30.1%. | ||||||
Construction in | 1,202,594 | 2.84 | 1,815,549 | 3.98 | -33.76 | During the Reporting Period, the oil |
process | cleaning project was mechanically | |||||
completed, and the transferred capital | ||||||
was RMB650 million. | ||||||
Accounts | 6,066,658 | 14.34 | 7,664,296 | 16.79 | -20.85 | Affected by the downturn of the industry |
payable | and the pandemic, the unit price of raw | |||||
materials procurement of the Company | ||||||
decreased, and the purchase payment | ||||||
payable decreased. | ||||||
Other payable | 2,599,719 | 6.14 | 867,967 | 1.9 | 199.52 | The increase of other payable mainly |
included an increase of RMB1.298 | ||||||
billion in dividends payable. | ||||||
22 Sinopec Shanghai Petrochemical Company Limited
REPORT OF THE DIRECTORS (continued)
- Analysis of Investments
- Entrusted Wealth Managements and Entrusted Loans
-
Entrusted Wealth Managements
The Company did not engage in entrusted wealth management during the Reporting Period. - Entrusted Loans
The Company did not engage in entrusted loans during the Reporting Period.
-
Entrusted Wealth Managements
- Application of Funds Raised
During the Reporting Period, the Company did not raise funds, nor has it used the funds raised from the previous reporting periods.
3. Analysis of the Companies in which the Company has Controlling Interests or Investment Interests
Shanghai SECCO Petrochemical Company Limited, an associate company of the Group, recorded a net profit of RMB801.0 million during the Reporting Period, profit attributable to the Group was RMB160.0 million, representing 9.33% of net profit or loss attributable to equity shareholders of the Company during the Reporting Period.
2020 Interim Report 23
REPORT OF THE DIRECTORS (continued)
4. Projects funded by Non-fund-raising Capital
Estimated | |||
Estimated | total project | ||
total project | investment in the | Status as at | |
Major project | investment | Reporting Period | 30 June 2020 |
Oil cleaning project 400,000 tons/year | 781,657 | 198,917 | Mechanical |
clean gasoline components units | completion | ||
PAN (Polyacrylonitrile) based carbon | 847,794 | 0 | Under |
fibre project (Second stage) with | construction | ||
annual production of 1500 tons | |||
Improvement of separation of | 64,474 | 3,342 | Under |
waste and clear water project of | construction | ||
the Storage and Transportation | |||
Department | |||
Function reconstruction of emergency | 76,766 | 2,789 | Under |
shut-off valve of the Storage and | construction | ||
Transportation Department | |||
Upgraded factory facilities | 47,532 | 1,108 | Under |
reconstruction of bunker fuel oil | construction | ||
project | |||
Drying and reduction of oil sludge | 52,520 | 1,190 | Under |
project of the Environmental | construction | ||
Protection Water Supplies | |||
Department | |||
24 Sinopec Shanghai Petrochemical Company Limited
REPORT OF THE DIRECTORS (continued)
- Other Disclosure Items
1. Possible Risks - The cyclical characteristics of the petroleum and petrochemical products market and price volatility in crude oil and petrochemical products may have an adverse impact on the Group's operations.
A large part of the Group's operating income is derived from the sales of refined oil and petrochemical products. Historically, such products have been cyclical in nature and relatively sensitive to macroeconomic changes. Additionally, changes in regional and global economic conditions, productivity and output, prices and supply of raw materials, consumer demand and prices and supply of substitutes also have an effect. From time to time, these factors have a material impact on the prices of the Group's products in regional and global markets. Given the reduction of tariffs and other import restrictions as well as the relaxation of control by the PRC government over the distribution and pricing of products, a substantial number of the Group's products will increasingly be subject to the cyclical impact in the regional and global markets. In addition, the prices of crude oil and petrochemical products will remain volatile and uncertain. Higher crude oil prices and lower petrochemical products prices are likely to have an adverse impact on the Group's business, operating results and financial condition. - The Group may be exposed to risks associated with the procurement of imported crude oil and may not be able to pass on all increased costs due to rising crude oil price.
At present, the Group consumes a significant amount of crude oil for the production of petrochemical products. More than 95% of the crude oil consumption is imported. In recent years, crude oil prices have been subject to significant fluctuations due to a variety of factors, and the Group cannot rule out the possibility of any major unexpected event which may cause a suspension in crude oil supply. The Group has attempted to mitigate the effects of increased costs from rising crude oil prices by passing them on to the customers, but the ability to do so is limited because of market conditions and government control over the pricing of refined oil products. Since there is a time-lag between increase in crude oil prices and increase in petrochemical product prices, higher costs cannot be totally offset by raising the selling prices. In addition, the State also imposes control over the distribution of some petroleum products within China. For instance, some of the Group's petroleum products are required to be sold to designated customers (such as subsidiaries of Sinopec Corp.). Hence, when crude oil prices are high, the higher costs cannot be totally offset by raising the selling prices of the Group's petroleum products.
- The cyclical characteristics of the petroleum and petrochemical products market and price volatility in crude oil and petrochemical products may have an adverse impact on the Group's operations.
2020 Interim Report 25
REPORT OF THE DIRECTORS (continued)
- Substantial capital expenditures and financing requirements are required for the Group's development plans, presenting a number of risks and uncertainties.
The petrochemical industry is a capital-intensive industry. The Group's ability to maintain and raise income, net income and cash flows are closely connected with ongoing capital expenditures. The Group's estimated capital expenditures is estimated to amount to approximately RMB1,500.0 million in 2020, which will be met by internal funding and bank loans. The Group's effective capital expenditures may vary significantly due to the Group's ability to generate sufficient cash flows from operations, investments and other factors that are beyond control. Furthermore, there is no assurance as to the completion, cost or outcome of the Group's capital projects.
The Group's ability to secure external financing in the future is subject to a number of uncertainties which include the Company's operating results, financial conditions and cash flow in the future; China's economic conditions and the market conditions for the Group's products; financing costs and conditions of the financial market; issuance of government approval documents; as well as other risks associated with the development of infrastructure projects in China and so forth. The Group's failure to secure sufficient financing required for its operations or development plans may have an adverse impact on the Group's business, operating results and financial condition. - The Group's business operations may be affected by existing or future environmental protection regulations.
The Group is subject to a number of environmental protection laws and regulations in China. Waste products (waste water, waste gas and waste residue) are generated during the Group's production operations. Currently the Group's operations fully comply with all applicable Chinese environmental protection laws and regulations. However, the Chinese government may further enforce stricter environmental standards, and the Group cannot assure that the central or local governments will not issue more regulations or enforce stricter regulations which may cause the Group to incur additional expenses on environmental protection measures.
26 Sinopec Shanghai Petrochemical Company Limited
REPORT OF THE DIRECTORS (continued)
- Changes in the monetary policy and fluctuations in the value of Renminbi may have an adverse impact on the Group's business and operating results.
The exchange rate of the Renminbi against the US dollar and other foreign currencies may fluctuate and is subject to alterations due to changes in the Chinese political and economic situations. In July 2005, the PRC government overhauled its policy of pegging the value of the Renminbi to the US dollar by permitting the Renminbi to fluctuate within a certain band against a basket of foreign currencies. Since the adoption of this new policy, the value of the Renminbi against the US dollar fluctuates daily. In addition, the Chinese government has been under international pressure to further ease its exchange rate policy, and may as a result further change its currency policy. A small portion of our cash and cash equivalents are denominated in foreign currencies, including the US dollar. Any increase in the value of Renminbi against other currencies, including the US dollar, may decrease the Renminbi value of our cash and cash equivalents that are denominated in foreign currencies. On the other hand, most of our revenue is denominated in Renminbi, but a major part of our procurement of crude oil, certain equipment and certain debt repayments are denominated in foreign currencies. Any devaluation of Renminbi in the future will increase our costs and jeopardize profitability. Any devaluation of Renminbi may also have an adverse impact on the value of dividends payable in foreign currencies by the Group for H shares and American Depository Securities. - Connected transactions may have an adverse impact on the Group's business and economic efficiency.
The Group will, from time to time, continue to conduct transactions with the Group's controlling shareholder Sinopec Corp. and Sinopec Corp.'s controlling shareholder Sinopec Group as well as their connected parties (subsidiaries or associates). These connected transactions include the provision of the following services by such connected parties to the Group: raw materials purchases, agency sale of petrochemical products, construction, installation and engineering design services, petrochemical products industry insurance services and financial services, and the sale of petroleum and petrochemical products by the Group to Sinopec Corp. and its connected parties. These connected transactions and services conducted by the Group are carried out under normal commercial terms and in accordance with the relevant agreements. However, if Sinopec Corp. and Sinopec Group refuse to conduct such transactions or revise the agreements between the Group and itself in a manner unfavorable to the Group, the Group's business and business efficiency will be adversely impacted. Furthermore, Sinopec Corp. has an interest in certain sectors that are directly or indirectly competing with or which may compete with the Group's business. Since Sinopec Corp. is the controlling shareholder of the Group and its own interests may conflict with those of the Group, it may act for its own benefit regardless of the Group's interests. - Risks associated with control by the majority shareholder
Sinopec Corp., the controlling shareholder of the Company, owns 5,460,000,000 shares of the Company, which represents 50.44% of the total number of shares of the Company and gives it an absolute controlling position. Sinopec Corp. may, by using its controlling position, exercise influence over the Group's production operations, fund allocations, appointment or removal of senior staff and so forth, thereby adversely affecting the Group's production operations as well as minority shareholders' interests.
2020 Interim Report 27
MAJOR EVENTS
- Annual General Meeting
During the Reporting Period, the Company held the 2019 Annual General Meeting in Shanghai, China on 18 June 2020, which was in strict conformity with the relevant laws and regulations and the notice, convening and convening procedures stipulated in the Articles of Association. The relevant announcement was published in Shanghai Securities News, China Securities Journal and Securities Times on 19 June 2020 and was uploaded to the websites of the Hong Kong Stock Exchange and Shanghai Stock Exchange on 18 June 2020.
-
Plan for Ordinary Shares Profit Distribution or Capital Reserves Capitalization
1. The Formulation, Implementation or Adjustment of Cash Dividend Policy
The 2019 Profit Distribution Plan was considered and approved at the 2019 Annual General Meeting held on 18 June 2020 to distribute a dividend of RMB1.20 per 10 shares (including tax) totaling RMB1,298,857,620 based on the total issued share of 10,823,813,500 as at dividend payout date. The relevant announcement was published in Shanghai Securities News, China Securities Journal and Securities Times on 19 June 2020 and was uploaded to the websites of the Hong Kong Stock Exchange and Shanghai Stock Exchange on 18 June 2020. The record date for H shares dividend payment was 29 June 2020 and the dividend payment date for H shares was 21 July 2020. On 13 July 2020, the Company published an announcement on the implementation of profit distribution for A shares for 2019. The record date for A shares dividend payment was 20 July 2020 and the ex-dividend date was 21 July 2020. The dividend payment date for A shares was 21 July 2020. The Profit Distribution Plan was implemented as scheduled.
2. Plan for Profit Distribution or Capital Reserves Capitalization during the Reporting Period
Nil.
- Performance of Undertakings
1. Undertakings by De Facto Controller, Shareholders, Connected Parties, Purchaser and the Company during the Reporting Period or Continuing up to the Reporting Period
Undertakings about share reform
The Company disclosed The Explanatory Memorandum for the Share Reform Scheme of the Company (the Revised Draft) on 20 June 2013, in which the Company's controlling shareholder, Sinopec Corp., made the following major undertakings that continued up to the Reporting Period:
Sinopec Corp. shall continue to support the development of the Company upon the completion of the share reform scheme, and shall use the Company as a platform for the development of related businesses in the future.
28 Sinopec Shanghai Petrochemical Company Limited
MAJOR EVENTS (continued)
For details, please refer to "The Explanatory Memorandum for the Share Reform Scheme of the Company" (the Revised Draft) (Full Version) published in Shanghai Securities News and China Securities Journal on 20 June 2013, as well as the relevant announcements uploaded to the websites of the Shanghai Stock Exchange, the Hong Kong Stock Exchange and the Company.
The share reform scheme was reviewed and approved at the A shares shareholders' meeting held on 8 July 2013. After the implementation of the share reform scheme on 20 August 2013, the Company's A shares resumed trading, and non-circulating shares previously held by non-circulating shares shareholders attained the right of circulation. For details of the implementation of the share reform scheme, please refer to the "Implementation Report of Sinopec Shanghai Petrochemical Company Limited Share Reform Scheme" published in China Securities Journal and Shanghai Securities News on 14 August 2013 and the relevant announcement uploaded to the websites of the Shanghai Stock Exchange and the Hong Kong Stock Exchange.
With regard to the aforementioned undertakings, the Company did not notice any violation in fulfilling the above undertakings by Sinopec Corp.
- Appointment and Dismissal of Accounting Firm
During the Reporting Period, the Company had not changed its auditors.
- Material Lawsuits or Arbitration
During the Reporting Period, the Company had no material lawsuits or arbitration.
- Punishment and Reprimand of the Company and its Directors, Supervisors, Senior Management, Controlling Shareholders, De Facto Controller and Purchaser
During the Reporting Period, the Company and its Directors, Supervisors, senior management, controlling shareholder, de facto controller and purchasers had not been investigated, administratively punished, publicly criticized by the CSRC or publicly censured by the stock exchanges on which the Company is listed.
- Credit Status of the Company and its Controlling Shareholder and De Facto Controller during the Reporting Period
During the Reporting Period, the Company and its controlling shareholder and de facto controller of the Company were not involved in any events regarding failure to perform obligations under a judgement of courts, nor have they had any relatively large amount of debts which have become due and outstanding.
2020 Interim Report 29
MAJOR EVENTS (continued)
- Share Option Incentive Scheme
During the Reporting Period, the Company did not grant A-share share options under the Share Option Incentive Scheme, nor did the grantees exercise any A-share share options, and no A-share share options were cancelled or lapsed. No H-share share options were granted, cancelled or lapsed.
- Major Connected Transactions of the Company
1. Connected Transactions in relation to Daily Operations
Continuing connected transactions under Chapter 14A of the Hong Kong Listing Rules
During the Reporting Period, pursuant to the Mutual Product Supply and Sales Services Framework Agreement entered into with the controlling shareholder of the Company, Sinopec Corp., and the de facto controller, Sinopec Group on 23 October 2019, and the Comprehensive Services Framework Agreement entered into with the Sinopec Group on 23 October 2019, the Company purchased raw materials from Sinopec Group, Sinopec Corp. and their associates and sold petroleum products and petrochemical products and leased properties to Sinopec Corp. and its associates, and Sinopec Corp. and its associates provided agency sales services for petrochemical products to the Company. Pursuant to the Comprehensive Services Framework Agreement entered into with the Company's de facto controller Sinopec Group on 23 October 2019, the Company obtained construction and installation, engineering design, petrochemical industry insurance and financial services from Sinopec Group and its associates. The Mutual Product Supply and Sales Services Framework Agreement and the Comprehensive Services Framework Agreement shall be valid for three years until 31 December 2022.
The transactions under the abovementioned Mutual Product Supply and Sales Services Framework Agreement and the Comprehensive Services Framework Agreement constituted continuing connected transactions under Chapter 14A of the Hong Kong Listing Rules and constituted ongoing connected transactions under the Shanghai Listing Rules. The Company disclosed the two agreements and the respective continuing connected transactions under the agreements in an announcement dated 23 October 2019 and a circular dated 13 November 2019. These two agreements and the respective continuing connected transactions under the agreements together with the associated annual caps from 2020 to 2022 were considered and approved at the first extraordinary general meeting for 2019 held on 10 December 2019.
During the Reporting Period, the relevant continuing connected transactions were conducted in accordance with the terms of the Mutual Product Supply and Sales Services Framework Agreement and the Comprehensive Services Framework Agreement. The transaction amounts of the relevant connected transactions did not exceed the caps in relation to the respective continuing connected transactions approved at the first extraordinary general meeting for 2019.
30 Sinopec Shanghai Petrochemical Company Limited
MAJOR EVENTS (continued)
The table below sets out the amounts of the continuing connected transactions of the Company with
Sinopec Corp. and Sinopec Group during the Reporting Period:
Unit: RMB'000 | |||||
Percentage of | |||||
the transaction | |||||
Transaction | amount of the | ||||
Annual cap | amount during the | same type of | |||
Type of connected transaction | Connected parties | for 2020 | Reporting Period | transaction (%) | |
Mutual Product Supply and Sales Services Framework Agreement | |||||
Purchases of raw materials | Sinopec Group, | 78,453,000 | 19,581,627 | 39.20% | |
Sinopec Corp. and | |||||
their associates | |||||
Sales of petroleum and | Sinopec Corp. and its | 70,113,000 | 22,268,268 | 60.92% | |
petrochemical products | associates | ||||
Property leasing | Sinopec Corp. and its | 37,000 | 13,852 | 38.70% | |
associates | |||||
Agency sales of petrochemical | Sinopec Corp. and its | 166,000 | 51,395 | 100.00% | |
products | associates | ||||
Comprehensive Services Framework Agreement | |||||
Construction, installation and | Sinopec Group and its | 684,000 | 74,426 | 20.52% | |
engineering design services | associates | ||||
Petrochemical industry insurance | Sinopec Group and its | 120,000 | 55,770 | 100.00% | |
services | associates | ||||
Financial services | Sinopec Group and its | 200,000 | 921 | 0.52% | |
associates | |||||
(Finance Department | |||||
of Sinopec) | |||||
The Company approved a storage service agreement with Sinopec Petroleum Reserve Company Limited and its Baishawan branch at the 19th meeting of the Ninth Session of the Board on 27 December 2019 and signed the agreement on 31 December 2019. Pursuant to the agreement, Baishawan branch is to provide the storage service for the Company for one year, with the leasing period from 1 January 2020 to 31 December 2020, at an annual storage fee of a maximum of RMB114.0 million (including VAT). Related announcements were published on the websites of the Shanghai Stock Exchange, the Hong Kong Stock Exchange and the Company on 27 December 2019, as well as on "Shanghai Securities News" and "China Securities Journal" on 28 December 2019.
2020 Interim Report 31
MAJOR EVENTS (continued)
Continuing connected transactions under Chapter 14A of the Hong Kong Listing Rules
On 28 December 2018, the Company signed the Technical Service Contract with the Company's actual controller, Sinopec Group's non-wholly owned subsidiary, Petro-Cyberworks Information Technology Co.,Ltd. ("Petro-Cyberworks"), which entrusted Petro-Cyberworks to undertake the design, construction and operation and maintenance of the smart factory project. The total amount of technical service contract is RMB30,580,000 (inclusive of tax). The term of the technical service contract shall start from the date of signing by both parties, and the main function construction will be completed in July 2020 when the pilot will start. Related announcements were published on the websites of the Shanghai Stock Exchange, the Hong Kong Stock Exchange and the Company on 28 December 2018, as well as on Shanghai "Shanghai Securities News" and "China Securities Journal" on 29 December 2018.
2. Credits and Liabilities with Connected Parties
Unit: RMB'000
Funds provided to | Funds provided by connected parties | |||||||||
connected parties | to the listed company | |||||||||
Connected | Opening | Amount of | Closing | Opening | Amount of | Closing | ||||
Connected party | relationship | balance | transaction | balance | balance | transaction | balance | |||
Sinopec Corp., its | Controlling | 30,760 | -22,397 | 8,363 | 39,917 | 29,549 | 69,466 | |||
subsidiaries, joint ventures | shareholder, de | |||||||||
and associates & Sinopec | facto controller and | |||||||||
Group and its subsidiaries | their related parties | |||||||||
Note 1: The period-end balance of the funds provided by the Group to the connected parties was mainly unsettled receivables arising from the provision of services and pipeline leases to Sinopec Corp., its subsidiaries and associates.
Note 2: The period-end balance of the funds provided by the connected parties to the Group was mainly unsettled payables arising from the provision of construction, installation and engineering design services by Sinopec Group and its subsidiaries.
The prices of the continuing connected transactions conducted by the Company with Sinopec Group, Sinopec Corp. and their associates were determined, upon negotiations between both parties, on the basis of
- state tariffs, (ii) state guidance prices, or (iii) market prices. Such connected transactions were entered into in line with the Company's production and operational needs. Accordingly, the aforementioned continuing connected transactions did not have a significant adverse impact on the Company's independence.
32 Sinopec Shanghai Petrochemical Company Limited
MAJOR EVENTS (continued)
(10) Material Contracts and their Performance
1. Entrustments, Sub-contracts and Lease Arrangements
During the Reporting Period, the Company had no entrustments, sub-contracts or lease arrangements that generated 10% or more (including 10%) of the gross profit of the Company for the Reporting Period.
2. Guarantees
The Company did not provide any guarantees during the Reporting Period.
3. Other Material Contracts
There were no other material contracts during the Reporting Period.
(11) Environmental Information
1. Environmental Protection Situation of Key Pollutant-discharging Companies and their Subsidiaries as Announced by the Environmental Protection Ministry
The Company is one of the contaminating enterprises under Intensive Monitoring and Control by the State proclaimed by the Ministry of Ecology and Environment. According to Measures for Self-Monitoring and Information Disclosure by the Enterprises subject to Intensive Monitoring and Control of the State (Trial Implementation) (國家重點監控企業自行監測及信息公開辦法(試行)), the Company has disclosed to the public on the website of the National Pollution Source Monitoring Information Management and Sharing Platform the sites of the source of pollution, pollutant types and concentration of pollutants which are subject to intensive monitoring and control of the State.
The Company, as a manufacturing enterprise in the petrochemical industry, consistently places environmental protection as its first priority. It continues to participate in ISO14001 Environmental Management System Certification. In January 2013, it received certifications from the Shanghai Audit Center of Quality for quality (GB/T 19001: 2008), environment (GB/T 24001: 2004) and occupational health and safety (GB/T28001: 2011). On 16 September 2019, the continued use of the title "China Environmental Friendly Enterprise" ("中華環境友好企業") was approved. On 27 December 2019, the Company was awarded the title "Sinopec Green Enterprise" ("中國石化綠色企業") after passing through the approval of the HSSE Committee of Sinopec Group.
In 2020, the Company actively fulfilled the main responsibility of environmental protection, comprehensively promoted the green development of the industry, resolutely fought against pollution, won the battle of defending the blue sky, and conscientiously implemented the requirements of "the Seventh Environmental Protection Three-Year Action Plan", "Shanghai Clean Air Action Plan (2018-2022)" and "Jinshan District Environmental Comprehensive Remediation Action Plan", thereby promoting the establishment of green enterprise and green grassroots establishment and helping the Company in achieving high quality and sustainable development.
2020 Interim Report 33
MAJOR EVENTS (continued)
The Company actively carried out environmental protection renovation. In the first half of 2020, the chemical oxygen demand of key pollutants, ammonia nitrogen, sulfur dioxide and nitrogen oxides of the Company decreased by 10.69%, 8.16%, 10.76% and 11.61% respectively year-on-year. The passing rate of the company's discharged waste water was 100%, that of the controlled waste gas was 100%, and the rate of proper disposal of hazardous waste was 100%, thereby meeting the requirements of the environmental protection assessment index of the energy and environmental responsibility statement of Sinopec Group.
2. Construction and Operation of Pollution Prevention Facilities
The Company strengthened the daily operation supervision of environmental protection facilities, and the operational parameters of environmental protection facilities were included in the production indicators for management. Environmental protection equipment was listed as an important production equipment, and environmental protection on-line instruments were integrated into the equipment management system.
By November 2018, all boilers of the Thermal Power Department had completed ultra-low emission conversion. In the first half of 2020, the emission of soot, SO2 and NOX from thermoelectric boilers reached Shanghai Emission Standard of Air Pollutants for Coal-fired Power Plant (DB31/963-2016), namely, soot
- the standard, SO2≤O and NOX≤O; SO2 emissions from three sulfur recovery units met the emission standards stipulated in the Emission Standards of Pollutants for Petroleum Chemistry Industry (GB31570- 2015), namely, SO2≤O; the emission of pollutants from catalytic cracking units met the emission standards stipulated in the Emission Standards of Pollutants for Petroleum Chemistry Industry (GB31570-2015), namely, soot ≤ the standard, SO2≤O and NOX≤O. The emission of pollutants from process heating furnace met the emission standards stipulated in the Emission Standards of Pollutants for Petroleum Chemistry Industry (GB31570-2015) and Emission Standard of Pollutants for Petroleum Chemistry Industry (GB31571-2015), namely, soot ≤ the standard g/m3, SO2≤O g/m3 and NOX≤O g/m3.
Sinopec Shanghai's Environmental Protection Water Supplies Department has two sets of sewage biochemical treatment devices (1# sewage treatment plant and 3# sewage treatment plant), and the sewage treatment design capacity is 84,000 tons/day. After the sewage treatment reaches the standard, it is discharged to Hangzhou Bay through the deep-sea discharge pipe.
In the first half of 2020, the second-level sewage biochemical treatment capacity of the Environmental Protection Water Supplies Department totaled 13,704,100 tons, approximately 75,300 tons/day. The total effluent concentration of CODcr and ammonia nitrogen was 33.2mg/l and 2.0mg/l respectively. The sewage treatment plant facilities were 100% intact and the operation rate was 100%.
34 Sinopec Shanghai Petrochemical Company Limited
MAJOR EVENTS (continued)
3. Environmental Impact Assessment and Other Environmental Protection Administrative Approval
According to relevant requirements of national and local governments such as the "Environmental Impact Assessment Law", "Regulations on Environmental Protection Management of Construction Projects" and "Classification Management List for Construction Project Environmental Impact Assessment", the Company actively promoted the alignment of construction projects with the "three at the same time" environmental protection principle. In the first half of 2020, the project "Storage and Transportation Department T-121~124 Tank Intrinsic Safety and Environmental Protection Hazard Control" was approved by Jinshan Ecological Environment Bureau (approval number: [2020]79), and the project "Sinopec Shanghai Petrochemical Company Limited precursor with annual production of 24,000 tons and 48K large tow carbon fibre with annual production of 12,000 tons" was approved by Shanghai Municipal Bureau of Ecology and Environment (approval number: [2020]24).
The Company obtained the sewage discharge licenses (petrochemical industry) issued by the Shanghai Municipal Environmental Protection Bureau on 31 December 2017. In 2020, the Company strictly carried out self-monitoring, reporting of pollutant discharge permit execution reports and information disclosure in strict accordance with the requirements of sewage permit management.
In July 2020, due to the operation of the new gasoline cleaning project of the Refining Department in August, Sinopec Shanghai applied to the Shanghai Municipal Bureau of Ecology and Environment for a change to the sewage discharge license, which is in progress.
4. Response Plan for Emergent Environmental Incidents
According to the three-year validity requirement in the "Administrative Measures for Emergency Preparedness for Environmental Incidents of Sinopec", the Company completed the revision of the "Comprehensive Emergency Response Plan for Environmental Emergencies" and filed a report to Shanghai Municipal Bureau of Ecology and Environment in December 2019. The Company's overall plan includes 11 areas, such as "Corporate Profile", "Emergency Organization System and Responsibility", "Environmental Risk Analysis", "Internal Alarm Mechanism", "Emergency Response", etc. The special emergency plan includes 6 plans, including "Special Emergency Plan for Water Environment Risk", "Special Emergency Plan for Long-Distance Pipeline Leakage", "Special Emergency Response Plan for Chemicals (Including Hazardous Waste) Leakage Incident", "Special Emergency Response Plan for Oil and Gas Pipeline Leakage Incident", "Sinopec Shanghai Special Emergency Plan for Soil Pollution Prevention", "Sinopec Shanghai Special Emergency Plan for Hazardous Waste Disposal", etc.
In accordance with the requirements of the "Notice on the Issuance of 'Sinopec Environmental Risk Assessment Guide' ([2019]29)" issued by the Sinopec Group, the Company carried out reassessment of environmental risk sources. As at July 2020, a total of 113 environmental risk sources were assessed, of which none was level I environmental risk source, 34 were level II environmental risk sources (18 in the equipment, 15 in the tank area and 1 in the wharf), and 79 were level III environmental risk sources (61 in the equipment, 13 in the tank area, 4 in the land pipelines and 1 in the wharf).
2020 Interim Report 35
MAJOR EVENTS (continued)
The Company carried out regular environmental protection emergency drills. On 29 June 2020, the Company carried out "LPG tank leak in the LPG tank station in the third storage and transportation workshop". It was the first time that blind drill was carried out at a company level. The video of the drill was transmitted to the emergency command center of the Company in real time. Mr. Guan Zemin, President of the Company, participated in the drill as chief commander in the emergency command center. Through the blind drill and actual practice, the Storage and Transportation Department found effective measures for further adjustments. Moreover, the Company accumulated extensive experience to improve relevant emergency drill plans: (1) the Company's department can quickly arrive at the scene after receiving the general dispatching information;
(2) the fire brigade can quickly and effectively deal with it after receiving the alarm; (3) the third storage and transportation workshop did a good job in self-rescue, especially in process disposal, on-site opening of rescue water and the overall leakage handling was appropriate, fast and effective.
5. Environmental Self-monitoring Programme
In accordance with Sinopec Shanghai's Self-Monitoring Program for Pollution Discharge Permit, Sinopec Provisions on the Management of Environment Monitoring and Sinopec Shanghai's Provisions on the Management of Environment Monitoring, in early 2020, the Company organized and published the annual Sinopec Shanghai Environmental Monitoring Plan and emission implementation standards. The monitoring contents included the following nine parts: water quality (rain water) monitoring plan, atmospheric monitoring plan (atmospheric PM10, unorganized emission monitoring), exhaust gas monitoring plan, noise monitoring plan, radioactive instrument monitoring plan, water quality (sewage) monitoring plan, soil and groundwater monitoring plan, covering the Company's sewage, clean water, waste gas, noise, radioactivity and other pollution sources, as well as environmental monitoring of the atmosphere, groundwater, etc. Daily environmental monitoring is carried out according to the monitoring plan. In the first half of 2020, a total of 13,294 water quality monitoring data, 4,047 air and waste gas monitoring data, and 152 noise monitoring data were completed, with the compliance rate of 100%.
(12) Corporate Governance
The Company acted in strict compliance with regulatory legislations such as the Company Law, the Securities Law, the Corporate Governance Principles for Listed Companies and the Guidelines for Establishing the Independent Directors System for Listed Companies issued by the CSRC, as well as the relevant requirements of the Shanghai Stock Exchange, the Hong Kong Stock Exchange and the New York Stock Exchange to push forward the innovation of the Company's system and management, to improve the corporate governance structure, and to strengthen the establishment of the Company's system in order to enhance the overall image of the Company.
36 Sinopec Shanghai Petrochemical Company Limited
CHANGE IN SHARE CAPITAL OF ORDINARY SHARES AND SHAREHOLDERS
- Changes in Share Capital of Ordinary Shares during the Reporting Period
1. Changes in Share Capital of Ordinary Shares during the Reporting Period
During the Reporting Period, there was no change in the ordinary shares of the Group.
- Issue of shares
1. Issue of Shares during the Reporting Period
During the Reporting Period, the Group did not issue any shares.
2. Changes in the Company's Total Number of Ordinary Shares, Shareholding Structure and the Company's Assets and Liabilities
During the Reporting Period, there was no change in the Company's total number of shares, shareholding structure and Company's assets and liabilities due to reasons such as stock dividend and allotment of shares.
3. Employees Shares
The Company had no employees shares as at the end of the Reporting Period.
2020 Interim Report 37
CHANGE IN SHARE CAPITAL OF ORDINARY SHARES AND SHAREHOLDERS
(continued)
-
Shareholders
1. Total Number of Shareholders
Number of shareholders of ordinary shares as at the end of the Reporting Period | 95,776 |
2. Shareholding of the Top Ten Shareholders as at the End of the Reporting Period
Unit: Shares | |||||||||
Shareholding of the top ten shareholders | |||||||||
Increase/decrease | Number of | ||||||||
of shareholding | Number of shares | shares | |||||||
during the | held at the end of | Percentage of | held with selling | Pledged/Frozen | |||||
Name of shareholders | Class of | Reporting | the Reporting | shareholding | restrictions | Status of | Number of | Nature of | |
(Full name) | shares | Period (shares) | Period (shares) | (%) | (shares) | shares | shares | shareholders | |
China Petroleum & Chemical | A shares | 0 | 5,460,000,000 | 50.44 | 0 | None | 0 | State-owned legal | |
Corporation | person | ||||||||
HKSCC (Nominees) Limited | H shares | -809,717 | 3,453,874,030 | 31.91 | 0 | Unknown | - | Overseas legal | |
person | |||||||||
China Securities Finance | A shares | 0 | 324,111,018 | 2.99 | 0 | None | 0 | Others | |
Corporation Limited | |||||||||
Central Huijin Investment | A shares | 0 | 67,655,800 | 0.63 | 0 | None | 0 | Others | |
Limited | |||||||||
HKSCC Limited | A shares | -13,130,965 | 64,546,170 | 0.60 | 0 | None | 0 | Others | |
Huitianfu Fund Management | A shares | 5,000,000 | 50,000,620 | 0.46 | 0 | None | 0 | Others | |
Co., Ltd. - Social Security | |||||||||
Fund 1103 portfolio | |||||||||
GF Fund - Agricultural Bank of | A shares | 0 | 45,222,300 | 0.42 | 0 | None | 0 | Others | |
China - GF CSI Financial | |||||||||
Asset Management Plan | |||||||||
Dacheng Fund - | A shares | 0 | 43,531,469 | 0.40 | 0 | None | 0 | Others | |
Agricultural Bank of China | |||||||||
- Dacheng CSI Financial | |||||||||
Asset Management Plan | |||||||||
China Asset Fund - Agricultural | A shares | 0 | 43,083,750 | 0.40 | 0 | None | 0 | Others | |
Bank of China - China | |||||||||
Asset CSI Financial Asset | |||||||||
Management Plan | |||||||||
Bosera Fund - Agricultural | A shares | 0 | 43,083,700 | 0.40 | 0 | None | 0 | Others | |
Bank of China - Bosera | |||||||||
CSI Financial Asset | |||||||||
Management Plan | |||||||||
Note on connected relations | Among the above-mentioned shareholders China Petroleum & Chemical Corporation ("Sinopec Corp."), a state-owned legal person, does not have any | ||||||||
or acting in concert of the | connected relationship with the other shareholders, and does not constitute an act-in-concert party under the Administrative Measures on Acquisition | ||||||||
above shareholders | of Listed Companies. Among the above-mentioned shareholders, HKSCC (Nominees) Limited is a nominee. Apart from the above, the Company is not | ||||||||
aware of any connected relationship among the other shareholders, or whether any other shareholder constitutes an acting-in-concert party under the | |||||||||
Administrative Measures on Acquisition of Listed Companies. | |||||||||
38 Sinopec Shanghai Petrochemical Company Limited
CHANGE IN SHARE CAPITAL OF ORDINARY SHARES AND SHAREHOLDERS
(continued)
- Change in Controlling Shareholder or De Facto Controller
During the Reporting Period, there was no change in the controlling shareholder or the de facto controller of the
Company.
- Interests and Short Positions of the Substantial Shareholders of the Company in Shares and Underlying Shares of the Company
As at 30 June 2020, as was known to the Directors or chief executive of the Company, the interests and short positions of the Company's substantial shareholders (being those who are entitled to exercise or control the exercise of 5% or more of the voting power at any general meeting of the Company but excluding the Directors, chief executive and Supervisors) who are required to disclose their interests pursuant to Divisions 2 and 3 of Part XV of the SFO in the shares and underlying shares of the Company or as recorded in the register of interests required to be kept under section 336 of the SFO are as set out below:
2020 Interim Report 39
CHANGE IN SHARE CAPITAL OF ORDINARY SHARES AND SHAREHOLDERS
(continued)
Interests in ordinary shares of the Company | ||||||||
Percentage of | ||||||||
Percentage of | total issued | |||||||
Interests held or | total issued | shares of the | ||||||
deemed as held | shares of the | relevant class | ||||||
Name of shareholder | (shares) | Note | Company (%) | (%) | Capacity | |||
China Petroleum & Chemical Corporation | 5,460,000,000 A shares (L) | (1) | 50.44 | (L) | 74.50 | (L) | Beneficial owner | |
("Sinopec Corp.") | Shares of legal person | |||||||
The Bank of New York Mellon | 405,786,808 H shares (L) | (2) | 3.75 | (L) | 11.61 | (L) | Interests of controlled | |
Corporation | corporation | |||||||
348,916,700 | H shares (S) | 3.22 | (S) | 9.98 | (S) | |||
53,222,904 | H shares (P) | 0.49 | (P) | 1.52 | (P) | |||
BlackRock, Inc. | 321,970,895 H shares (L) | (3) | 2.97 | (L) | 9.21 | (L) | Interests of controlled | |
corporation | ||||||||
36,728,400 | H shares (S) | 0.34 | (S) | 1.05 | (S) | |||
Corn Capital Company Limited | 211,008,000 H shares (L) | (4) | 1.95 | (L) | 6.04 | (L) | Beneficial owner | |
200,020,000 | H shares (S) | 1.85 | (S) | 5.72 | (S) | |||
Hung Hin Fai | 211,008,000 H shares (L) | (4) | 1.95 | (L) | 6.04 | (L) | Interests of controlled | |
corporation | ||||||||
200,020,000 | H shares (S) | 1.85 | (S) | 5.72 | (S) | |||
Yardley Finance Limited | 200,020,000 H shares (L) | (5) | 1.85 | (L) | 5.72 | (L) | Secured equity holders | |
Chan Kin Sun | 200,020,000 H shares (L) | (5) | 1.85 | (L) | 5.72 | (L) | Interests of controlled | |
corporation | ||||||||
Citigroup Inc. | 227,905,889 H shares (L) | (6) | 2.11 | (L) | 6.52 | (L) | Secured equity holders, | |
11,912,455 | H shares (S) | 0.11 | (S) | 0.34 | (S) | Interests of controlled | ||
208,391,836 | H shares (P) | 1.93 | (P) | 5.96 | (P) | corporation, and | ||
approved lending | ||||||||
agents | ||||||||
Wellington Management Group LLP | 213,197,224 H shares (L) | (7) | 1.97 | (L) | 6.10 | (L) | Investment manager | |
13,926 | H shares (S) | - | - |
(L): Long position; (S): Short position; (P): Lending pool
40 Sinopec Shanghai Petrochemical Company Limited
CHANGE IN SHARE CAPITAL OF ORDINARY SHARES AND SHAREHOLDERS
(continued)
Note:
- Based on the information obtained by the Directors from the website of The Hong Kong Stock Exchange and as far as the Directors are aware, Sinopec Group directly and indirectly owned 68.77% of the issued share capital of Sinopec Corp. as at 30 June 2020. By virtue of such relationship, Sinopec Group is deemed to have an interest in the 5,460,000,000 A shares of the Company directly owned by Sinopec Corp.
-
All the 405,786,808 H shares (long position) and 348,916,700 H shares (short position) are deemed to be held by The Bank of New York Mellon Corporation, due to control of multiple companies (among which 348,916,700 H shares (short position) are held through physical- settlement unlisted derivatives). Below are the companies indirectly or wholly owned by The Bank of New York Mellon Corporation:
(2.1) All the 405,769,008 H shares (long position) and 348,916,700 H shares (short position) are held by The Bank of New York Mellon. Since The Bank of New York Mellon is wholly owned by The Bank of New York Mellon Corporation, The Bank of New York Mellon Corporation is deemed to have an interest in the 405,769,008 H shares (long position) and 348,916,700 H shares (short position) of the Company held by The Bank of New York Mellon.
(2.2) All the 17,800 H shares (long position) are held by BNY MELLON, NATIONAL ASSOCIATION. Since BNY MELLON NATIONAL ASSOCIATION is wholly owned by The Bank of New York Mellon Corporation, The Bank of New York Mellon Corporation is deemed to have an interest in the 17,800 H shares (long position) of the Company held by BNY MELLON, NATIONAL ASSOCIATION. - All the 321,970,895 H shares (long position) (among which 2,806,000 H shares (long position) are held through cash settled unlisted derivatives) and 36,728,400 H shares (short position) (among which 334,000 H shares (short position) are held through cash settled unlisted derivatives) are deemed to be held by BlackRock, Inc., due to control of multiple companies. Below are the companies indirectly wholly owned by BlackRock, Inc:
(3.1) All the 2,355,000 H shares (long position) are held by BlackRock Investment Management, LLC. Since BlackRock Investment Management, LLC is indirectly wholly owned by BlackRock, Inc. through Trident Merger, LLC, BlackRock, Inc. is deemed to have an interest in the 2,355,000 H shares (long position) of the Company held by BlackRock Investment Management, LLC.
(3.2) All the 15,058,700 H shares (long position) are held by BlackRock Financial Management, Inc. Since BlackRock Financial Management, Inc. is indirectly wholly owned by BlackRock, Inc. through BlackRock Holdco 2, Inc., BlackRock, Inc. is deemed to have an interest in the 15,058,700 H shares (long position) of the Company held by BlackRock Financial Management, Inc. In addition, BlackRock Financial Management, Inc. is interested in the shares of the Company through the following companies:
(3.2.1) 1,070,000 H shares (long position) are held by BlackRock Advisors, LLC.
(3.2.2) BlackRock Holdco 4, LLC is wholly owned by BlackRock Financial Management, Inc. BlackRock Holdco 4, LLC is interested in the shares of the Company through the following companies:
(3.2.2.1) 56,398,337 H shares (long position) and 36,394,400 H shares (short position) are held by BlackRock Institutional Trust Company, National Association.
(3.2.2.2) 83,156,000 H shares (long position) are held by BlackRock Fund Advisors.
(3.3) 86% of interest in BR Jersey International Holdings L.P. are indirectly held by BlackRock, Inc. BR Jersey International Holdings L.P. is interested in the shares of the Company through the following companies:
(3.3.1) 5,044,788 H shares (long position) are held by BlackRock Japan Co., Ltd. (which is indirectly wholly owned by BR Jersey International Holdings L.P.)
2020 Interim Report 41
CHANGE IN SHARE CAPITAL OF ORDINARY SHARES AND SHAREHOLDERS
(continued)
(3.3.2) 942,000 H shares (long position) are held by BlackRock Asset Management Canada Limited (which is 99.9% indirectly held by BR Jersey International Holdings L.P.)
(3.3.3) 1,596,000 H shares (long position) are held by BlackRock Investment Management (Australia) Limited (which is indirectly wholly owned by BR Jersey International Holdings L.P.)
(3.3.4) 1,991,813 H shares (long position) are held by BlackRock Asset Management North Asia Limited (which is indirectly wholly owned by BR Jersey International Holdings L.P.)
(3.3.5) 1,124,000 H shares (long position) are held by BlackRock (Singapore) Limited (which is indirectly wholly owned by BR Jersey International Holdings L.P.)
(3.4) 90% of interest in BlackRock Group Limited is indirectly held by BR Jersey International Holdings L.P. (See (3.3) above). BlackRock Group Limited is interested in the shares of the Company through the following companies, which are directly or indirectly wholly owned by BlackRock Group Limited:
(3.4.1) 552,000 H shares (long position) are held by BlackRock (Netherlands) B.V.
(3.4.2) 1,794,000 H shares (long position) are held by BlackRock Advisors (UK) Limited.
(3.4.3) 30,898,998 H shares (long position) are held by BlackRock Investment Management (UK) Limited.
(3.4.4) 19,603,951 H shares (long position) are held by BlackRock Fund Managers Limited.
(3.4.5) 372,000 H shares (long position) are held by BlackRock International Limited.
(3.4.6) 7,848,308 H shares (long position) are held by BlackRock Life Limited.
(3.4.7) 31,433,000 H shares (long position) are held by BlackRock Asset Management Ireland Limited.
(3.4.8) 60,704,000 H shares (long position) and 334,000 H shares (short position) are held by BLACKROCK (Luxembourg) S.A.
(3.4.9) 28,000 H shares (long position) are held by BlackRock Asset Management (Schweiz) AG.
- These shares were held by Corn Capital Company Limited. Hung Hin Fai held 100% interests in Corn Capital Company Limited. Pursuant to the SFO, Hung Hin Fai was deemed to be interested in the shares held by Corn Capital Company Limited.
- These shares were held by Yardley Finance Limited. Chan Kin Sun held 100% interests in Yardley Finance Limited. Pursuant to the SFO, Chan Kin Sun was deemed to be interested in the shares held by Yardley Finance Limited.
-
Of the H shares (long position) held by Citigroup Inc., 4,535,100 H shares (long position) are held through physically settled listed derivatives, 5,222,031 H shares (long position) are held through physically settled unlisted derivatives, and 226,000 H shares (long position) are held through cash settled unlisted derivatives. Of the H shares (short position) held by Citigroup Inc., 2,450,000 H shares (short position) are held through cash settled unlisted derivatives. In addition, Citigroup Inc. is deemed to hold a total of 227,905,889 H shares (long position) and 11,912,455 H shares (short position) of the Company, due to control of multiple companies. The following companies are indirectly owned by Citigroup Inc.:
(6.1) All the 208,391,836 H shares (long position) are held by Citibank, N.A. Since Citibank, N.A. is indirectly wholly owned by Citigroup Inc., Citigroup Inc. is deemed to have an interest in the 208,391,836 H shares (long position) of the Company held by Citibank, N.A.
42 Sinopec Shanghai Petrochemical Company Limited
CHANGE IN SHARE CAPITAL OF ORDINARY SHARES AND SHAREHOLDERS
(continued)
(6.2) All the 5,518,486 H shares (long position) are held by Citigroup Global Markets Hong Kong Limited. Since Citigroup Global Markets Hong Kong Limited is indirectly wholly owned by Citigroup Inc., Citigroup Inc. is deemed to have an interest in the 5,518,486 H shares (long position) of the Company held by Citigroup Global Markets Hong Kong Limited.
(6.3) All the 3,300 H shares (long position) and 296,455 H shares (short position) are held by Citigroup Global Markets Inc. Since Citigroup Global Markets Inc. is indirectly wholly owned by Citigroup Inc., Citigroup Inc. is deemed to have an interest in the 3,300 H shares (long position) and 296,455 H shares (short position) of the Company held by Citigroup Global Markets Inc.
(6.4) All the 13,992,267 H shares (long position) and 11,616,000 H shares (short position) are held by Citigroup Global Markets Limited. Since 90% of interest in Citigroup Global Markets Limited are indirectly held by Citigroup Inc., Citigroup Inc. is deemed to have an interest in the 13,992,267 H shares (long position) and 11,616,000 H shares (short position) of the Company held by Citigroup Global Markets Limited.
-
Of the H shares (short position) held by Wellington Management Group LLP, 13,926 H shares (short position) are held through cash settled listed derivatives. In addition, Wellington Management Group LLP is deemed to hold a total of 213,197,224 H shares (long position) and 13,926 H shares (short position) of the Company, due to control of multiple companies. The following companies are indirectly owned by Wellington Management Group LLP:
(7.1) All the 12,482,220 H shares (long position) and 11,514 H shares (short position) are held by Wellington Management Company LLP. Since 99.99% of interest in Wellington Management Company LLP are directly held by Wellington Investment Advisors Holdings LLP, 99.99% of interest in Wellington Investment Advisors Holdings LLP are directly held by Wellington Group Holdings LLP, and 99.70% of interest in Wellington Group Holdings LLP are directly held by Wellington Management Group LLP, Wellington Management Group LLP is deemed to have an interest in the 12,482,220 H shares (long position) and 11,514 H shares (short position) of the Company held by Wellington Management Company LLP.
(7.2) All the 436 H shares (short position) are indirectly held by Wellington Management Hong Kong Ltd. Since Wellington Management Hong Kong Ltd is wholly owned by Wellington Management Global Holdings, Ltd., and Wellington Management Global Holdings, Ltd. is held by Wellington Investment Advisors Holdings LLP, Wellington Management Group LLP (see (7.1)) is deemed to have an interest in the 436 H shares (short position) of the Company held by Wellington Management Hong Kong Ltd.
(7.3) All the 1,917 H shares (short position) are indirectly held by Wellington Management International Ltd. Since Wellington Management International Ltd is wholly owned by Wellington Management Global Holdings, Ltd., and Wellington Management Global Holdings, Ltd. is held by Wellington Investment Advisors Holdings LLP, Wellington Management Group LLP (see (7.1)) is deemed to have an interest in the 1,917 H shares (short position) of the Company held by Wellington Management International Ltd.
(7.4) All the 200,715,004 H shares (long position) and 59 H shares (short position) are held by Wellington Management Singapore Pte. Ltd. Since Wellington Management Singapore Pte. Ltd. is wholly owned by Wellington Management Global Holdings, Ltd., and Wellington Management Global Holdings, Ltd. is held by Wellington Investment Advisors Holdings LLP, Wellington Management Group LLP (see (7.1)) is deemed to have an interest in the 200,715,004 H shares (long position) and 59 H shares (short position) of the Company held by Wellington Management Singapore Pte. Ltd.
Save as disclosed above, as at 30 June 2020, the Directors have not been notified by any person (other than the Directors, chief executive and Supervisors) who had interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO or as recorded in the register of interests required to be kept by the Company under Section 336 of the SFO.
2020 Interim Report 43
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND OTHERS
-
Changes in Shareholdings
1. Changes in Shareholdings of the Current Directors, Supervisors and Senior Management and those Resigned during the Reporting Period
Unit: Shares | ||||
Number of | Number of | Change in | ||
shares held at | shares held | number of | ||
the beginning | at the end of | shares during | ||
of the Reporting | the Reporting | the Reporting | ||
Name | Position | Period | Period | Period |
Wu Haijun | Executive Director and Chairman | Nil | Nil | No change |
Guan Zemin | Executive Director, Vice | Nil | Nil | No change |
Chairman and President | ||||
Jin Qiang | Executive Director and Vice | 301,000 | 301,000 | No change |
President | ||||
Jin Wenmin | Executive Director and Vice | 175,000 | 175,000 | No change |
President | ||||
Zhou Meiyun | Executive Director, Vice | Nil | Nil | No change |
President and Chief Financial | ||||
Officer | ||||
Huang Xiangyu | Executive Director and Vice | 140,000 | 140,000 | No change |
President | ||||
Huang Fei | Executive Director, Vice | Nil | Nil | No change |
President and Secretary of the | ||||
Board | ||||
Xie Zhenglin | Non-executive Director | Nil | Nil | No change |
Peng Kun | Non-executive Director | Nil | Nil | No change |
Li Yuanqin | Independent Non-executive | Nil | Nil | No change |
Director | ||||
Tang Song | Independent Non-executive | Nil | Nil | No change |
Director | ||||
Chen Haifeng | Independent Non-executive | Nil | Nil | No change |
Director | ||||
Yang Jun | Independent Non-executive | Nil | Nil | No change |
Director | ||||
Gao Song | Independent Non-executive | Nil | Nil | No change |
Director | ||||
Ma Yanhui | Supervisor and Chairman of the | Nil | Nil | No change |
Supervisory Committee | ||||
Zhang Feng | Supervisor | 10,000 | 10,000 | No change |
Chen Hongjun | Supervisor | 31,400 | 31,400 | No change |
Zhang | Supervisor | Nil | Nil | No change |
Xiaofeng | ||||
Zheng Yunrui | Independent Supervisor | Nil | Nil | No change |
Choi Ting Ki | Independent Supervisor | Nil | Nil | No change |
Lei Dianwu | Outgoing Non-executive Director | Nil | Nil | No change |
Mo Zhenglin | Outgoing Non-executive Director | Nil | Nil | No change |
Zhang Yimin | Outgoing Independent Non- | Nil | Nil | No change |
executive Director | ||||
Liu Yunhong | Outgoing Independent Non- | Nil | Nil | No change |
executive Director | ||||
Du Weifeng | Outgoing Independent Non- | Nil | Nil | No change |
executive Director | ||||
Zhai Yalin | Outgoing Supervisor | Nil | Nil | No change |
44 Sinopec Shanghai Petrochemical Company Limited
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND OTHERS
(continued)
- Share Options Held by the Directors, Supervisors and Senior Management during the Reporting Period
During the Reporting Period, the Company's Directors, Supervisors and senior management did not hold Company's
share options.
- Changes in Directors, Supervisors and Senior Management during the Reporting Period
Name | Position | Change | Date of change | Reason | |
Guan Zemin | President | Recruitment | 3 February 2020 | - | |
Huang Xiangyu | Vice President | Recruitment | 3 February 2020 | - | |
Huang Fei | Vice President | Recruitment | 3 February 2020 | - | |
Guan Zemin | Executive Director and Vice Chairman | Election | 18 June 2020 | - | |
Huang Xiangyu | Executive Director | Election | 18 June 2020 | - | |
Huang Fei | Executive Director | Election | 18 | June 2020 | - |
Huang Fei | Secretary of the Board | Recruitment | 18 June 2020 | - | |
Xie Zhenglin | Non-executive Director | Election | 18 | June 2020 | - |
Peng Kun | Non-executive Director | Election | 18 June 2020 | - | |
Lei Dianwu | Non-executive Director | Outgoing | 18 June 2020 | Expiration | |
Mo Zhenglin | Non-executive Director | Outgoing | 18 June 2020 | Expiration | |
Zhai Yalin | Supervisor | Outgoing | 18 | June 2020 | Expiration |
Zhang Xiaofeng | Supervisor | Election | 18 June 2020 | - | |
Tang Song | Independent Non-executive Director | Election | 18 June 2020 | - | |
Chen Haifeng | Independent Non-executive Director | Election | 18 June 2020 | - | |
Yang Jun | Independent Non-executive Director | Election | 18 June 2020 | - | |
Gao Song | Independent Non-executive Director | Election | 18 June 2020 | - | |
Zhang Yimin | Independent Non-executive Director | Outgoing | 18 June 2020 | Expiration | |
Liu Yunhong | Independent Non-executive Director | Outgoing | 18 June 2020 | Expiration | |
Du Weifeng | Independent Non-executive Director | Outgoing | 18 June 2020 | Expiration |
Note: Mr. Huang Fei was appointed as Secretary to the Board of the Company at the 1st meeting of the Tenth Session of the Board on 18 June 2020. In view of the fact that Mr. Huang Fei was attending the qualification training for the Secretary to the Board at the time, Mr. Wu Haijun, Chairman of the Company, temporarily acted as Secretary to the Board according to relevant provisions of the Shanghai Listing Rules. Mr. Huang Fei obtained the qualification of Secretary to the Board of Shanghai Stock Exchange on 6 July 2020 and began to perform the duties of Secretary to the Board.
2020 Interim Report 45
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND OTHERS
(continued)
- Interests and Short Positions of the Directors, Chief Executives and Supervisors in the Shares, Underlying Shares and Debentures of the Company or its Associated Corporations
As at 30 June 2020, the interests and short positions of the Directors, chief executive and Supervisors of the Company in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or to be recorded in the register of interests required to be kept under Section 352 of the SFO; or as otherwise notified to the Company and the Hong Kong Stock Exchange pursuant to the Model Code for Securities Transactions set out in Appendix 10 to the Hong Kong Listing Rules were as follows:
Interests in the Shares and Underlying Shares of the Company
Percentage of | Percentage of | ||||
Number of | total issued | total issued | |||
Name | Position | shares (shares) | shares (%) | A shares (%) | Capacity |
Jin Qiang | Executive Director and Vice | 301,000 | 0.0028 | 0.0041 | Beneficial |
President | A shares (L) | owner | |||
Jin Wenmin | Executive Director and Vice | 175,000 | 0.0016 | 0.0024 | Beneficial |
President | A shares (L) | owner | |||
Huang Xiangyu | Executive Director and Vice | 140,000 | 0.0013 | 0.0019 | Beneficial |
President | A shares (L) | owner | |||
Zhang Feng | Supervisor | 10,000 | 0.0001 | 0.0001 | Beneficial |
A shares (L) | owner | ||||
Chen Hongjun | Supervisor | 31,400 | 0.0003 | 0.0004 | Beneficial |
A shares (L) | owner |
(L): Long position
Save as disclosed above, as at 30 June 2020, so far as was known to the Directors, chief executive and Supervisors of the Company, none of the Directors, chief executive or Supervisors of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or its associated corporations which were required to be disclosed or recorded pursuant to the SFO and the Hong Kong Listing Rules as mentioned above.
46 Sinopec Shanghai Petrochemical Company Limited
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND OTHERS
(continued)
- Changes in Directors' and Supervisors' Information
During the Reporting Period, disclosure of changes in the information of Directors and Supervisors in accordance with Rule 13.51B(1) of the Hong Kong Listing Rules are set out as below:
- Mr. Wu Haijun, an Executive Director, ceased to serve as Acting Secretary to the Board on 18 June 2020.
- Mr. Zhou Meiyun, an Executive Director, has been serving as Chairman of Shanghai Chemical Industry Park Development Company Limited since April 2020.
- Mr. Tang Song, an Independent Non-executive Director, has been serving as Independent Director of Shanghai Universal Biotech Company Limited since May 2020.
- Mr. Tang Song, an Independent Non-executive Director, has been serving as Independent Director of Shanghai QiFan Cable Co., Ltd. (Listed on the Shanghai Stock Exchange on 31 July 2020, stock code: 605222) since July 2019.
- Ms. Li Yuanqin, an Independent Non-executive Director, has been serving as Independent Director of Inesa Intelligent Tech Inc. (Listed on the Shanghai Stock Exchange, stock codes; 600602, 900901) since June 2020.
- Audit Committee
On 25 August 2020, the Audit Committee of the Tenth Session of the Board held its first meeting, primarily to review the financial statement of the Group for the Reporting Period, and discussed matters relating to risk management, internal control and financial reporting.
- Purchase, Sale and Redemption of the Company's Securities
During the Reporting Period, the Group did not purchase, sell or redeem any of the Company's securities (for the definition of "securities", please refer to paragraph 1 of Appendix 16 to the Hong Kong Listing Rules).
- Compliance with Corporate Governance Code
During the Reporting Period, the Company applied and complied with all code provisions as set out in the Corporate Governance Code contained in Appendix 14 to the Hong Kong Listing Rules.
2020 Interim Report 47
DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND OTHERS
(continued)
- Compliance with Model Code for Securities Transactions
The Company has adopted and implemented the Model Code for Securities Transactions to regulate the securities transactions of the Directors and Supervisors of the Company. After making specific enquiries with all Directors and Supervisors of the Company and having obtained written confirmations from each Director and Supervisor, the Company is not aware of any incident of non-compliance with the Model Code for Securities Transactions by the Directors and Supervisors of the Company during the Reporting Period.
The Model Code for Securities Transactions is also applicable to the senior management who may be in possession of unpublished inside information of the Company. The Company is not aware of any incident of non-compliance with the Model Code for Securities Transactions by the senior management of the Company.
48 Sinopec Shanghai Petrochemical Company Limited
DOCUMENTS FOR INSPECTION
- 2020 interim report signed by the Chairman;
- Financial statements signed and sealed by the legal representative, chief financial officer and accounting chief of the Company;
- Originals of all documents and announcements of the Company which were disclosed in the newspapers designated by the CSRS during the Reporting Period;
-
Written confirmation of the interim report signed by the Company's Directors, Supervisors and senior management.
The Company keeps all the documents listed above at the Company's Secretariat, the address of which is as follows:
No.48 Jinyi Road, Jinshan District, Shanghai, PRC, Postal code: 200540
Chairman: Wu Haijun
Date of filing approved by the Board: 26 August 2020
2020 Interim Report 49
Report On Review of Interim Financial Information
TO THE BOARD OF DIRECTORS OF SINOPEC SHANGHAI PETROCHEMICAL COMPANY LIMITED
(incorporated in the People's Republic of China with limited liability)
Introduction
We have reviewed the interim financial information set out on pages 51 to 96, which comprises the interim condensed consolidated balance sheet of Sinopec Shanghai Petrochemical Company Limited (the "Company") and its subsidiaries (together, the "Group") as at 30 June 2020 and the interim condensed consolidated income statement, the interim condensed consolidated statement of comprehensive income, the interim condensed consolidated statement of changes in equity and the interim condensed consolidated statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and International Accounting Standard 34 "Interim Financial Reporting". The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with International Accounting Standard 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.
Scope of Review
We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim financial information of the Group is not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting".
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 26 August 2020
50 Sinopec Shanghai Petrochemical Company Limited
- Condensed Consolidated Interim Financial Information Prepared under
International Financial Reporting Standards (unaudited)
Sinopec Shanghai Petrochemical Company Limited - For the six months ended 30 June 2020
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
Unaudited | |||||
Six months ended 30 June | |||||
Note | 2020 | 2019 | |||
RMB'000 | RMB'000 | ||||
Revenue | 6 | 35,627,558 | 51,955,226 | ||
Taxes and surcharges | (5,701,797) | (5,830,148) | |||
Net sales | 29,925,761 | 46,125,078 | |||
Cost of sales | (32,549,404) | (45,225,356) | |||
Gross (loss)/profit | 6 | (2,623,643) | 899,722 | ||
Selling and administrative expenses | (233,782) | (265,883) | |||
Net impairment losses on financial assets | - | (2) | |||
Other operating income | 53,995 | 45,794 | |||
Other operating expenses | (6,796) | (11,741) | |||
Other gains/(losses) - net | 7 | 71,117 | (13,302) | ||
Operating (loss)/profit | 6 | (2,739,109) | 654,588 | ||
Finance income | 7 | 179,142 | 234,392 | ||
Finance expenses | 7 | (28,120) | (20,648) | ||
Finance income - net | 151,022 | 213,744 | |||
Share of net profits of associates and joint ventures accounted for | |||||
using the equity method | 278,712 | 497,230 | |||
(Loss)/profit before income tax | (2,309,375) | 1,365,562 | |||
Income tax expense | 8 | 646,300 | (215,526) | ||
(Loss)/profit for the period | (1,663,075) | 1,150,036 | |||
2020 Interim Report 51
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT (continued)
Unaudited
Six months ended 30 June
Note20202019
RMB'000 RMB'000
(Loss)/profit is attributable to: | |||
- Owners of the Company | (1,670,829) | 1,143,560 | |
- Non-controlling interests | 7,754 | 6,476 | |
(1,663,075) | 1,150,036 | ||
(Losses)/earnings per share attributable to owners of the | |||
Company for the period (expressed in RMB per share) | |||
Basic (losses)/earnings per share | 9 | RMB (0.154) | RMB0.106 |
Diluted (losses)/earnings per share | 9 | RMB (0.154) | RMB0.106 |
The above condensed consolidated income statement should be read in conjunction with the accompanying notes.
Wu Haijun | Zhou Meiyun |
Chairman | Director, Vice General Manager and Chief Financial Officer |
52 Sinopec Shanghai Petrochemical Company Limited
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited | ||||
Six months ended 30 June | ||||
2020 | 2019 | |||
RMB'000 | RMB'000 | |||
(Loss)/profit for the period | (1,663,075) | 1,150,036 | ||
Other comprehensive loss | ||||
Items that may be reclassified to profit or loss | ||||
Share of other comprehensive loss of associates accounted for using the | ||||
equity method | (748) | (3,667) | ||
Losses on cash flow hedges | (11,344) | - | ||
Income tax relating to these items | 2,836 | - | ||
Other comprehensive loss for the period, net of tax | (9,256) | (3,667) | ||
Total comprehensive (loss)/income for the period | (1,672,331) | 1,146,369 | ||
Total comprehensive (loss)/income for the period is attributable to: | ||||
- Owners of the Company | (1,680,085) | 1,139,893 | ||
- Non-controlling interests | 7,754 | 6,476 | ||
Total comprehensive (loss)/income for the period | (1,672,331) | 1,146,369 | ||
The above condensed consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Wu Haijun | Zhou Meiyun |
Chairman | Director, Vice General Manager and Chief Financial Officer |
2020 Interim Report 53
INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
Unaudited | Audited | |||
Note | 30 June 2020 | 31 December 2019 | ||
RMB'000 | RMB'000 | |||
Assets | ||||
Non-current assets | ||||
Property, plant and equipment | 11 | 11,932,695 | 11,300,797 | |
Right-of-use assets | 435,618 | 343,860 | ||
Investment properties | 375,252 | 367,468 | ||
Construction in progress | 1,202,594 | 1,815,549 | ||
Investments accounted for using the equity method | 12 | 5,435,290 | 5,208,758 | |
Deferred tax assets | 817,445 | 150,832 | ||
Financial assets at fair value through other comprehensive income | 16 | 5,000 | 5,000 | |
Time deposits with banks | 15 | 5,014,915 | 3,511,234 | |
Other non-current assets | 477,716 | 481,414 | ||
25,696,525 | 23,184,912 | |||
Current assets | ||||
Inventories | 4,381,070 | 6,754,434 | ||
Trade receivables | 13 | 87,149 | 120,739 | |
Other receivables | 13 | 79,622 | 26,101 | |
Prepayments | 24,086 | 23,767 | ||
Amounts due from related parties | 22(c) | 1,830,579 | 1,565,993 | |
Cash and cash equivalents | 14 | 2,865,267 | 7,449,699 | |
Time deposits with banks | 15 | 2,007,369 | 1,508,839 | |
Financial assets at fair value through other comprehensive income | 16 | 1,451,072 | 1,540,921 | |
Financial assets at fair value through profit or loss | 17 | 3,727,444 | 3,318,407 | |
Derivative financial assets | 5 | 21,394 | 263 | |
16,475,052 | 22,309,163 | |||
Total assets | 42,171,577 | 45,494,075 | ||
Equity and liabilities | ||||
Equity attributable to owners of the Company | ||||
Share capital | 10,823,814 | 10,823,814 | ||
Reserves | 21 | 16,060,531 | 19,039,474 | |
26,884,345 | 29,863,288 | |||
Non-controlling interests | 138,314 | 130,560 | ||
Total equity | 27,022,659 | 29,993,848 | ||
54 Sinopec Shanghai Petrochemical Company Limited
INTERIM CONDENSED CONSOLIDATED BALANCE SHEET (continued)
Unaudited | Audited | |||
Note | 30 June 2020 | 31 December 2019 | ||
RMB'000 | RMB'000 | |||
Liabilities | ||||
Non-current liabilities | ||||
Lease liabilities | 6,813 | 10,593 | ||
Deferred tax liabilities | 36,704 | - | ||
Deferred income | 10,414 | 10,005 | ||
53,931 | 20,598 | |||
Current liabilities | ||||
Borrowings | 18 | 3,030,000 | 1,547,600 | |
Lease liabilities | 11,706 | 11,450 | ||
Derivative financial liabilities | 5 | 33,028 | 799 | |
Trade and other payables | 19 | 6,548,115 | 7,330,000 | |
Contract liabilities | 364,946 | 655,117 | ||
Amounts due to related parties | 19,22(c) | 5,083,409 | 5,708,394 | |
Income tax payable | 23,783 | 226,269 | ||
15,094,987 | 15,479,629 | |||
Total liabilities | 15,148,918 | 15,500,227 | ||
Total equity and liabilities | 42,171,577 | 45,494,075 | ||
The above condensed consolidated balance sheet should be read in conjunction with the accompanying notes.
Wu Haijun | Zhou Meiyun |
Chairman | Director, Vice General Manager and Chief Financial Officer |
2020 Interim Report 55
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited | ||||||||
Attributable to owners of the Company | ||||||||
Non- | ||||||||
Other | Retained | controlling | ||||||
Note | Share capital | reserves | earnings | Total | interests | Total equity | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |||
Balance at 1 January 2020 | 10,823,814 | 4,369,391 | 14,670,083 | 29,863,288 | 130,560 | 29,993,848 | ||
(Loss)/profit for the period | - | - | (1,670,829) | (1,670,829) | 7,754 | (1,663,075) | ||
Other comprehensive loss | 21 | - | (9,256) | - | (9,256) | - | (9,256) | |
Total comprehensive (loss)/ | ||||||||
income for the period | - | (9,256) | (1,670,829) | (1,680,085) | 7,754 | (1,672,331) | ||
Dividends proposed and | ||||||||
approved | 10 | - | - | (1,298,858) | (1,298,858) | - | (1,298,858) | |
Appropriation of safety | ||||||||
production fund | 21 | - | 44,238 | (44,238) | - | - | - | |
Balance at 30 June 2020 | 10,823,814 | 4,404,373 | 11,656,158 | 26,884,345 | 138,314 | 27,022,659 | ||
56 Sinopec Shanghai Petrochemical Company Limited
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY (continued)
Unaudited | ||||||||
Attributable to owners of the Company | ||||||||
Non- | ||||||||
Other | Retained | controlling | ||||||
Note | Share capital | reserves | earnings | Total | interests | Total equity | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |||
Balance at 1 January 2019 | 10,823,814 | 4,361,940 | 15,160,309 | 30,346,063 | 116,378 | 30,462,441 | ||
Profit for the period | - | - | 1,143,560 | 1,143,560 | 6,476 | 1,150,036 | ||
Other comprehensive loss | 21 | - | (3,667) | - | (3,667) | - | (3,667) | |
Total comprehensive (loss)/ | ||||||||
income for the period | - | (3,667) | 1,143,560 | 1,139,893 | 6,476 | 1,146,369 | ||
Dividends proposed and | ||||||||
approved | 10 | - | - | (2,705,953) | (2,705,953) | - | (2,705,953) | |
Appropriation of safety | ||||||||
production fund | 21 | - | 5,314 | (5,314) | - | - | - | |
Balance at 30 June 2019 | 10,823,814 | 4,363,587 | 13,592,602 | 28,780,003 | 122,854 | 28,902,857 | ||
The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Wu Haijun | Zhou Meiyun |
Chairman | Director, Vice General Manager and Chief Financial Officer |
2020 Interim Report 57
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited | |||||
Six months ended 30 June | |||||
Note | 2020 | 2019 | |||
RMB'000 | RMB'000 | ||||
Cash flows from operating activities | |||||
Cash (used in)/generated from operations | (2,684,204) | 702,670 | |||
Interest paid | (34,763) | (25,561) | |||
Income tax paid | (219,962) | (456,696) | |||
Net cash (outflow)/inflow from operating activities | (2,938,929) | 220,413 | |||
Cash flows from investing activities | |||||
Dividends received from joint ventures and associates | 51,432 | 18,152 | |||
Interest received from structured deposits | 73,170 | 57,306 | |||
Interest received | 184,124 | 218,568 | |||
Net proceeds from settlement of foreign exchange options and | |||||
forward exchange contracts | 1,031 | (15,350) | |||
Net proceeds from disposal of property, plant and equipment | 19,410 | 12,098 | |||
Cash received from time deposits within one year | 500,000 | 1,500,000 | |||
Cash received from structured deposits | 7,200,000 | 2,700,000 | |||
Cash payment of structured deposits | (7,600,000) | (500,000) | |||
Cash payment for time deposits within one year | (1,000,000) | (3,000,000) | |||
Cash payment for time deposits above one year | (1,500,000) | - | |||
Cash payment for acquisition of subsidiary | 20 | (340,369) | - | ||
Payments for sale of financial assets at fair value through other | |||||
comprehensive income | (13,185) | (14,219) | |||
Cash held by the subsidiary before acquisition | 54 | - | |||
Purchases of property, plant and equipment and other long-term | |||||
assets | (696,245) | (565,379) | |||
Net cash (outflow)/inflow from investing activities | (3,120,578) | 411,176 | |||
58 Sinopec Shanghai Petrochemical Company Limited
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(continued)
Unaudited | |||||
Six months ended 30 June | |||||
Note | 2020 | 2019 | |||
RMB'000 | RMB'000 | ||||
Cash flows from financing activities | |||||
Proceeds from borrowings | 3,438,100 | 2,405,100 | |||
Principal elements of lease payments | (9,498) | (4,078) | |||
Repayments of borrowings | (1,958,562) | (1,839,897) | |||
Dividends paid to the Company's shareholders | (888) | - | |||
Net cash inflow from financing activities | 1,469,152 | 561,125 | |||
Net (decrease)/increase in cash and cash equivalents | (4,590,355) | 1,192,714 | |||
Cash and cash equivalents at the beginning of the period | 7,449,699 | 8,741,893 | |||
Exchange gains on cash and cash equivalents | 5,923 | 6,444 | |||
Cash and cash equivalents at end of the period | 14 | 2,865,267 | 9,941,051 | ||
The above condensed consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Wu Haijun | Zhou Meiyun |
Chairman | Director, Vice General Manager and Chief Financial Officer |
2020 Interim Report 59
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
- General information
Sinopec Shanghai Petrochemical Company Limited ("the Company"), located in Jinshan District of Shanghai, is one of the largest refining-chemical integrated petrochemical companies in China. It is one of the subsidiaries of China Petroleum & Chemical Corporation ("Sinopec Corp."). The Company and its subsidiaries ("the Group") are principally engaged in processing the crude oil into synthetic fibres, resins and plastics, intermediate petrochemical and petroleum products.
This condensed consolidated interim financial information is presented in thousands of Renminbi Yuan (RMB), unless otherwise stated. This condensed consolidated interim financial information was approved for issuing on 26 August 2020.
This condensed consolidated interim financial information has been reviewed, not audited.
- Basis of preparation
This condensed consolidated interim financial information for the six months ended 30 June 2020 has been prepared in accordance with International Accounting Standard 34 ("IAS 34"), 'Interim financial reporting'. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with International Financial Reporting Standards ("IFRS").
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the adoption of new and amended standards as set out below.
- New and amended standards adopted by the Group
The Group has applied the following standards and amendments for the first time for their current reporting period commencing 1 January 2020:
- Amendments to IAS 1 'Presentation of financial statements' and IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors'
- Amendments to IFRS 3 'Business Combinations'
- Amendments to conceptual Framework of IASB, and
- Amendments to IFRS 9 'Prepayment Features with Negative Compensation', IAS 39 'Financial Instruments: Recognition and Measurement' and IFRS 7 'Financial Instruments: Disclosures'.
60 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Basis of preparation (continued)
- New standards and interpretations not yet adopted
The following new standards, amendments to standards and interpretations have been issued but are not effective for the financial year beginning on 1 January 2020 and have not been early adopted by the Group:
- IFRS 17 'Insurance Contracts', effective for the accounting period beginning on or after 1 January 2023, and
- Amendments to IFRS 10 'Sale or contribution of assets between an investor and its associate or joint venture'.
The new standards and interpretations that are not yet effective are not expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions.
- Estimates
The preparation of interim financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2019.
- Financial risk management
- Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, cash flow and fair value interest rate risk and commodity price risk), credit risk and liquidity risk.
The interim condensed consolidated financial information do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2019.
2020 Interim Report 61
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Financial risk management (continued)
- Market risk
-
Foreign exchange risk
The Group's major operational activities are carried out in Mainland China and a majority of the transactions are denominated in RMB. Nevertheless the Group is exposed to foreign exchange risk arising from the recognised assets and liabilities (mainly trade payables), and future transactions denominated in foreign currencies, primarily with respect to US dollar. The Group's finance department at its headquarter is responsible for monitoring the amount of assets and liabilities, and transactions denominated in foreign currencies to minimise the foreign exchange risk. For the six months ended 30 June 2020, the Group used foreign exchange option contracts to mitigate its exposure to foreign exchange risk respect to US dollar. As at 30 June 2020, the nominal amount of US dollar foreign exchange options were amounted to RMB35,641 thousands (31 December 2019: RMB40,754 thousands), which would be matured within six months.
As at 30 June 2020, if the foreign currencies had weakened/strengthened by 5% against RMB with all other variables held constant, the Group's net loss for the six months ended 30 June 2020 would have been RMB3,702 thousands decreased/increased (31 December 2019: RMB13,699 thousands increased/decreased in net profit) before considering the impact of forward and option contracts as a result of foreign exchange gains/losses which is mainly resulted from the translation of US dollar denominated trade receivables and payables. - Commodity price risk
The Group principally engages in processing crude oil into synthetic fibers, resins and plastics, intermediate petrochemicals and petroleum products. The selling price of petroleum products is periodically adjusted by government department based on the market price adjustment mechanism, and generally in connection with the crude oil price. The selling prices of synthetic fibers, resins and plastics and intermediate petrochemicals are market prices. For the six months ended 30 June 2020, the Group used swaps contracts to manage a portion of this risk as the fluctuation of crude oil price could have significant impact on the Group.
As at 30 June 2020, the Group had certain commodity contracts of crude oil designed as qualified cash flow hedges. As at 30 June 2020, the fair value of such derivative hedging financial instruments is derivative financial assets of RMB21,011 thousands (31 December 2019: Nil) and derivative financial liabilities of RMB32,353 thousands(31 December 2019: Nil).
-
Foreign exchange risk
62 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Financial risk management (continued)
- Market risk (continued)
-
Commodity price risk (continued)
As at 30 June 2020, it was estimated that a general increase/decrease of USD10 per barrel in basic price of derivative financial instruments, with all other variables held constant, would impact the fair value of derivative financial instruments, which would decrease/increase the Group's other reserves by approximately RMB47,787 thousands (31 December 2019: Nil). This sensitivity analysis has been determined assuming that the changes in prices had occurred at the balance sheet date and the changes was applied to the Group's derivative financial instruments at that date with exposure to commodity price risk.
-
Commodity price risk (continued)
- Credit risk
Credit risk is managed on group basis. It mainly arises from cash and cash equivalents, time deposits with banks, structured deposits, trade receivables, other receivables, bills receivable, etc.
The Group expects that there is no significant credit risk associated with cash at bank (including time deposits and structured deposits) and bills receivable since they are deposits and bank acceptance bills at state-owned banks and other medium or large size listed banks. Management does not expect that there will be any significant losses from non-performance by these counterparties.
In addition, the Group has policies to limit the credit exposure on trade receivables, other receivables and bills receivable. The Group assesses the credit quality of and sets credit limits on its customers by taking into account their financial position, the availability of guarantee from third parties, their credit history and other factors such as current market conditions. The credit history of the customers is regularly monitored by the Group. In respect of customers with a poor credit history, the Group will use written payment reminders, or shorten or cancel credit periods, to ensure the overall credit risk of the Group is limited to a controllable extent.
2020 Interim Report 63
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Financial risk management (continued)
-
Credit risk (continued)
The Group considers the probability of default upon initial recognition of a financial asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the Group compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forward-looking information. Especially the following indicators are incorporated: - internal credit rating;
- external credit rating (as far as available);
- actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the debtors' ability to meet its obligations;
- actual or expected significant changes in the operating results of the debtors;
- significant increases in credit risk on other financial instruments of the same debtors;
- significant changes in the value of the collateral supporting the obligation or in the quality of third- party guarantees or credit enhancements;
- significant changes in the expected performance and behaviour of the debtors, including changes in the payment status of debtors, etc.
-
Credit risk (continued)
Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 30 days past due in making a contractual payment.
It has other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews regularly the recoverable amount of each individual trade receivables to ensure that adequate impairment losses are made for irrecoverable amounts. The Group has no significant concentrations of credit risk, with exposure spread over a large number of counterparties and costumers.
For other receivables, management makes periodic collective assessment as well as individual assessment on the recoverability of other receivables based on historical settlement records and forward-looking information. The management believe that there is no material credit risk inherent in the Group's outstanding balance of other receivable.
64 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Financial risk management (continued)
- Liquidity risk
Cash flow forecast is performed by the operating entities of the Group and aggregated by Group finance. Group finance monitors rolling forecasts of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities from major financial institution so that the Group does not breach borrowing limits or covenants on any of its borrowing facilities to meet the short-term and long-term liquidity requirements.
The liquidity of the Group is primarily dependent on its ability to maintain adequate cash inflow from operations, the renewal of its short-term bank loans and its ability to obtain adequate external financing to support its working capital and meet its debt obligation when they become due. As at 30 June 2020, the Group had credit facilities with several PRC financial institutions which provided the Group to draw down or to guarantee the issuance of the bills of lading to RMB23,802,278 thousands, within which amounted to RMB18,303,816 thousands were unused. The maturity dates of the unused facility amounted to RMB6,100,000 thousands will be after 30 June 2021 as disclosed in Note 18. Management assessed that all the facilities could be renewed upon the expiration dates.
Surplus cash held by the operating entities over and above balance required for working capital management are transferred to the Group treasury. As at 30 June 2020, the Group held cash and cash equivalents of RMB2,865,267 thousands (31 December 2019: RMB7,449,699 thousands) (Note 14) and trade receivables (including trade receivables with related parties and those carried at fair value through other comprehensive income ("FVOCI") of RMB2,570,263 thousands (31 December 2019: RMB2,376,098 thousands), that are expected to readily generate cash inflows for managing liquidity risk.
The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
2020 Interim Report 65
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Financial risk management (continued)
- Liquidity risk (continued)
Contractual | ||||||
maturities of | Less than | Between | Between | Over | ||
financial liabilities | 1 year | 1 and 2 years | 2 and 5 years | 5 years | Total | |
30 June 2020 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Non-derivatives | ||||||
Borrowings | 3,076,438 | - | - | - | 3,076,438 | |
Lease liabilities | 11,911 | 5,738 | 1,984 | 353 | 19,986 | |
Bills payables | 850,800 | - | - | - | 850,800 | |
Trade payables | 1,709,215 | - | - | - | 1,709,215 | |
Other payables | 1,875,053 | - | - | - | 1,875,053 | |
Amounts due to | ||||||
related parties | 5,082,109 | - | - | - | 5,082,109 | |
12,605,526 | 5,738 | 1,984 | 353 | 12,613,601 | ||
Derivatives | ||||||
Derivative financial | ||||||
liabilities | 33,028 | - | - | - | 33,028 | |
Contractual | ||||||
maturities of | Less than | Between | Between | Over | ||
financial liabilities | 1 year | 1 and 2 years | 2 and 5 years | 5 years | Total | |
31 December 2019 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Non-derivatives | ||||||
Borrowings | 1,575,176 | - | - | - | 1,575,176 | |
Lease liabilities | 11,700 | 8,846 | 2,435 | 495 | 23,476 | |
Bills payables | 673,900 | - | - | - | 673,900 | |
Trade payables | 2,142,402 | - | - | - | 2,142,402 | |
Other payables | 747,133 | - | - | - | 747,133 | |
Amounts due to | ||||||
related parties | 5,702,728 | - | - | - | 5,702,728 | |
10,853,039 | 8,846 | 2,435 | 495 | 10,864,815 | ||
Derivatives | ||||||
Derivative financial | ||||||
liabilities | 799 | - | - | - | 799 | |
66 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Financial risk management (continued)
- Fair value estimation
The table below analyses the Group's financial instruments carried at fair value as at 30 June 2020 and 31 December 2019 by level of the inputs to valuation techniques used to measure fair value. Such inputs are categorised into three levels within a fair value hierarchy as follows:
- The fair value of financial instruments traded in active markets (such as publicly traded derivatives and equity securities) is based on quoted market prices at the end of the reporting period. The quoted marked price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.
- The fair value of financial instruments that are not traded in an active market (for example, over-the- counter derivatives) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
- If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities.
2020 Interim Report 67
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Financial risk management (continued)
- Fair value estimation (continued)
Recurring fair value | ||||||
measurements | Level 1 | Level 2 | Level 3 | Total | ||
As at 30 June 2020 | Note | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Financial assets | ||||||
Structured deposits | 17 | - | - | 3,727,444 | 3,727,444 | |
Derivative financial assets | 5 | - | 21,394 | - | 21,394 | |
Financial assets at fair value | ||||||
through other comprehensive | ||||||
income | ||||||
Trade and bill receivables | 16 | - | 1,451,072 | - | 1,451,072 | |
Equity investments | 16 | - | - | 5,000 | 5,000 | |
- | 1,472,466 | 3,732,444 | 5,204,910 | |||
Financial liabilities | ||||||
Derivative financial liabilities | 5 | - | 33,028 | - | 33,028 | |
Recurring fair value | ||||||
measurements | Level 1 | Level 2 | Level 3 | Total | ||
As at 31 December 2019 | Note | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Financial assets | ||||||
Structured deposits | 17 | - | - | 3,318,407 | 3,318,407 | |
Derivative financial assets | 5 | - | 263 | - | 263 | |
Financial assets at fair | ||||||
value through other | ||||||
comprehensive income | ||||||
Trade and bill receivables | 16 | - | 1,540,921 | - | 1,540,921 | |
Equity investments | 16 | - | - | 5,000 | 5,000 | |
- | 1,541,184 | 3,323,407 | 4,864,591 | |||
Financial liabilities | ||||||
Derivative financial liabilities | 5 | - | 799 | - | 799 | |
The Group uses discounted cash flow model with inputted interest rate, which were influenced by historical
fluctuation and the probability of market fluctuation, to evaluate the fair value of the structured deposits
classified as Level 3 financial assets.
68 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Financial risk management (continued)
- Fair value estimation (continued)
Fair value measurements using significant unobservable inputs (level 3)
The following table presents the changes in level 3 items for the six months ended 30 June 2020:
Equity | Structured | |||
investments | deposits | Total | ||
RMB'000 | RMB'000 | RMB'000 | ||
Closing balance 31 December 2019 | 5,000 | 3,318,407 | 3,323,407 | |
Acquisitions | - | 7,600,000 | 7,600,000 | |
Disposals | - | (7,200,000) | (7,200,000) | |
Fair value change | - | 9,037 | 9,037 | |
Closing balance 30 June 2020 | 5,000 | 3,727,444 | 3,732,444 | |
Financial assets and financial liabilities not measured at fair value mainly represent trade receivables, other receivables, amounts due from related parties excluded prepayments, trade payables, amounts due to related parties, other payables (except for the staff salaries and welfare payables and taxes payables) and borrowings. The carrying amounts of these financial assets and liabilities not measured at fair value are a reasonable approximation of their fair value.
2020 Interim Report 69
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Derivatives
- The Group has the following derivative financial instruments in the following line items in the balance sheet:
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Current assets | ||
Foreign exchange options | 383 | 263 |
Swaps contracts | 21,011 | - |
Total derivative financial assets | 21,394 | 263 |
Current liabilities | ||
Foreign exchange options | 675 | 799 |
Swaps contracts | 32,353 | - |
Total derivative financial liabilities | 33,028 | 799 |
- Classification of derivatives
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives do not meet the hedge accounting criteria, they are classified as 'held for trading' for accounting purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities to the extent they are expected to be settled within 12 months after the end of the reporting period.
The Group's accounting policy for its cash flow hedges is set out in Note 5(b).
70 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Derivatives (continued)
- The Group has the following derivative financial instruments in the following line items in the balance sheet: (continued)
-
Hedging reserves
The Group's hedging reserves disclosed in Note 21 relate to the following hedging instruments:
-
Hedging reserves
Total cash flow | ||
hedge reserve | ||
RMB'000 | ||
Opening balance 1 January 2020 | - | |
Add: Change in fair value of hedging instruments recognised in other | ||
comprehensive loss | (87,138) | |
Less: Reclassified to the cost of inventory - not included in other | ||
comprehensive loss | 75,794 | |
Less: Deferred tax | 2,836 | |
Closing balance 30 June 2020 | (8,508) | |
- Amounts recognised in profit or loss
In addition to the amounts disclosed in the reconciliation of hedging reserves above, the following amounts were recognised in profit or loss in relation to derivatives:
Six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Net gains/(losses) on foreign exchange options not | |||
qualifying as hedges included in Other gains/(losses) - | |||
net | 1,275 | (11,982) | |
2020 Interim Report 71
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Derivatives (continued)
- The Group has the following derivative financial instruments in the following line items in the balance sheet: (continued)
-
Amounts recognised in profit or loss (continued)
Hedge effectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments, to ensure that an economic relationship exists between the hedged item and hedging instrument.
The Group enters into commodity swaps contracts that have similar critical terms as the hedged item, such as reference rate, payment dates, transaction price, crude oil variety and crude oil quantity.
Hedge ineffectiveness for commodity swaps contracts may occur due to the changes in value of the hedged item. There was no recognised ineffectiveness during the six months ended 30 June 2020 in relation to the commodity swaps.
-
Amounts recognised in profit or loss (continued)
- Derivative financial instruments and hedge accounting
Derivative financial instruments are recognised initially at fair value. At each balance sheet date, the fair value is remeasured. The gain or loss on remeasurement to fair value is recognised immediately in profit or loss, except where the derivatives qualify for hedge accounting.
Hedge accounting is a method which recognises the offsetting effects on profit or loss (or other comprehensive income) of changes in the fair values of the hedging instrument and the hedged item in the same accounting period, to represent the effect of risk management activities. Hedged items are the items that expose the Group to risks of changes in future cash flows and that are designated as being hedged and that must be reliably measurable. The Group's hedged items include a forecast transaction that is settled with an undetermined future market price and exposes the Group to risk of variability in cash flows, etc.
A hedging instrument is a designated derivative whose changes in cash flows are expected to offset changes in cash flows of the hedged item.
72 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Derivatives (continued)
- Derivative financial instruments and hedge accounting (continued)
The hedging relationship meets all of the following hedge effectiveness requirements:
- There is an economic relationship between the hedged item and the hedging instrument, which shares a risk and that gives rise to opposite changes in fair value that tend to offset each other.
- The effect of credit risk does not dominate the value changes that result from that economic relationship.
- The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item. However, that designation does not reflect an imbalance between the weightings of the hedged item and the hedging instrument.
Cash flow hedges
Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with all, or a component of, a recognised asset or liability (such as all or some future interest payments on variable-rate debt) or a highly probable forecast transaction, and could affect profit or loss. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument.
As long as a cash flow hedge meets the qualifying criteria for hedge accounting, the separate component of equity associated with the hedged item (cash flow hedge reserve) is adjusted to the lower of the following (in absolute amounts):
- The cumulative gain or loss on the hedging instrument from inception of the hedge; and
- The cumulative change in fair value (present value) of the hedged item (i.e. the present value of the cumulative change in the hedged expected future cash flows) from inception of the hedge.
2020 Interim Report 73
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Derivatives (continued)
- Derivative financial instruments and hedge accounting (continued)
Cash flow hedges (continued)
The gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income.
The portion of the gain or loss on the hedging instrument that is determined to be an ineffective hedge is recognised in profit or loss.
If a hedged forecast transaction subsequently results in the recognition of a non-financial asset or non- financial liability, or a hedged forecast transaction for a non-financial asset or a non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, the entity removes that amount from the cash flow hedge reserve and include it directly in the initial cost or other carrying amount of the asset or the liability. This is not a reclassification adjustment and hence it does not affect other comprehensive income.
For cash flow hedges, other than those covered by the preceding policy statements, that amount is reclassified from the cash flow hedge reserve to profit or loss as a reclassification adjustment in the same period or periods during which the hedged expected future cash flows affect profit or loss.
If the amount that has been accumulated in the cash flow hedge reserve is a loss and the Group expects that all or a portion of that loss will not be recovered in one or more future periods, the Group immediately reclassifies the amount that is not expected to be recovered into profit or loss.
When the hedging relationship no longer meets the risk management objective on the basis of which it qualified for hedge accounting (ie the entity no longer pursues that risk management objective), or when a hedging instrument expires or is sold, terminated, exercised, or there is no longer an economic relationship between the hedged item and the hedging instrument or the effect of credit risk starts to dominate the value changes that result from that economic relationship or no longer meets the criteria for hedge accounting, the Group discontinues prospectively the hedge accounting treatments. If the hedged future cash flows are still expected to occur, that amount remains in the cash flow hedge reserve and is accounted for as cash flow hedges. If the hedged future cash flows are no longer expected to occur, that amount is immediately reclassified from the cash flow hedge reserve to profit or loss as a reclassification adjustment. A hedged future cash flow that is no longer highly probable to occur may still be expected to occur, if the hedged future cash flows are still expected to occur, that amount remains in the cash flow hedge reserve and is accounted for as cash flow hedges.
74 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Segment information
The basis of segmentation and the basis of measurement of segment profits or losses, and assets and liabilities are consistent with those of the annual financial statements for the year ended 31 December 2019.
Trading of | ||||||||
Synthetic | Resins and | Intermediate | Petroleum | petrochemical | ||||
Six months ended | fibres | plastics | petrochemicals | products | products | Others | Total | |
30 June 2020 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Total segment revenue | 720,697 | 4,479,214 | 9,192,552 | 24,275,022 | 5,889,864 | 660,449 | 45,217,798 | |
Inter segment revenue | - | (47,073) | (5,080,015) | (3,940,247) | (192,470) | (330,435) | (9,590,240) | |
Revenue from external | ||||||||
customers | 720,697 | 4,432,141 | 4,112,537 | 20,334,775 | 5,697,394 | 330,014 | 35,627,558 | |
Timing of revenue | ||||||||
recognition | ||||||||
At a point in time | 720,697 | 4,432,141 | 4,112,537 | 20,334,775 | 5,696,343 | 330,014 | 35,626,507 | |
Over time | - | - | - | - | 1,051 | - | 1,051 | |
720,697 | 4,432,141 | 4,112,537 | 20,334,775 | 5,697,394 | 330,014 | 35,627,558 | ||
Total gross (loss)/profit | (323,920) | (226,806) | (383,396) | (1,720,744) | 48,550 | (17,327) | (2,623,643) | |
2020 Interim Report 75
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Segment information (continued)
Trading of | ||||||||
Synthetic | Resins and | Intermediate | Petroleum | petrochemical | ||||
Six months ended | fibres | plastics | petrochemicals | products | products | Others | Total | |
30 June 2019 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |
Total segment revenue | 1,219,618 | 5,372,785 | 12,138,660 | 32,291,902 | 13,434,925 | 755,551 | 65,213,441 | |
Inter segment revenue | - | (239,302) | (6,877,155) | (5,668,424) | (120,706) | (352,628) | (13,258,215) | |
Revenue from external | ||||||||
customers | 1,219,618 | 5,133,483 | 5,261,505 | 26,623,478 | 13,314,219 | 402,923 | 51,955,226 | |
Timing of revenue | ||||||||
recognition | ||||||||
At a point in time | 1,219,618 | 5,133,483 | 5,261,505 | 26,623,478 | 13,308,687 | 402,923 | 51,949,694 | |
Over time | - | - | - | - | 5,532 | - | 5,532 | |
1,219,618 | 5,133,483 | 5,261,505 | 26,623,478 | 13,314,219 | 402,923 | 51,955,226 | ||
Total gross (loss)/profit | (201,185) | 423,781 | 426,682 | 134,331 | 73,757 | 42,356 | 899,722 | |
Six months ended 30 June | |||
2020 | 2019 | ||
RMB'000 | RMB'000 | ||
Segment result - (loss)/profit from operations | |||
Synthetic fibres | (337,374) | (222,079) | |
Resins and plastics | (313,186) | 332,716 | |
Intermediate petrochemicals | (460,168) | 336,548 | |
Petroleum products | (1,745,070) | 111,120 | |
Trading of petrochemical products | 20,983 | 40,762 | |
Others | 95,706 | 55,521 | |
(Loss)/profit from operations | (2,739,109) | 654,588 | |
Finance income - net | 151,022 | 213,744 | |
Share of net profit of associates and joint ventures accounted for using | |||
the equity method | 278,712 | 497,230 | |
(Loss)/profit before income tax | (2,309,375) | 1,365,562 | |
76 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
6 | Segment information (continued) | ||
As at | As at | ||
30 June 2020 | 31 December 2019 | ||
Total assets | Total assets | ||
RMB'000 | RMB'000 | ||
Allocated assets | |||
Synthetic fibres | 963,616 | 997,650 | |
Resins and plastics | 1,715,148 | 1,802,681 | |
Intermediate petrochemicals | 3,386,704 | 3,721,337 | |
Petroleum products | 12,494,266 | 14,014,403 | |
Trading of petrochemical products | 1,444,611 | 1,492,405 | |
Others | 2,256,266 | 2,294,668 | |
Allocated assets | 22,260,611 | 24,323,144 | |
Unallocated assets | |||
Investments accounted for using the equity method | 5,435,290 | 5,208,758 | |
Cash and cash equivalents | 2,865,267 | 7,449,699 | |
Time deposits with banks | 7,022,284 | 5,020,073 | |
Deferred tax assets | 817,445 | 150,832 | |
Financial assets at fair value through profit or loss | 3,727,444 | 3,318,407 | |
Derivative financial assets | 21,394 | 263 | |
Others | 21,842 | 22,899 | |
Unallocated assets | 19,910,966 | 21,170,931 | |
Total assets | 42,171,577 | 45,494,075 | |
2020 Interim Report 77
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- Segment information (continued)
As at | As at | |
30 June 2020 | 31 December 2019 | |
Total liabilities | Total liabilities | |
RMB'000 | RMB'000 | |
Allocated liabilities | ||
Synthetic fibres | 253,719 | 340,034 |
Resins and plastics | 1,421,319 | 1,372,574 |
Intermediate petrochemicals | 1,534,622 | 1,736,967 |
Petroleum products | 7,379,088 | 8,482,596 |
Trading of petrochemical products | 1,376,911 | 1,946,530 |
Others | 83,527 | 73,127 |
Allocated liabilities | 12,049,186 | 13,951,828 |
Unallocated liabilities | ||
Borrowings | 3,030,000 | 1,547,600 |
Deferred tax liabilities | 36,704 | - |
Derivative financial liabilities | 33,028 | 799 |
Unallocated liabilities | 3,099,732 | 1,548,399 |
Total liabilities | 15,148,918 | 15,500,227 |
78 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
7 | (Loss)/profit before income tax | |||||
(a) | Finance income - net | |||||
Six months ended 30 June | ||||||
2020 | 2019 | |||||
RMB'000 | RMB'000 | |||||
Interest income | 176,082 | 209,960 | ||||
Net foreign exchange gains | 3,060 | 24,432 | ||||
Finance income | 179,142 | 234,392 | ||||
Interest on bank and other borrowings | (35,274) | (21,905) | ||||
Less: amounts capitalized on qualifying assets | 7,154 | 1,257 | ||||
Finance expenses | (28,120) | (20,648) | ||||
Finance income - net | 151,022 | 213,744 | ||||
(b) | Other gains/(losses) - net | |||||
Six months ended 30 June | ||||||
2020 | 2019 | |||||
RMB'000 | RMB'000 | |||||
Gains from structured deposits | 82,207 | 41,497 | ||||
Net gains/(losses) on disposal of property, plant and equipment | 2,186 | (18,724) | ||||
Net gains/(losses) on foreign exchange option contracts and | ||||||
forward exchange contracts | 1,275 | (11,982) | ||||
Net foreign exchange losses | (1,366) | (9,874) | ||||
Net losses on selling of FVOCI | (13,185) | (14,219) | ||||
71,117 | (13,302) | |||||
2020 Interim Report 79
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
7 | (Loss)/profit before income tax (continued) | |||||
(c) Operating items | ||||||
Six months ended 30 June | ||||||
2020 | 2019 | |||||
RMB'000 | RMB'000 | |||||
Depreciation | (780,290) | (810,179) | ||||
Research and development costs | (47,528) | (21,379) | ||||
(Provision)/reversal of inventory write-down | (3,836) | 26,743 | ||||
Net gains/(losses) on disposal of property, plant and equipment | 2,186 | (18,724) | ||||
Impairment of construction in progress | - | (486) | ||||
8 | Income tax expense | |||||
Six months ended 30 June | ||||||
2020 | 2019 | |||||
RMB'000 | RMB'000 | |||||
Provision for PRC income tax for the period | (17,477) | (217,114) | ||||
Deferred taxation | 663,777 | 1,588 | ||||
646,300 | (215,526) | |||||
The provision for PRC income tax is calculated at the rate of 25% (six months ended 30 June 2019: 25%) on the estimated taxable income of the six months ended 30 June 2020 determined in accordance with relevant income tax rules and regulations.
80 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
- (Losses)/earnings per share
- Basic
The calculation of basic (losses)/earnings per share is based on the loss attributable to equity shareholders of the Company for the six months ended 30 June 2020 of RMB1,670,829 thousands (six months ended 30 June 2019: profit of RMB1,143,560 thousands) and 10,823,813,500 shares (six months ended 30 June 2019: 10,823,813,500 shares) in issue during the interim period.
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
(Loss)/profit attributable to owners of the Company | (1,670,829) | 1,143,560 |
Weighted average number of ordinary shares in issue | ||
(thousands of shares) | 10,823,814 | 10,823,814 |
Basic (losses)/earnings per share (RMB per share) | RMB (0.154) | RMB0.106 |
- Diluted
There were no dilutive potential ordinary shares, therefore diluted earnings per share is the same as basic earnings per share.
10 Dividends
Pursuant to a resolution passed at the Annual General Meeting held on 18 June 2020, a total dividend of RMB1,298,858 thousands was declared for the year ended 31 December 2019 and subsequently paid in July 2020. The Board of Directors did not propose any dividend in respect of the six months ended 30 June 2020.
Pursuant to a resolution passed at the Annual General Meeting held on 20 June 2019, a total dividend of RMB2,705,953 thousands was declared for the year ended 31 December 2018 and subsequently paid in July 2019. The Board of Directors did not propose any dividend in respect of the six months ended 30 June 2019.
2020 Interim Report 81
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
11 Property, plant and equipment
Vehicles | |||||
Plant and | and other | ||||
Buildings | machinery | equipments | Total | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
As at 1 January 2019 | |||||
Cost | 3,229,642 | 41,007,229 | 1,785,889 | 46,022,760 | |
Accumulated depreciation | (2,142,540) | (29,905,377) | (1,451,131) | (33,499,048) | |
Impairment loss | (53,872) | (815,329) | (8,121) | (877,322) | |
Net book amount | 1,033,230 | 10,286,523 | 326,637 | 11,646,390 | |
Six months ended 30 June 2019 | |||||
Opening net book amount | 1,033,230 | 10,286,523 | 326,637 | 11,646,390 | |
Additions | 732 | 52,077 | 173 | 52,982 | |
Disposals | (3,119) | (27,017) | (686) | (30,822) | |
Reclassification | - | 1,117 | (1,117) | - | |
Transferred from construction in | |||||
progress | 12,217 | 23,511 | 6,151 | 41,879 | |
Transferred to investment properties | (11,869) | - | - | (11,869) | |
Transferred from investment | |||||
properties | 6,924 | - | - | 6,924 | |
Charge for the period | (44,046) | (679,275) | (32,887) | (756,208) | |
Closing net book amount | 994,069 | 9,656,936 | 298,271 | 10,949,276 | |
As at 30 June 2019 | |||||
Cost | 3,231,914 | 40,959,995 | 1,771,817 | 45,963,726 | |
Accumulated depreciation | (2,183,973) | (30,487,730) | (1,465,425) | (34,137,128) | |
Impairment loss | (53,872) | (815,329) | (8,121) | (877,322) | |
Net book amount | 994,069 | 9,656,936 | 298,271 | 10,949,276 | |
82 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
11 Property, plant and equipment (continued)
Vehicles | |||||
Plant and | and other | ||||
Buildings | machinery | equipments | Total | ||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | ||
As at 1 January 2020 | |||||
Cost | 3,336,375 | 41,455,159 | 1,871,684 | 46,663,218 | |
Accumulated depreciation | (2,310,970) | (30,793,083) | (1,432,530) | (34,536,583) | |
Impairment loss | (50,785) | (766,932) | (8,121) | (825,838) | |
Net book amount | 974,620 | 9,895,144 | 431,033 | 11,300,797 | |
Six months ended 30 June 2020 | |||||
Opening net book amount | 974,620 | 9,895,144 | 431,033 | 11,300,797 | |
Additions | 442 | 77,318 | 25,807 | 103,567 | |
Disposals | (120) | (15,984) | (899) | (17,003) | |
Reclassification | - | (7) | 7 | - | |
Acquisition of subsidiary (Note 20) | 161,499 | 85,895 | 28,459 | 275,853 | |
Transferred from construction in | |||||
progress | 8,190 | 997,606 | 34,822 | 1,040,618 | |
Transferred to investment properties | (15,302) | - | - | (15,302) | |
Charge for the period | (46,222) | (665,045) | (44,568) | (755,835) | |
Closing net book amount | 1,083,107 | 10,374,927 | 474,661 | 11,932,695 | |
As at 30 June 2020 | |||||
Cost | 3,477,816 | 42,433,448 | 1,934,788 | 47,846,052 | |
Accumulated depreciation | (2,343,924) | (31,292,922) | (1,452,006) | (35,088,852) | |
Impairment loss | (50,785) | (765,599) | (8,121) | (824,505) | |
Net book amount | 1,083,107 | 10,374,927 | 474,661 | 11,932,695 | |
For the six months ended 30 June 2020, the amount of depreciation expense charged to cost of sales and selling and administrative expense were RMB751,282 thousands and RMB4,553 thousands, respectively (six months ended 30 June 2019: RMB751,702 thousands and RMB4,506 thousands, respectively).
2020 Interim Report 83
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
12 Investments accounted for using the equity method
Six months ended 30 June | ||||||
2020 | 2019 | |||||
RMB'000 | RMB'000 | |||||
Beginning of the period | 5,208,758 | 4,527,133 | ||||
Share of profit | 278,712 | 497,230 | ||||
Other comprehensive loss | (748) | (3,667) | ||||
Cash dividends distribution | (51,432) | (18,152) | ||||
End of the period | 5,435,290 | 5,002,544 | ||||
13 Trade and other receivables | ||||||
As at | As at | |||||
30 June 2020 | 31 December 2019 | |||||
RMB'000 | RMB'000 | |||||
Trade receivables | 87,149 | 120,739 | ||||
Less: impairment provision | - | - | ||||
87,149 | 120,739 | |||||
Amounts due from related parties excluded prepayments | 1,764,146 | 1,521,187 | ||||
1,851,295 | 1,641,926 | |||||
Other receivables | 79,622 | 26,101 | ||||
1,930,917 | 1,668,027 | |||||
The interest receivable amounted of RMB674 thousands was recorded in the balance of other receivables (31 December 2019: RMB10,927 thousands).
Amounts due from related parties mainly represent trade-related balances, unsecured in nature and bear no interest.
84 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
13 Trade and other receivables (continued)
The aging analysis based on invoice date of trade receivables and amounts due from related parties excluded prepayments (net of allowance for doubtful debts) is as follows:
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Within one year | 1,851,295 | 1,641,926 |
Movements of the Group's impairment provision for trade and other receivables are as follows:
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
As at 1 January | 139 | 198 |
Provision for receivables impairment | - | 2 |
As at 30 June | 139 | 200 |
As at 30 June 2020 and 31 December 2019, no trade receivables was pledged as collateral.
Sale to third parties are generally on cash basis or on letter of credit. Subject to negotiation, credit is generally only available for major customers with well-established trading records.
14 Cash and cash equivalents
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Cash deposits with a related party (Note 22(c)) | 39,093 | 67,015 |
Cash at bank and in hand | 2,826,174 | 7,382,684 |
2,865,267 | 7,449,699 | |
2020 Interim Report 85
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
15 Time deposits with banks
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Time deposits with banks within one year | 2,007,369 | 1,508,839 |
Time deposits with banks above one year | 5,014,915 | 3,511,234 |
7,022,284 | 5,020,073 | |
As at 30 June 2020, interest rates of time deposits with banks within one year ranged from 3.60% to 4.10% per annum (31 December 2019: 3.95% to 4.10% per annum), which were presented as current assets. Time deposits with banks above one year were time deposits of three years with the interest rates from 3.85% to 4.18% per annum, which were presented as non-current assets in the balance sheet (31 December 2019: 4.13% to 4.18% per annum).
16 Financial assets at fair value through other comprehensive income
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Trade and bill receivables (i) | 1,451,072 | 1,540,921 |
Equity investments | 5,000 | 5,000 |
1,456,072 | 1,545,921 | |
- As at 30 June 2020 and 31 December 2019, certain trade receivables and bills receivable were classified as financial assets at FVOCI, as the Group's business model is achieved both by collecting contractual cash flows and selling of these assets.
86 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
17 Financial assets at fair value through profit or loss
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Structured deposits | 3,727,444 | 3,318,407 |
As at 30 June 2020 and 31 December 2019, financial assets at fair value through profit or loss are mainly structured deposits with banks, which are presented as current assets since they are expected to be collected within 6 months from the end of the reporting period.
18 Borrowings
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Credit loan due within one year | ||
- Short term bank loans | 3,030,000 | 1,547,600 |
The weighted average interest rate for the Group's borrowings was 2.88% as at 30 June 2020 (31 December 2019: 3.35%).
As at 30 June 2020 and 31 December 2019, no borrowings were secured by property, plant and equipment.
The Group has the following undrawn facilities: | ||
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Expiring within one year | 12,203,816 | 15,101,233 |
Expiring beyond one year | 6,100,000 | 2,500,000 |
18,303,816 | 17,601,233 | |
These facilities have been arranged to finance the working capitals as well as ongoing investments on long-term assets.
The Company does not have any exposure to collateralised debt obligations. The Company has sufficient headroom to enable it to conform to covenants on its existing borrowings. The Company has sufficient undrawn financing facilities to service its operating activities and ongoing investments.
2020 Interim Report 87
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
19 Trade and other payables
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Trade payables | 1,709,215 | 2,142,402 |
Bills payable | 850,800 | 673,900 |
Amounts due to related parties (Note 22(c)) | 5,083,409 | 5,708,394 |
7,643,424 | 8,524,696 | |
Staff salaries and welfares payable | 528,567 | 189,547 |
Taxes payable (excludes income tax payable) | 1,584,480 | 3,577,018 |
Interest payable | 2,197 | 1,686 |
Dividends payable | 671,914 | 29,144 |
Construction payable | 116,206 | 277,184 |
Other liabilities | 1,084,736 | 439,119 |
3,988,100 | 4,513,698 | |
11,631,524 | 13,038,394 | |
As at 30 June 2020 and 31 December 2019, all trade and other payables of the Group were non-interest bearing, and their fair value, approximated their carrying amounts due to their short maturities.
As at 30 June 2020, the amounts due to related parties included the dividend payable due to Sinopec Corp. of RMB655,200 thousands (31 December 2019: Nil).
As at 30 June 2020 and 31 December 2019, the ageing analysis of the trade payables (including amounts due to related parties of trading in nature) and bills payable based on invoice date were as follows:
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Within one year | 7,617,002 | 8,509,327 |
Between one and two years | 25,094 | 11,209 |
Over two years | 1,328 | 4,160 |
7,643,424 | 8,524,696 | |
88 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
20 Business combination
In June 2020, one of the Company's subsidiary, Shanghai Petrochemical Investment Development Company Limited ("Toufa") acquired 100% share of Zhejiang Zhonghang Oil Petrochemical Storage and Transportation Co., Ltd., renamed as Zhejiang Jinlian Petrochemical Storage and Transportation Co., Ltd., with the total purchase consideration of RMB340,369 thousands.
The assets and liabilities recognised as a result of the acquisition as at 30 June 2020 are as follows:
Fair value | ||
RMB'000 | ||
Cash and cash equivalents | 54 | |
Property, plant and equipment (Note 11) | 275,853 | |
Trade and other receivables | 5 | |
Right-of-use assets | 102,102 | |
Trade and other payables | (868) | |
Deferred tax liabilities | (36,704) | |
Net identifiable assets acquired | 340,442 | |
Add: goodwill | (73) | |
Net assets acquired | 340,369 | |
2020 Interim Report 89
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
21 | Reserves | ||||||||||
Safety | |||||||||||
Legal | Capital | Surplus | Other | Share | production | Retained | |||||
surplus | surplus | reserve | reserve | Hedging | premium | fund | earnings | Total | |||
RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | RMB'000 | |||
Balance at 1 January 2019 | 4,072,476 | 13,739 | 101,355 | 10,389 | - | 106,846 | 57,135 | 15,160,309 | 19,522,249 | ||
Net profit attributable to | |||||||||||
shareholders of the Company | - | - | - | - | - | - | - | 1,143,560 | 1,143,560 | ||
Dividends proposed and | |||||||||||
approved | - | - | - | - | - | - | - | (2,705,953) | (2,705,953) | ||
Appropriation of safety production | |||||||||||
fund | - | - | - | - | - | - | 5,314 | (5,314) | - | ||
Share of other comprehensive | |||||||||||
loss of investments accounted | |||||||||||
for using the equity method | - | - | - | (3,667) | - | - | - | - | (3,667) | ||
Balance at 30 June 2019 | 4,072,476 | 13,739 | 101,355 | 6,722 | - | 106,846 | 62,449 | 13,592,602 | 17,956,189 | ||
Balance at 1 January 2020 | 4,072,476 | 13,739 | 101,355 | 17,838 | - | 106,846 | 57,137 | 14,670,083 | 19,039,474 | ||
Net loss attributable to | |||||||||||
shareholders of the Company | - | - | - | - | - | - | - | (1,670,829) | (1,670,829) | ||
Dividends proposed and | |||||||||||
approved | - | - | - | - | - | - | - | (1,298,858) | (1,298,858) | ||
Appropriation of safety production | |||||||||||
fund | - | - | - | - | - | - | 44,238 | (44,238) | - | ||
Change in fair value of hedging | |||||||||||
instruments | - | - | - | - | (87,138) | - | - | - | (87,138) | ||
Reclassified to cost of inventory | - | - | - | - | 75,794 | - | - | - | 75,794 | ||
Deferred income tax | - | - | - | - | 2,836 | - | - | - | 2,836 | ||
Share of other comprehensive | |||||||||||
loss of investments accounted | |||||||||||
for using the equity method | - | - | - | (748) | - | - | - | - | (748) | ||
Balance at 30 June 2020 | 4,072,476 | 13,739 | 101,355 | 17,090 | (8,508) | 106,846 | 101,375 | 11,656,158 | 16,060,531 | ||
90 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
22 Related-party transactions
The following is a list of the Group's major related parties: | |
Names of related parties | Relationship with the Company |
China Petrochemical Corporation ("Sinopec Group") | Ultimate parent company |
Sinopec Corp. | Immediate parent company |
Sinopec Chemical Commercial Holding Company Limited | Subsidiary of the immediate parent |
company | |
China International United Petroleum and Chemical Company Limited | Subsidiary of the immediate parent |
company | |
China Petrochemical International Company Limited | Subsidiary of the immediate parent |
company | |
Sinopec Chemical Commercial Company Limited | Subsidiary of the immediate parent |
company | |
Sinopec Refinery Product Sales Company Limited | Subsidiary of the immediate parent |
company | |
Sinopec Petroleum Commercial Reserve Company Limited | Subsidiary of the ultimate parent |
company | |
Sinopec Finance Company Limited ("Sinopec Finance") | Subsidiary of the ultimate parent |
company | |
Shanghai Secco Petrochemical Co., Ltd. ("Shanghai Secco") | Associate of the Group |
Shanghai Nanguang Petrochemical Co., Ltd. | Associate of the Group |
BOC-SPC Gases Co., Ltd. | Joint venture of the Group |
The following is a summary of significant balances and transactions between the Group and its related parties except for the dividends payable as disclosed in Note 10 and Note 19.
Most of the transactions undertaken by the Group during the six months ended 30 June 2020 have been affected on such terms as determined by Sinopec Corp. and relevant PRC authorities.
Sinopec Corp. negotiates and agrees the terms of crude oil supply with suppliers on a group basis, which is then allocated among its subsidiaries, including the Group, on a discretionary basis. Sinopec Corp. also owns a widespread petroleum products sales network and possesses a fairly high market share in domestic petroleum products market, which is subject to extensive regulation by the PRC government.
The Group has entered into a mutual product supply and sales services framework agreement with Sinopec Corp. Pursuant to the agreement, Sinopec Corp. provides the Company with crude oil, other petrochemical raw materials and agent services. On the other hand, the Group provides Sinopec Corp. with petroleum products, petrochemical products and property leasing services.
2020 Interim Report 91
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
22 Related-party transactions (continued)
The pricing policy for these services and products provided under the agreement is as follows:
- if there are applicable State (central and local government) tariffs, the pricing shall follow the State tariffs;
- if there are no State tariffs, but there are applicable State's guidance prices, the pricing shall follow the State's guidance prices; or
- if there are no State tariffs or State's guidance prices, the pricing shall be determined in accordance with the prevailing market prices (including any bidding prices).
- Transactions between the Group and Sinopec Corp, its subsidiaries and joint ventures during the six months ended 30 June 2020 and the six months ended 30 June 2019 were as follows:
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Sales of petroleum products | 18,977,693 | 24,165,991 |
Sales other than petroleum products | 3,288,659 | 4,858,076 |
Purchases of crude oil | 14,144,865 | 21,644,763 |
Purchases other than crude oil | 4,402,230 | 4,168,885 |
Sales commissions | 51,395 | 64,456 |
Rental income | 13,852 | 26,051 |
92 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
22 Related-party transactions (continued)
- Other transactions between the Group and Sinopec Group and its subsidiaries, associates and joint ventures of the Group during the six months ended 30 June 2020 and the six months ended 30 June 2019 were as follows:
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Sales of goods and service fee income | ||
- Sinopec Group and its subsidiaries | 1,916 | 3,759 |
- Associates and joint ventures of the Group | 990,820 | 1,566,798 |
992,736 | 1,570,557 | |
Purchases | ||
- Sinopec Group and its subsidiaries | 1,034,532 | 21,832 |
- Associates and joint ventures of the Group | 1,861,840 | 2,326,159 |
2,896,372 | 2,347,991 | |
Insurance premium expenses | ||
- Sinopec Group and its subsidiaries | 55,770 | 55,210 |
Addition to right-of-use assets | ||
- Sinopec Group and its subsidiaries | 1,375 | 36,327 |
Depreciation of right-of-use assets | ||
- Sinopec Group and its subsidiaries | 4,297 | 35,989 |
- Joint ventures of the Group | 30 | - |
4,327 | 35,989 | |
Interest expense of lease liabilities | ||
- Sinopec Group and its subsidiaries | 355 | 1,261 |
- Joint ventures of the Group | 15 | - |
370 | 1,261 | |
Interest income | ||
- Sinopec Finance | 921 | 507 |
Construction and installation cost | ||
- Sinopec Group and its subsidiaries | 67,257 | 25,257 |
Rental income | ||
- Associates and joint ventures of the Group | 8,989 | - |
The directors of the Company are of the opinion that the transactions with Sinopec Corp., its subsidiaries
and joint ventures, Sinopec Group and its subsidiaries, associates and joint ventures of the Group as
disclosed in Note 22(a) and 22(b) were conducted in the ordinary course of business, on normal commercial
terms and in accordance with the agreements governing such transactions.
2020 Interim Report 93
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
22 Related-party transactions (continued)
- The relevant amounts due from/to Sinopec Corp., its subsidiaries and joint ventures, Sinopec Group and its subsidiaries, associates and joint ventures of the Group, arising from purchases, sales and other transactions as disclosed in Note 22(a) and 22(b), are summarised as follows:
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Amounts due from related parties | ||
- Sinopec Corp., its subsidiaries and joint ventures | 1,778,014 | 1,505,836 |
- Associates and joint ventures of the Group | 52,565 | 60,157 |
1,830,579 | 1,565,993 | |
Amounts due to related parties | ||
- Sinopec Corp., its subsidiaries and joint ventures | 3,697,851 | 4,756,382 |
- Sinopec Group and its subsidiaries | 1,236,301 | 202,553 |
- Associates and joint ventures of the Group | 149,257 | 749,459 |
5,083,409 | 5,708,394 | |
Lease liabilities | ||
- Sinopec Group and its subsidiaries | 12,254 | 15,571 |
- Joint ventures of the Group | 560 | 698 |
12,814 | 16,269 | |
Cash deposits, maturing within three months | ||
- Sinopec Finance (i) | 39,093 | 67,015 |
- As at 30 June 2020 and 31 December 2019, cash deposits at Sinopec Finance were charged at an interest rate of 0.35% per annum.
Except for cash deposits at Sinopec Finance, the balances with related parties as above are unsecured,
interest-free and repayable on demand.
94 Sinopec Shanghai Petrochemical Company Limited
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
22 Related-party transactions (continued)
- Key management personnel compensation, post-employment benefit plans and share options
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including directors and supervisors of the Group. The key personnel compensations are as follows:
Six months ended 30 June | ||
2020 | 2019 | |
RMB'000 | RMB'000 | |
Short-term employee benefits | 6,419 | 6,007 |
Post-employment benefits | 190 | 82 |
6,609 | 6,089 | |
- Commitments with related parties
- Construction and installation cost
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Sinopec Group and its subsidiaries | 241,617 | 156,309 |
Except for the above, the Group had no other material commitments with related parties as at 30 June 2020 and 31 December 2019, which are contracted, but not included in the interim financial report.
2020 Interim Report 95
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (continued)
22 Related-party transactions (continued)
- Investment commitments with related parties
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Capital contribution to Shanghai Secco (i) | 111,263 | 111,263 |
Capital contribution to Shanghai Shidian Energy Company | ||
Limited ("Shidian Energy") (ii) | 80,000 | 80,000 |
191,263 | 191,263 | |
- Pursuant to the resolution of the 18th meeting of the 7th term of Board of Directors on 5 December 2013, the Group was approved to make capital contribution of USD30,017 thousands (RMB182,804 thousands equivalent) to Shanghai Secco, an associate of the Group. As at 30 June 2020, the Company has contributed RMB71,541 thousands to Shanghai Secco. According to the approval by Shanghai Municipal Commission of Commerce as issued on 19 October 2015, the rest of the capital contribution to Shanghai Secco should be within 50 years starting from its registration date.
-
Pursuant to the articles of association of Shidian Energy in August 2019, Toufa agreed to make capital contribution of RMB400,000 thousands to acquire 40% share of Shidian Energy. As at 30 June 2020, Toufa has contributed RMB320,000 thousands to Shidian Energy, and the rest of the capital contribution to Shidian Energy should be paid before January 2022 in accordance with the agreement.
Except for the above disclosed in Note 22(e) and 22(f), the Group had no other material commitments with related parties as at 30 June 2020, which are contracted, but not included in the financial statements.
23 Commitments
(a) Capital commitments
As at | As at | |
30 June 2020 | 31 December 2019 | |
RMB'000 | RMB'000 | |
Property, plant and equipment | ||
Contracted but not provided for | 237,900 | 247,220 |
96 Sinopec Shanghai Petrochemical Company Limited
- Interim Financial Statements Prepared under China Accounting
Standards for Business Enterprises (unaudited)
CONSOLIDATED AND COMPANY BALANCE SHEETS
AS AT 30 JUNE 2020 | |||||
(All amounts in thousands of Renminbi Yuan unless otherwise stated) | |||||
30 June | 31 December | 30 June | 31 December | ||
2020 | 2019 | 2020 | 2019 | ||
(unaudited) | (unaudited) | ||||
Assets | Note | Consolidated | Consolidated | Company | Company |
Current Assets | |||||
Cash at bank and on hand | 4(1) | 3,869,936 | 8,958,538 | 2,706,273 | 7,263,279 |
Derivative financial instruments | 4(2) | 21,394 | 263 | 21,011 | - |
Financial assets at fair value through profit | |||||
or loss | 4(3),12(1) | 3,727,444 | 3,318,407 | 3,727,444 | 3,318,407 |
Accounts receivable | 4(4),12(2) | 1,842,932 | 1,639,916 | 1,512,041 | 1,310,449 |
Financial assets at fair value through other | |||||
comprehensive income | 4(5) | 1,451,072 | 1,540,921 | 555,915 | 669,889 |
Advances to suppliers | 4(6) | 74,351 | 56,602 | 70,112 | 47,547 |
Other receivables | 4(7),12(3) | 87,985 | 28,111 | 14,810 | 14,637 |
Inventories | 4(8) | 4,381,070 | 6,754,434 | 4,145,169 | 6,368,389 |
Other current asset | 4(9) | 1,018,868 | 11,971 | 1,002,966 | - |
Total Current Assets | 16,475,052 | 22,309,163 | 13,755,741 | 18,992,597 | |
Non-Current Assets | |||||
Long-term equity investments | 4(10),12(4) | 5,550,290 | 5,328,758 | 6,917,143 | 6,489,898 |
Other equity instrument investments | 5,000 | 5,000 | - | - | |
Investment properties | 4(11) | 375,252 | 367,468 | 404,849 | 397,573 |
Property, plant and equipment | 4(12),12(5) | 11,953,743 | 11,322,850 | 11,487,063 | 11,123,442 |
Construction in progress | 4(13) | 1,202,594 | 1,815,549 | 1,200,807 | 1,814,985 |
Right-of-use assets | 4(14) | 20,928 | 23,648 | 16,648 | 20,520 |
Intangible assets | 4(15) | 430,865 | 337,846 | 292,542 | 298,914 |
Long-term prepaid expenses | 4(16) | 461,541 | 463,780 | 453,778 | 455,391 |
Deferred tax assets | 4(17) | 817,445 | 150,832 | 805,593 | 138,648 |
Other non-current assets | 4(18) | 5,014,915 | 3,511,234 | 5,014,915 | 3,511,234 |
Total Non-current assets | 25,832,573 | 23,326,965 | 26,593,338 | 24,250,605 | |
Total assets | 42,307,625 | 45,636,128 | 40,349,079 | 43,243,202 | |
2020 Interim Report 97
CONSOLIDATED AND COMPANY BALANCE SHEETS (continued)
AS AT 30 JUNE 2020 | |||||
(All amounts in thousands of Renminbi Yuan unless otherwise stated) | |||||
30 June | 31 December | 30 June | 31 December | ||
2020 | 2019 | 2020 | 2019 | ||
(unaudited) | (unaudited) | ||||
Note | Consolidated | Consolidated | Company | Company | |
Liabilities & Equity | |||||
Current Liabilities | |||||
Short term loan | 4(20) | 3,030,000 | 1,547,600 | 3,000,000 | 1,500,000 |
Derivative financial liability | 4(2) | 33,028 | 799 | 32,353 | - |
Notes payable | 4(21) | 850,800 | 733,900 | 834,000 | 715,000 |
Accounts payable | 4(22) | 6,066,658 | 7,664,296 | 4,908,230 | 5,951,568 |
Contract liabilities | 4(23) | 366,246 | 660,783 | 279,089 | 601,912 |
Employee benefits payable | 4(24) | 528,567 | 189,547 | 524,198 | 183,912 |
Taxes payable | 4(25) | 1,608,263 | 3,803,287 | 1,574,846 | 3,776,221 |
Other payable | 4(26) | 2,599,719 | 867,967 | 2,642,144 | 854,759 |
Non-current liabilities within one year | 4(27) | 11,706 | 11,450 | 8,905 | 10,059 |
Total Current Liabilities | 15,094,987 | 15,479,629 | 13,803,765 | 13,593,431 | |
Non-Current Liabilities | |||||
Defer tax liabilities | 4(17) | 36,704 | - | - | - |
Lease liabilities | 4(28) | 6,813 | 10,593 | 5,415 | 8,860 |
Deferred revenue | 4(29) | 125,414 | 130,005 | 125,005 | 130,005 |
Total Non-Current Liabilities | 168,931 | 140,598 | 130,420 | 138,865 | |
Total Liabilities | 15,263,918 | 15,620,227 | 13,934,185 | 13,732,296 | |
Equity | |||||
Share capital | 1, 4(30) | 10,823,814 | 10,823,814 | 10,823,814 | 10,823,814 |
Capital surplus | 4(31) | 610,327 | 610,327 | 600,768 | 600,768 |
Other comprehensive income | 4(32) | 8,582 | 17,838 | 8,582 | 17,838 |
Specific reserve | 4(33) | 101,375 | 57,137 | 101,375 | 57,135 |
Surplus reserve | 4(34) | 6,437,010 | 6,437,010 | 6,437,010 | 6,437,010 |
Undistributed profits | 4(35) | 8,924,285 | 11,939,215 | 8,443,345 | 11,574,341 |
Total equity attributable to equity | |||||
shareholders of the Company | 26,905,393 | 29,885,341 | 26,414,894 | 29,510,906 | |
Non-Controlling Interests | 4(36) | 138,314 | 130,560 | - | - |
Total Equity | 27,043,707 | 30,015,901 | 26,414,894 | 29,510,906 | |
Total Liabilities and Shareholders' Equity | 42,307,625 | 45,636,128 | 40,349,079 | 43,243,202 | |
The accompanying notes form an integral part of these financial statements.
Wu Haijun | Zhou Meiyun | Yang Yating |
Chairman | Director Chief Financial Officer and | Accounting Chief |
Vice General Manager |
98 Sinopec Shanghai Petrochemical Company Limited
CONSOLIDATED AND COMPANY INCOME STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2020
(All amounts in thousands of Renminbi Yuan unless otherwise stated) [English Translation for Reference Only]
Six months ended 30 June | Six months ended 30 June | ||||||||
2020 | 2019 | 2020 | 2019 | ||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||
Items | Note | Consolidated | Consolidated | Company | Company | ||||
Revenue | 4(37),12(6) | 35,663,352 | 51,992,583 | 29,679,232 | 38,462,207 | ||||
Less: Cost of sales | 4(37),12(6) | 30,909,800 | 43,664,730 | 25,098,218 | 30,315,825 | ||||
Taxes and surcharges | 4(38) | 5,701,797 | 5,830,148 | 5,694,869 | 5,818,515 | ||||
Selling and distribution expenses | 4(39) | 229,966 | 260,415 | 191,543 | 215,684 | ||||
General and administrative expenses | 4(40) | 1,511,043 | 1,516,182 | 1,472,892 | 1,460,716 | ||||
R&D expenses | 4(41) | 47,528 | 21,379 | 43,664 | 17,531 | ||||
Finance income - net | 4(42) | (145,840) | (198,402) | (129,590) | (185,514) | ||||
Including: finance expense | 28,120 | 20,648 | 27,300 | 19,416 | |||||
financial income | (176,082) | (209,960) | (161,542) | (195,459) | |||||
Other income | 4(44) | 16,495 | 2,551 | 15,144 | 952 | ||||
Investment income | 4(45),12(7) | 334,728 | 519,967 | 286,378 | 502,015 | ||||
Including: Share of profits of associates and | |||||||||
joint ventures | 273,712 | 492,230 | 227,993 | 463,496 | |||||
Gain/(losses) from changes in fair values | 4(46) | 9,281 | (12,441) | 9,037 | (12,252) | ||||
Credit impairment losses | 4(47) | - | (2) | - | (7) | ||||
Asset impairment losses | 4(48) | (120,928) | (24,786) | (120,140) | (24,786) | ||||
Asset disposal gains/(losses) | 4(49) | 15,256 | (18,724) | 15,256 | (23,772) | ||||
Operating (loss)/profit | (2,336,110) | 1,364,696 | (2,486,689) | 1,261,600 | |||||
Add: Non-operating income | 4(50) | 6,706 | 10,886 | 6,566 | 5,136 | ||||
Less: Non-operating expenses | 4(51) | 25,214 | 16,339 | 25,205 | 16,337 | ||||
Total (loss)/profit | (2,354,618) | 1,359,243 | (2,505,328) | 1,250,399 | |||||
Less: Income tax expenses | 4(52) | (646,300) | 215,526 | (673,190) | 193,418 | ||||
Net (loss)/profit | (1,708,318) | 1,143,717 | (1,832,138) | 1,056,981 | |||||
Attributable to shareholders of the Company | (1,716,072) | 1,137,241 | - | - | |||||
Non-controlling interests | 7,754 | 6,476 | - | - | |||||
(Loss)/profit from continuing operations | (1,708,318) | 1,143,717 | (1,832,138) | 1,056,981 | |||||
(Loss)/profit from discontinued operations | - | - | - | - | |||||
2020 Interim Report 99
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Sinopec Shanghai Petrochemical Company Limited published this content on 16 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 September 2020 08:44:03 UTC