SEG Announces 2018 Annual Results: Seized Opportunities and Overcome Challenges High Performance Achieved

11 March 2019, SINOPEC Engineering(Group) Co., Ltd. (“SEG” or the “Company”, together with its subsidiariescollectively known as the “Group”) (stock code: 2386) today announces itsannual results for the twelve months period ended 31 December 2018 (the“Reporting Period”).


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


Significant increase in newlysigned contracts by proactively seizing market opportunities. As the successive commencement of construction of certain projectsin relation to the “seven major national petrochemical industry bases” and “Sinopec’sworld-class refining bases in China”, the Company seized possible opportunitiesin the market and exerted its competitive advantages to maintain and expand itsmarket share. The Company has concluded a series of new contracts with SaudiArabia, Kuwait and Malaysia during the year. Meanwhile, the Company still closelytracked market opportunities in other countries along the Belt & Road, soas to lay foundation for exploiting new overseas markets. The total value of newcontracts was RMB50.92 billion, representing a significant increase of 30.4% ona year-on-year basis.


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


Continuous promotion ofinnovation and technological advancement and achieved fruitful results. During the Reporting Period, the Company worked hard to successfullyorganize the collaboration of major technologies and the implementation of technologicalinnovation projects, made full use of the distinctive advantages of the R&Dcenter in the development of engineering technology and continuously strengthenedthe collaboration with famous licensors in the world. The Company has creatednew accomplishments, among which, “high efficiency methanol to olefins wholeprocess technology” and “coal-based oil/olefin large-scale modern coal chemicalindustry complete technology development and application” were awarded thefirst prize of national science and technology progress; “deep delayed cokingtechnology to improve the yield of light oil” won second prize of nationalscience and technology progress.


Chairman of SEG, Mr. YUBaocai said, “In 2018, in the face of the complicated andever-changing political and economic trends at home and abroad, the Companyseized opportunities, worked hard against challenges and acted proactively. Themanagement of the Company led all employees to expand market, control cost,consolidate foundation, prevent risks , push forward optimization andimprovement, and thus achieved optimal business performance and stabledevelopment trend with its major economic indicators all realizing significantgrowth. In 2019, the Company will actively ride the reform waves, followdevelopment requirements, improve development quality, accelerate new market explorationand new business development, and spare no efforts to promote quality reform,efficiency reform and drive reform. Also the Company will stride towardscomprehensively sustainable development and high quality development, and thusmake contributions to the society, to shareholders and to employees by ourexceptional performance.”


Business Review and Highlights


Significant results in marketdevelopment


During the Reporting Period, the Company grasped market recoveryopportunity, exploited its overall advantages in its industry, business andtechnical chains, and increased market development efforts. During theReporting Period, the value of new contracts entered into by the Company wasRMB50.927 billion, representing an increase of 30.4% year-on-year. Among which,the value of newly signed domestic contracts amounted to RMB45.925 billion,representing an increase of 58.0% year-on-year. The value of newly signedoverseas contracts amounted to approximately RMB5.002 billion, representing adecrease of 49.9% year-on-year.


In the PRC, during the Reporting Period, the Company entered intonew contracts for a number of large projects, such as Sinopec-KNPC Project (oilrefining, chemical industry and power station part) with a total contract valueof approximately RMB19.644 billion; Sinopec Sabic Project with a total contractvalue of approximately RMB4.586 billion; Luoyang Residual Oil Hydrotreating Projectwith a total contract value of approximately RMB1.842 billion; SinochemQuanzhou Project with a total contract value of approximately RMB1.506 billion.


Overseas, during the Reporting Period, the Company entered intonew contracts for a number of large projects, such as Saudi SABIC GAS Phase-9Air Separation Project with a total contract value of approximately RMB1.756 billion;Kuwait New Collection Center (GC-32) Project with a total contract value ofapproximately RMB867 million; Saudi Arabia IBB Ammonia Project with a totalcontract value of approximately RMB666 million; Kuwait heating furnacerenovation project with a total contract value of approximately RMB206 million.


In addition to the above projects, the Company has also kept trackof some oil refining, petrochemical engineering, new coal chemical, energysaving and environmental protection projects, which are expected to be signedin the future.


Successful Implementation of MajorProjects


  • One of Sinopec Group’s “four world-class refiningbases”: the design development of the Zhongke Guangdong Integrated Project isalmost completed, the civil works are completed and equipment installation is comprehensivelystarted. Overall progress of this project is completed by 40%


  • Eastern China 's largest coal-based methanol toolefins project: Zhong’An Joint Coalification Complex Project is in the stageof interim handover and preparation for start-up. Overall progress has exceeded90%, and overall quality and safety are under control.


  • Sinopec - Saudi Basic Industry Corporation StrategicCooperation Project: Sinopec-SABIC Polycarbonate Project is currently in thedesign development stage. At the site, the workers are working on pilefoundation and underground pipeline. The overall progress of the project iscompleted by more than 20%.


  • Building a world-class portside petrochemical base:the Sinochem Quanzhou 1 million tons / year ethylene and oil refining expansionproject is in the implementation stage and the overall progress is completed byabout 30%, and underground pipe and civil work construction are in the processonsite.


l Large crude oil commercialreserve base projectDongjiakou crude oilcommercial reservation base project is at endphase onsite, the overall progress has exceeded 90%, the detailed design isfully completed and the procurement and construction is approaching the end.


l TheCompany's largest project by contract value in the Gulf region: the generalprogress of the Kuwait Oil Refining Project has exceeded 80%. On the aspect ofoverall progress, maintained No.1 among contractors. Project HSE, quality,progress, expense and other items are under control.


l TheCompany's largest project in the Southeast Asian region: the overall progressof the Malaysia RAPID Oil Refining Project is nearly completed, all mechanicalwork at the site is completed and the devices are about to enter in thestart-up and delivery stage.


l TheCompany’s large-scale oil refining projects in Central Asia: the scope of workunder the contract for the FCC Project of Kazakhstan Atyrau Refinery mainlycovers the engineering, procurement, construction & commissioning of 13processing units including 2.43 Mtpa FCC units and 47 utilities units. Theproject successfully completed all aspects of project engineering, procurement,construction and commissioning, all devices were successfully ramped up anddelivered to owners successively.


Continuous enhancement of project assurance capability


Fullyimproving project management and meeting global standards. The Company gave fullplay to its overall synergy and strengthened organizational coordination byleveraging the organizational support force of the Company. The Company tightenedits project monitoring and, ensured early planning and overall coordination ofkey projects, and ensured internal resource integration and optimization, so asto ensure the quality and safety of projects.


Toenhance subcontracting management capability, reducing cost and ensuring profitabilityof projects, the Company established a unified subcontracting resource libraryfor projects. As a result, the Company has reduced subcontracting cost andfully improved project management. The Company increased its input incultivating Level A subcontractors, as a way to maintain its market share. TheCompany triggered the activity of quality subcontractors in long-termcooperation and increased their stickiness. In addition, the Company alsohelped them to better their familiarity to the Company’s management system, soas to ensure smooth progress of projects.


Tocontinuously strengthen risk management system, the Company closely monitoredand discussed the implementation of settlement plans, analyzed problemsexisting in project settlement and project inventory management, and based onwhich, put forward corresponding policies and measures. The Companystrengthened its process management in project implementation and timelyconfirmed project progress and contract changes.


All engineering technology R&D has been steadily promoted.


TheCompany carried out various researches and development centering its mainbusinesses: during the Reporting Period. Second, the Company activated 201 keyscientific research projects, which involved its conventional advantageousbusinesses such as petroleum refining, petrochemical, inorganic chemical,construction and manufacturing businesses and also environment-friendly technologiessuch as CO2 utilization, solid waste recycling, and fiber bio-catalyticpreparation of bio-based aviation fuel. These researches reflected thedevelopment demands of the technical market and embodied the overall guidingideas of “taking energy and chemical as its basis and seeking innovationdriving, global development and value focusing”.


Keyscientific research projects saw major progress: the research tasks of a batchof key research projects such as such as large size liquefied natural gas (LNG)receiving station engineering complete set technology are completed; seven keyresearch projects such as complete set of technology for production of premiumhydroisomerization dewax base oil and new complete set of sulfuric acidalkylation technology realized industrialized application; the projects such ascoal chemical sewage comprehensive treatment and near-zero emission technologyhave stepped into the practical application stage. The application of thesecondgeneration of aromatics technology and water-coal slurry gasificationtechnology has entered the site construction stage.


Agroup of scientific research findings were practically applied and promoted inengineering projects. The technical certification concerning ethylene andrelevant technologies for Gulei refining-chemical integration was completed. Abatch of scientific

researchresults, including the fixed weld seam automatic welding technology, wereapplied in Sinopec Group and Anhui Province Joint Coalification Complex andSinopec-KNPC projects and helped to substantially improve the work efficiencyand guarantee engineering quality.


Continuingto achieve fruitful results in technology innovation: During the ReportingPeriod, the Company also won various awards in scientific innovation andengineering construction at the provincial level and above, in which, total 39prizes for scientific and technological advancement. There were 3 nationalscientific advancement awards, two projects of the “coal-based oil/olefinlarge-scale modern coal chemical industry complete technology development andapplication” and the “high efficiency methanol to olefins whole processtechnology” were awarded the first prize of national science and technologyprogress; 19 projects obtained the Sinopec Science and Technology Progress Award(6 awards of first prize, 4 awards of second prize and 9 awards of thirdprize); and there were also 15 provincial and ministerial scientificadvancement awards (8 awards of first prize, 3 awards of second prize and 4awards of third prize), 8 excellent design awards, which include 1 nationalaward and 7 provincial and ministerial awards; 30 quality engineering awards, including2 national gold awards and 5 silver awards and 23 other provincial andministerial awards.


Digital engineering application saw first results


Duringthe Reporting Period, the Company has been stably promoting the construction ofdigital factories. In this regard, the publishing of the national standard, theStandard of Digital Delivery for Oil Refining and Petrochemical Project ;digital archives being listed as a national pilot project; further applicationof engineering design and production line for overseas projects, such as MalaysiaRAPID Oil Refining Project, Kuwait Oil Refining Project, and US FormosaPlastics Project; promotion of intelligent P&ID application for keyprojects, such as Sinopec-KNPC Project, Sinopec-SABIC Project and ZhenhaiProject; the improvement of the digital delivery platform; independentinnovation in professional 3D design for equipment and structures; integratedapplication of standardized design, electronic archiving, digitalizedpublishing; and reform in the modes of digitalized, networked and intelligent engineeringdesign: all of them promoted the engineering service ability and providingpowerful support for the construction of intelligent factories.


Market and Business Outlook


Lookingahead to 2019, it is expected that as the global industrial production willspeed down and the trade environment will become tensioned, there will be moreuncertain factors affecting the recovery of the world economy. At the sametime, China’s economy will operate steadily with certain changes and worries.It faces both complex and severe external environment and domestic downwardpressure, economic growth rate will be maintained in reasonable interval. Theinternational oil market is accelerating rebalancing in 2019, and the extensionof the reduction agreement has injected more confidence into the recovery andrebalancing of the oil market, but oil demand and non-OPEC supply uncertaintieshave increased and international oil prices have remained volatile. In 2019, itis expected that the global industrial investment will continue to grow, someprojects in the national seven petrochemical industry base and Sinopec Group’sfour world-class refining bases will have substantial progress, production andmanagement situation in the domestic refining, chemical engineering industrywill be significantly improved, while resource competition will be moreintense, and engineering companies still face great cost control pressure.


In2019, the Company will actively grasp the improvement of the domestic marketsituation, make full use of its advantages such as collectivization,integration and economies of scale, continuously enhance its core competitiveedge, propel its sustainable and healthy development and make efforts to becomea “national business card” of the Chinese oil refinery and chemical engineeringindustry. In 2019, the target domestic new contract value of the Company isRMB45 billion, and the target overseas new contract value is USD1.5 billion.


About SINOPEC Engineering (Group) Co., Ltd.

TheGroup is a leading Chinese energy and chemical engineering company with stronginternational competitiveness. The Group can provide domestic and overseasclients with overall solutions for petrol refining, chemical engineering,aromatics, coal chemicals, inorganic chemicals, pharmaceutical chemicals, cleanenergy, storage and transportation facilities, environmental protection andenergy saving and other sectors, including engineering consulting, technologylicensing, project management contractor, financing assistance, EPCcontracting, as well as design, procurement, construction and installation,lifting and transportation of large equipment, pre-commissioning, start-up andother industrial chain services.


Aftermore than 60 years of continuous development, the Group currently has anacademician of the Chinese Academy of Sciences, two academicians of the ChineseAcademy of Engineering and nearly 10,000 high-quality professionals withextensive project management and implementation experience, and owns andcooperatively owns advanced patents and know-how in core business areas. TheGroup has delivered on schedule hundreds of modern factories with enormousinvestment, advanced technology, complicated process and high quality toclients in more than 20 countries and regions around the world, established long-termand steady cooperative relationships with large energy and chemical enterprisesat home and abroad, established an extensive and stable client base, and enjoysremarkable industrial influence and social reputation.


In thefuture, the Group will continue to focus on the development strategies of“energy and petrochemical-oriented, innovation-driven, globalization-targetedand value-focused”, enhance exploration and development in the fields ofhydrogen energy, renewable energy and new materials, and create a new momentumin achieving the vision of “building a world-class engineering company”.


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