Annual Report 2012

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Management’s Discussion and Analysis MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED) Most of crude oil and a portion of natural gas produced by the Company were internally used for refining and chemical production, with the remaining sold to other customers. In 2012, the turnover from crude oil, natural gas and other upstream products sold externally amounted to RMB 53.7 billion, an increase of 13.1% over 2011. The change was mainly due to the increase in sales volume of crude oil, natural gas and other upstream products compared with that of 2011. In 2012, the Refining segment and Marketing and Distribution segment of the Company sold petroleum products (mainly consisting of oil products and other refined petroleum products), and achieved external sales revenue of RMB 1,647 billion. This represented an increase of 8.0% over 2011, and accounted for 59.1% of the Company’s turnover and other operating revenues. This was mainly due to the increase of sales volume and prices of petroleum products. The sales revenue of gasoline, diesel and kerosene was RMB 1,302 billion, representing an increase of 9.0% over 2011, and accounting for 79.1% of the total sales revenue of petroleum products. Turnover of other refined petroleum products was RMB 345 billion, representing an increase of 4.3% compared with 2011, accounting for 20.9% of the total sales revenue of petroleum products. The Company’s external sales revenue of chemical products was RMB 356.2 billion, representing a drop of 3.4% over 2011, accounting for 12.8% of its turnover and other operating revenues. This was mainly due to the continuing low demand for chemical products as a result of macroeconomic downturn, which led to a major drop in chemical product prices. (2) Operating expenses In 2012, the Company’s operating expenses were RMB 2,687.4 billion, representing a growth of 12.0 %. The operating expenses mainly consisted of the following: Purchased crude oil, products and operating supplies and expenses were RMB 2,301.2 billion, representing an increase of 13.5% over the same period of 2011, accounting for 85.6 % of the total operating expenses, of which: Crude oil purchasing expenses were RMB 880.7 billion, representing an increase 20 Annual Report 2012 CHINA PETROLEUM & CHEMICAL CORPORATION of 5.0 % over the same period of 2011. Throughput of crude oil purchased externally in 2012 was 168.61 million tonnes (excluding the volume processed for third parties), representing an increase of 1.1% over the same period of 2011. The average cost of crude oil purchased externally was RMB 5,223 per tonne, representing an increase of 3.9 % over the same period of 2011. The Company’s other purchasing expenses were RMB 1,420.5 billion, representing an increase of 19.5 % over the same period of 2011. This was mainly due to the expansion of trading business, higher price of refined oil products and higher CPI comparing to the same period of 2011. Selling, general and administrative expenses of the Company totaled RMB 61.2 billion, representing an increase of 3.8 % over the same period of 2011. This was mainly due to the increase in sales volume, labor cost and the increase in sales expenses such as agent commission, freight and miscellaneous charges. Depreciation, depletion and amortization expenses of the Company were RMB 70.5 billion, representing an increase of 10.4 % as compared with 2011. This was mainly due to the increased depreciation expense as a result of continuous investment in property, plant and equipment in recent years. Exploration expenses were RMB 15.5 billion, representing an increase of 16.4 % compared with 2011, mainly due to the Company’s increasing investment in exploration of blocks such as Ordos, Sichuan Basin, Junggar as well as unconventional oil and gas resources. Personnel expenses were RMB 51.8 billion. Excluding the adjustment for salary related surcharges and insurance, as well as the implementation of employee annual leave and recuperation policy, housing policy reform and pension system, our personnel expenses increased by 5 % over 2011, as the Company improved its remuneration policy and reasonably increased employees’ income, especially those of field workers. Taxes other than income tax were RMB 188.5 billion, representing a decrease of 0.8 % comparing with 2011. It was mainly due to the decrease of special oil income levy by RMB 8.3 billion as compared with 2011 as the threshold of special oil income levy was raised from 1 November 2011. Meanwhile, price-based resource taxation has been fully carried out since 1 November 2011 and as a result, resource tax increased by RMB 4.4 billion comparing with the same period of 2011. Other operating expenses (net amount) decreased by RMB 2.2 billion on a yearon-year basis. (3) Operating profit was RMB 98.7 billion, representing a decrease of 6.5 % comparing with the same period of 2011. (4) Net finance costs were RMB 9.9 billion, representing an increase of 87.0 % over 2011. Of which: the interest expense of the Company was RMB 11.2 billion, representing an increase of RMB 2.0 billion over 2011; the gain of exchange decreased by RMB 1.0 billion as compared with 2011; for the convertible bonds issued by the Company, loss from fair value change at the end of the period increased by RMB 1.3 billion over the same period of 2011. (5) Profit before taxation was RMB 90.6 billion, representing a decrease of 13.3% as compared with the same period of 2011. (6) Tax expense was RMB 23.8 billion, representing a decrease of RMB 2.3 billion as compared with the same period of 2011. (7) Profit attributable to non-controlling interests of the Company was RMB 2.9 billion, representing a decrease of RMB 2.3 billion comparing with the same period of 2011. (8) Profit attributable to equity shareholders of the Company was RMB 63.9 billion, representing a decrease of 12.8% comparing with the same period of 2011. 2 RESULTS OF SEGMENT OPERATIONS The Company manages its operations through four business segments, namely exploration and production segment, refining segment, marketing and distribution segment and chemicals segment, and the corporate and others. Unless otherwise specified, the inter-segment transactions have not been eliminated from financial data discussed in this section. In addition, the operating revenue data of each segment include other operating revenues.
The following table shows the operating revenues by each segment, the contribution of external sales and inter-segment sales as a percentage of operating revenues before elimination of inter-segment sales, and the contribution of external sales as a percentage of consolidated operating revenues (i.e. after elimination of inter-segment sales) for the periods indicated. Operating revenues As a percentage of consolidated operating revenue before elimination of inter-segment sales As a percentage of consolidated operating revenue after elimination of inter-segment sales Year ended 31 December Year ended 31 December Year ended 31 December 2012 2011 2012 2011 2012 2011 RMB millions (%) (%) (%) (%) Exploration and Production Segment External sales (note) 82,614 68,723 1.7 1.6 3.0 2.7 Inter-segment sales 174,571 173,115 3.7 4.0 Operating revenues 257,185 241,838 5.4 5.6 Refining Segment External sales (note) 199,525 196,217 4.2 4.5 7.2 7.8 Inter-segment sales 1,071,387 1,015,855 22.7 23.3 Operating revenues 1,270,912 1,212,072 26.9 27.8 Marketing and Distribution Segment External sales (note) 1,462,244 1,341,859 31.0 30.8 52.5 53.6 Inter-segment sales 9,638 5,767 0.2 0.1 Operating revenues 1,471,882 1,347,626 31.2 30.9 Chemicals Segment External sales (note) 363,738 375,287 7.7 8.6 13.1 15.0 Inter-segment sales 48,226 45,203 1.0 1.0 Operating revenues 411,964 420,490 8.7 9.6 Corporate and Others External sales (note) 677,924 523,597 14.4 12.0 24.2 20.9 Inter-segment sales 635,046 610,585 13.4 14.1 Operating revenues 1,312,970 1,134,182 27.8 26.1 Operating revenue before elimination of inter-segment sales 4,724,913 4,356,208 100.0 100.0 Elimination of inter-segment sales (1,938,868) (1,850,525) Consolidated operating revenues 2,786,045 2,505,683 100.0 100.0 Note: Other operating revenues are included. The following table sets forth the operating revenues, operating expenses and operating profit/(loss) by each segment before elimination of the intersegment transactions for the periods indicated, and the change rate of 2012 compared to 2011. Year ended 31 December 2012 2011 Change RMB millions (%) Exploration and Production Segment Operating revenues 257,185 241,838 6.3 Operating expenses 187,131 170,207 9.9 Operating profit 70,054 71,631 (2.2) Refining Segment Operating revenues 1,270,912 1,212,072 4.9 Operating expenses 1,282,356 1,247,852 2.8 Operating loss (11,444) (35,780) (68.0) Marketing and Distribution Segment Operating revenues 1,471,882 1,347,626 9.2 Operating expenses 1,429,230 1,302,930 9.7 Operating profit 42,652 44,696 (4.6) Chemicals Segment Operating revenues 411,964 420,490 (2.0) Operating expenses 410,786 393,758 4.3 Operating profit 1,178 26,732 (95.6) Corporate and others Operating revenues 1,312,970 1,134,182 15.8 Operating expenses 1,315,413 1,136,822 15.7 Operating loss (2,443) (2,640) (7.5) Elimination of inter-segment profits (1,335) 891 — 21 CHINA PETROLEUM & CHEMICAL CORPORATION Annual Report 2012 Management’s Discussion and Analysis
Page 3 and 4: CONTENTS 2 Company Profile 3 Princi
Page 5 and 6: PRINCIPAL FINANCIAL DATA AND INDICA
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Page 9 and 10: (2) Information disclosed by the sh
Page 11: Sinopec Corp.’s development accel
Page 14 and 15: Business Review and Prospects BUSIN
Page 21: MANAGEMENT’S DISCUSSION AND ANALY
Page 25 and 26: In 2012, refining margin was RMB 15
Page 27 and 28: As at 31 December 2012, the Company
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Page 36 and 37: Significant Events SIGNIFICANT EVEN
Page 39 and 40: CONNECTED TRANSACTIONS 1 AGREEMENTS
Page 41: Decision-making procedures: The maj
Page 44 and 45: Corporate Governance CORPORATE GOVE
Page 51 and 52: REPORT OF THE BOARD OF DIRECTORS Th
Page 53 and 54: 6 DIVIDEND During this report perio
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Page 57 and 58: Firstly, the Board of Directors dil
Page 59 and 60: DIRECTORS, SUPERVISORS, SENIOR MANA
Page 61 and 62: Li Chunguang Dai Houliang Liu Yun L
Page 63 and 64: The Members of the Fourth Session o
Page 65 and 66: Zou Huiping Zou Huiping, aged 52, S
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Page 69 and 70: Lei Dianwu Ling Yiqun Lei Dianwu, a
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REPORT OF THE PRC AUDITOR All Share
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BALANCE SHEET as at 31 December 201
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INCOME STATEMENT for the year ended
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CASH FLOW STATEMENT for the year en
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STATEMENT OF CHANGES IN EQUITY for
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NOTES TO THE FINANCIAL STATEMENTS (
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CONSOLIDATED BALANCE SHEET as at 31
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CONSOLIDATED STATEMENT OF CASH FLOW
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(D) SUPPLEMENTAL INFORMATION ON OIL
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Corporate Information CORPORATE INF
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Confirmation from fhe Directors and
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Annual Report 2012

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