中國石化 (SNP) 2021 Q3 法說會逐字稿

Good morning, ladies and gentlemen. This is Jane Liu of PR China. Welcome, everyone, to Sinopec Corp.'s earnings conference call for the third quarter of 2021. Please be reminded that the results presentation for the third quarter of 2021 can be downloaded at www.sinopec.com. (Operator Instructions) Now I would like to transfer the call to Mr. [Zhang Jung], Head of Board Secretary of Sinopec Corp. Mr. Zhang, you may begin.

早安，女士們先生們。我是來自中國的 Jane Liu。歡迎大家參加中國石化2021年第三季財報電話會議。請注意，2021年第三季業績簡報可在www.sinopec.com下載。（接線生指令）現在我將電話轉接給中國石化董事會秘書組長【張榮】先生。張先生，您可以開始了。

Thank you, Jane. Good morning, ladies and gentlemen. Welcome to Sinopec Q3 results announcement, and thank you for joining us today. This meeting is attended by Mr. Huang Wensheng, Vice President and Secretary to the Board; Mr. [Sun Jung Go], Deputy Head of Finance Department; and Madam [Didi], Deputy Head of Operation Management department. First, I would like to give the floor to Mr. Chen Yang, Deputy Head of Board Secretary to present to you the performance of Q3. Mr. Chen, please.

謝謝你，簡。早安，女士們先生們。歡迎收看中國石化第三季業績公告，感謝您今天加入我們。副總裁兼董事會秘書黃文勝先生出席本次會議； [Sun Jung Go]先生，財務部副部長；以及營運管理部副部長【迪迪】女士。首先請董事會秘書陳陽副主任向大家介紹一下第三季的表現。陳先生，請。

Thank you, Mr. Zhang. Good morning, ladies and gentlemen. Firstly, I will brief on our third quarter results. In the first 3 quarters, China's GDP grew by 9.8% year-on-year. International crude oil prices kept growth. Domestic demand for natural gas continues to grow rapidly with our parent consumption up by 16.6% year-on-year. Domestic demand for refined oil products recovered steadily and the demand for major chemicals sustained growth. Confronted with the environment where the international oil price went up and the demand for petrochemical products recovered steadily, the company is stressed on improving our system, expanding markets and controlling costs and eventually achieve good results.

謝謝你，張先生。早安，女士們先生們。首先我簡單介紹一下我們第三季的業績。前三季度，中國國內生產毛額年增9.8%。國際原油價格持續上漲。國內天然氣需求持續快速成長，母公司消費量較去年同期成長16.6%。國內成品油需求穩定恢復，主要化學品需求持續成長。面對國際油價上漲、石化產品需求穩定恢復的環境，公司著力完善體制、拓展市場、控製成本，最終取得了良好的績效。

EBIT of the first 3 quarters was CNY 102 billion up by 124% year-on-year and also 32% higher than the same period in 2019. Profit attributable to shareholders was CNY 60.7 billion, up by 149%. EPS was CNY 0.5. We kept optimizing debt structure and increased low-cost financing. Gearing ratio was 51.8%, maintaining our strong financial position. As of September 30, net assets attributable to shareholders of the company was CNY 768.4 billion, up by 3.6% compared with the beginning of the year.

前三季息稅前利潤為1,020億元人民幣，較去年同期成長124%，較2019年同期成長32%。股東應佔溢利為人民幣607億元，成長149%。每股收益為0.5元。持續優化債務結構，加大低成本融資力道。資產負債率為51.8%，維持強勁的財務狀況。截至9月30日，歸屬於公司股東的淨資產7,684億元，較年初成長3.6%。

In the first 9 months, the company enhanced management of inventory, receivables and payables and optimized the payment of bills. Net cash generated from operating activities was CNY 116 billion, up by 37.4%. Cash used in investing activities was around CNY 100 billion. Net cash used in financing activities was CNY 12 billion. In E&P sector, we continued to promote high-efficiency exploration and a profit-oriented development, consolidated resource base and increased production and profits. In terms of exploration, we strengthened risk exploration in new regions and in new sectors, which led to new discoveries in key business and major breakthroughs in continental facies shale oil exploration.

前9個月，公司加強庫存、應收應付管理，優化票據支付。經營活動產生的現金淨額1,160億元，成長37.4%。投資活動使用現金約1000億元。融資活動使用的現金淨額為120億元。勘探開發領域，持續推動高效勘探和效益發展，夯實資源基礎，提高產量和效益。勘探方面，加強新地區、新領域風險勘探，重點業務取得新發現，陸相頁岩油勘探取得重大突破。

In terms of production, we enhanced the efforts in capacity building and output of major natural gas and crude oil products and the natural gas production increased by 13.7%. Realized price of crude in the first 9 months was USD 60.9 per barrel, up by 59% year-on-year. Natural gas was USD 6.7 per Mcf, up by 26.7%. Lifting cost was USD 16.2 per barrel. The EBIT of Upstream was CNY 10.9 billion, up by 37.6% year-on-year. In refining, the company actively responded to market changes, increased throughput, kept high utilization rate, actively adjusted product space and maximized profits along the industrial chain.

生產方面，加大主要天然氣、原油產品產能建設力度，天然氣產量增加13.7%。1-9月份原油實現價格為每桶60.9美元，較去年同期上漲59%。天然氣價格為每立方英尺 6.7 美元，上漲 26.7%。提升成本為每桶 16.2 美元。上游息稅前利潤為109億元人民幣，較去年同期成長37.6%。煉油方面，公司積極因應市場變化，提高吞吐量，維持高利用率，積極調整產品空間，實現產業鏈利潤最大化。

We optimized crude oil allocation and procurement costs. We insisted on the strategy of shifting from oil to chemicals, lowered refined oil products yield and increased production of light chemical feedstock. We increased production of higher value-added products and the specialties, built 6 sets of hydrogen purification units, developed high-end needle coke products and domestic market share of low sulfur bunker fuel rank the first.

優化原油配置和採購成本。堅持油改化工策略，降低成品油產量，增加輕化工原料產量。增加高附加價值產品及特色產品的生產，建造6組氫氣純化裝置，開發高階針狀焦產品，低硫船用燃料國內市場佔有率排名第一。

In the first 3 quarters, the company processed 191 million tonnes of crude oil, up by 9.3% year-on-year. and produced 109 million tonnes of refined oil products, up by 3.2% year-on-year. The refining margin was USD 11.8 per barrel, up by 248%. Cash operating cost was USD 3.96 per barrel. EBIT of refining segment totaled CNY 54.3 billion, May turnaround and increased by CNY 56 billion.

前三季度，公司加工原油1.91億噸，年增9.3%。生產成品油1.09億噸，年增3.2%。煉油利潤為每桶11.8美元，上漲248%。現金營運成本為每桶 3.96 美元。煉油板塊息稅前利潤543億元，5月轉虧為盈，增加560億元。

In marketing, the company leveraged our advantage of integration to expand markets and adopted targeted marketing strategy, resulting in an increase of scale. We consolidated our resources of customers and marketing throughout the country and continuously improved the quality of our services. We optimized the network layout to reach end users, accelerated the construction of integrated energy service stations, offering petrol gas, hydrogen, power and nonfuel services and put our first carbon neutral station and the BIPV station into operation.

在行銷方面，公司發揮一體化優勢，拓展市場，採取針對性行銷策略，規模不斷擴大。我們整合全國客戶資源和行銷資源，不斷提升服務品質。優化終端網路佈局，加速綜合能源服務站建設，提供油氣、氫氣、電力和非燃料服務，首個碳中和站和BIPV電站投入運作。

In the first 3 quarters, the marketing sector, the total domestic sales volume of refined oil products was 128 million tonnes, up by 3.8 year-on-year. The company strengthened the development and the marketing of branding merchandise, actively sped up the development of nonfuel businesses. Nonfuel business profit was CNY 3.4 billion, up by 10.8%. EBIT for the marketing segment was CNY 24.3 billion. In Chemicals, by adhering to following the market and centering on profit, the company sped up the advanced capacity building and structural adjustment. We fine-tuned chemical feedstock to reduce costs. We adjusted the structure of the facilities and optimized maintenance schedule to raise the utilization of profitable facilities. We enhanced integration of production, marketing and the research and then continuously increased the ratio of higher value-added products, raising the ratio of synthetic resin, synthetic rubber and the synthetic fiber by 1.4, 3.7 and 1.6 percentage points, respectively.

前三季度，行銷領域，國內成品油總銷量1.28億噸，年增3.8%。本公司加強品牌商品開發與行銷，積極加速非油業務發展。非燃料業務獲利34億元，成長10.8%。行銷板塊的息稅前利潤為243億元。化工業務堅持以市場為導向、以效益為中心，加速推廣產能建設和結構調整。我們對化學原料進行微調以降低成本。調整設施結構，優化檢修計劃，提高獲利設施利用率。加強產銷研一體化，不斷提高高附加價值產品比重，合成樹脂、合成橡膠、合成纖維比重分別提高1.4、3.7及1.6個百分點。

In the first 3 quarters, ethylene production reached 9.75 million tonnes, up by 10% year-on-year. By consistently optimizing the structure of feedstock products and facilities, we achieved a strong gross margin. Chemical segment EBIT was CNY 23 billion, up by 228% year-on-year. For CapEx, we kept improving investment management system and raising the quality and the efficiency of investment. The CapEx was CNY 89.7 billion in the first 3 quarters. CapEx for E&P was mainly for oil and gas capacity building and storage as well as transportation facilities construction.

前三季乙烯產量975萬噸，年增10%。透過不斷優化原料產品和設施結構，我們實現了強勁的毛利率。化工板塊息稅前利潤為230億元人民幣，較去年同期成長228%。資本支出方面，不斷改善投資管理體系，提升投資品質與效率。前三季資本支出為897億元。勘探開發資本支出主要用於油氣產能建設和儲存以及交通設施建設。

In refining, we focus on construction of Shanghai and Anchun refining structural upgrading projects. CapEx for marketing was mainly for construction of petrol stations, integrated energy stations and logistics facilities. For chemicals, it was mainly for construction of [Qinghai] and Hainan projects. That's all for the presentation. Now we are pleased to take your questions. Thank you.

煉油方面，重點建置上海、安春煉油結構升級計畫。行銷資本支出主要用於加油站、綜合能源站和物流設施的建設。化工方面，主要用於【青海】、海南工程建設。這就是演示的全部內容。現在我們很高興回答您的問題。謝謝。

Thank you, Mr. Chen. We now open the floor for Q&A.

謝謝陳先生。我們現在開始問答環節。

(Operator Instructions)

（操作員說明）

The first question comes from Parsley of JPMorgan.

第一個問題來自摩根大通的歐芹。

[Interpreted] There are 2 questions from JPMorgan. The first one is regarding the national government has proposed a policy on carbon neutrality. So I want to know the impact of the company and then what is the future policy or strategy of the company. And the second question is regarding the natural gas price escalation recently. So what is the impact on the company's LNG business? And what is the future strategy on the company's natural gas business strategy?

[解讀]摩根大通有2個問題。第一個是關於國家政府提出了碳中和政策。所以我想了解公司的影響，然後公司未來的政策或策略是什麼。第二個問題是關於最近天然氣價格上漲的問題。那麼對公司LNG業務有何影響呢？公司未來的天然氣業務策略是怎樣的？

Thank you for your 2 questions. So for the carbon peak and then the carbon neutralities has been one of the major missions for the company, start from September of last year when the President Xi Jinping made such a commitment. And each of the business is working on their targets on their emissions and their execution plans, respectively. We are very pleased to find is that the central government give us some guidance, the national, the whole nation's -- these activities' objectives. So that is a guideline for the companies to roll out.

謝謝你的2個問題。因此，從去年9月習近平主席做出這樣的承諾開始，碳達峰和碳中和一直是公司的重大使命之一。每個企業都在分別制定自己的排放目標和執行計畫。我們很高興地發現，中央政府給了我們一些指導，國家的、全國的──這些活動的目標。這是公司推出的指導方針。

For our observations based on our business, we sell some of 50% of the gasoline diesel and jet fuels to the Chinese market and that is our part market share. And we -- from our operation, we fund the diesel part have been [peaked] out in the year 2017, and we expect that the gasoline may [peak] out at around 2025 or 2026. But we have seen the transition of the electrifications in the transportation area. Those are the battery electric vehicle. And from a longer-term perspective, the fuel cell cars can replace some of the use of the gasoline and the diesels.

根據我們根據業務的觀察，我們將50%的汽油柴油和航空燃油出售給中國市場，這是我們的部分市場份額。從我們的營運來看，我們資助的柴油部分已在 2017 年達到峰值，我們預計汽油部分可能會在 2025 年或 2026 年左右達到峰值。但我們已經看到交通領域電氣化的轉變。這些是電池電動車。從長遠來看，燃料電池汽車可以取代汽油和柴油的部分使用。

So that is going to be a bit of stretch to our existing business, but it also provides a lot of opportunities for the companies. So up to now, the whole nation's capacity of refining is around some 900 million metric tons and then based on the guidance that is at hand, it's 1 billion. There's still some room, some -- but I personally don't expect that China may reach that capacity given some of the small [deep wells] refineries. They may knock down based on -- that's a severe situation. And even for my company, we do not have any interest to further increase all that capacity, and we do a lot of the upgrading of the existing facilities and even change some of our operations of some smaller refineries to some feedstock supplier of our chemicals and integrated those operations with our existing chemical facilities.

因此，這對我們現有的業務來說是一個延伸，但它也為公司提供了許多機會。所以到目前為止，全國的煉油能力約為9億噸，然後根據現有的指導，這個數字是10億噸。仍有一些空間，一些——但我個人認為，鑑於一些小型[深井]煉油廠，中國可能無法達到這一產能。他們可能會因為——這是一個嚴重的情況而被擊倒。即使對於我的公司來說，我們也沒有興趣進一步增加所有產能，我們對現有設施進行了大量升級，甚至將一些小型煉油廠的一些業務改為我們化學品和化學品的一些原料供應商。將這些業務與我們現有的化學設施整合起來。

So in the refining side, we do not see a lot of threats, but we see a lot of the opportunity in those area, given that we have been upgrade of refining at a very pretty low cost, and we are leveraging the company, the logistics advantage, and management advantage produce better, cleaner burn of the fuels at a lower cost.

因此，在煉油方面，我們沒有看到很多威脅，但我們在這些領域看到了很多機會，因為我們已經以非常低的成本升級了煉油，我們正在利用公司，物流優勢和管理優勢以更低的成本實現更好、更乾淨的燃料燃燒。

For the marketing business, it's going to be a threat. The threat [major] come from the transition. So we are now trying to do a lot of infrastructures to support those transitions. Likewise, we are now exploring the swap opportunities for the battery for the EV cars in our existing stations. And we also built some hydrogen filling stations in our stations to change the filling stations to be an integrated service stations, including serve not only the gasoline diesel, but we are going to add some of the gas, the natural gas, the hydrogens and the battery services.

對於行銷業務來說，這將是一個威脅。[主要]威脅來自轉型。因此，我們現在正在嘗試建立大量基礎設施來支持這些轉變。同樣，我們現在正在探索現有車站中電動車電池的更換機會。我們還在我們的車站建造了一些加氫站，把加氣站變成一個綜合服務站，不僅包括汽油柴油，我們還要加一些瓦斯、天然氣、氫氣和汽油。

For the chemicals, as you may know in China, the demand in the company is pretty strong. Even though our operations of the chemical is operated at full load, 100% at a higher capacity in this year, it's going to be a 12.5 million metric tons, but China still import some more than 40% of the chemical downstream products in China, and we have ambitious plans to building some new capacity in the upcoming 5 years to meet the strong market need in China, and we see a lot of opportunity there. And you can tell from our CapEx in this year, we have allocated more capacity in the chemical area.

對於化學品，正如您所知，在中國，公司的需求相當強勁。儘管我們的化學品業務今年是滿負荷運轉，100%以更高的產能運行，將達到1250萬噸，但中國仍然進口超過40%的化學品下游產品，我們制定了雄心勃勃的計劃，將在未來5 年內建造一些新產能，以滿足中國強勁的市場需求，我們在那裡看到了許多機會。從我們今年的資本支出可以看出，我們在化學領域分配了更多的產能。

So for the business, overall, we feel this carbon peak and the carbon neutrality is going to be a threat and going to be an opportunity. We see more opportunities for the companies. Thank you for that first question. The second question for the market -- for the natural gas, you are absolutely right that China is deficit in terms of the natural gas supply.

因此，對於企業來說，總的來說，我們認為這個碳峰值和碳中和將是一個威脅，也將是一個機會。我們看到企業有更多機會。謝謝你提出第一個問題。市場的第二個問題——對於天然氣，你說中國在天然氣供應上有赤字，這是完全正確的。

And in my company, we are -- we sell more than 60 billion cubic meter of the natural gas plant in this year, we expected. You can tell more than 50% come from our existing production and roughly 45% to 50% come from the imports. We -- today, the escalation of the natural gas have been raised a lot of pressure for the earnings in our natural gas business, and they took a lot of measures including hedging some of their trading and increased their long-term contract proportion. And even for the spot, they use a lot of hedging activities. And at some time, they negotiated with the downstream customers trying to pass on some of the higher costs to the customer.

在我的公司，我們預計今年天然氣工廠的銷售量將超過 600 億立方公尺。你可以看出超過 50% 來自我們現有的生產，大約 45% 到 50% 來自進口。我們今天呢，天然氣的升級，對我們天然氣業務的盈利造成了很大的壓力，他們採取了很多措施，包括對部分交易進行對沖，增加長約比例。即使對於現貨，他們也使用了大量的對沖活動。並且有時，他們會與下游客戶進行談判，試圖將一些較高的成本轉嫁給客戶。

And we believe from their activities, we feel they are -- they really did a great job. And it's going to be suffered loss in the -- for the input part. But good news is that from 2 days ago, the natural gas price internationally has declined a bit. Yesterday, the GK arm declined more than 10%. And similarly, the PPI also declined significantly. And we are supplying this part. We may seize the opportunities, trying hard to manage the cost escalations. Thank you very much.

我們相信，從他們的活動中，我們感覺到他們——他們確實做得很好。對於輸入部分，它將遭受損失。但好消息是，從兩天前開始，國際天然氣價格下降。昨天，GK 部門跌幅超過 10%。同樣，PPI也大幅下降。我們正在供應這部分。我們可以抓住機遇，努力控製成本上升。非常感謝。

The next question comes from [Cai Xu] of Morgan Stanley.

下一個問題來自摩根士丹利的[蔡旭]。

[Interpreted] So there are 2 questions from Morgan Stanley. The first one is regarding the profit of the company. Chemical segment was down Q-on-Q season, so vertical was a little different from the performance of the third-party refineries in China. So I want to know the reason and actually please elaborate the reason. The second question is that the minority profit of -- the profit of the minority shareholders was also different on Q-on-Q speaking. So could you also please elaborate the reasons?

[解讀]摩根士丹利有2個問題。第一個是關於公司的利潤。化工板塊環比下滑，垂直產業與中國第三方煉油廠的表現略有不同。所以我想知道原因並請詳細說明原因。第二個問題是，少數股東的利潤從 Q-on-Q 來講也是不同的。那麼您能否也詳細說明一下原因呢？

[Interpreted] So for the Chemical segment in the third quarter, the profit -- the realized profit was around CNY 2.6 billion and decreased around CNY 3.3 billion Q-on-Q speaking. So there are 2 main reasons. The first one is that impacted by the crude oil price escalation, the price of chemical feedstock also increased, so the margin between the chemical feedstock and the chemical product also increased for around CNY 160 per tonne, and this led to the profit decreased around CNY [2.2] billion. And the second reason is that we also arranged the facilities' maintenance to enhance the chemical segment, which increased the cost for around CNY 0.6 billion. Thank you.

【解讀】所以化工板塊第三季的利潤－實現利潤在26億元左右，較上季減少了33億元左右。所以有兩個主要原因。一是受原油價格上漲影響，化工原料價格也有所上漲，因此化工原料與化學產品之間的毛利也增加了160元/噸左右，導致利潤在元左右下降。第二個原因是我們也安排了設施維護以增強化學板塊的實力，增加了約6億元的成本。謝謝。

Okay. So the company also reinforced the management of the tax. So this year, the income tax was -- so the income tax of the company for the first quarter -- for the first 3 quarters was up by 22%. And we had in the third quarter, the minority of the shareholders also kept the slide. Thank you.

好的。因此公司也加強了稅務管理。所以今年前三個季度的所得稅——所以公司第一季的所得稅——增加了22%。我們在第三季度，少數股東也保持了下滑。謝謝。

The next question comes from Neil of Bernstein.

下一個問題來自伯恩斯坦的尼爾。

Just a couple of questions. So picking up on the carbon neutrality question, the company is generating very strong free cash flow. You've got a cash balance of over RMB 200 billion. So most companies at this stage would start buying back their own stock, which is not something I expect you to do. But can you elaborate more on what opportunities you see to deploy this cash within low carbon businesses which are clearly going to be a significant part of energy growth as we head into the energy transition?

只是幾個問題。因此，考慮到碳中和問題，該公司正在產生非常強勁的自由現金流。你的現金餘額超過2000億元。因此，現階段大多數公司都會開始回購自己的股票，這不是我希望你做的事情。但是，您能否詳細說明您認為在低碳業務中部署這筆現金的機會，隨著我們進入能源轉型，這些業務顯然將成為能源成長的重要組成部分？

My second question is really around how you're seeing the fourth quarter. So we've seen reports of power shortages of China, gas shortages in China, and that's impacted some of the highly energy-intensive industries, including chemicals. We're also seeing a slowdown in the housing market. So can you comment a little bit about how you see this impacting the fourth quarter, particularly on the chemicals business?

我的第二個問題實際上是關於您如何看待第四季度。因此，我們看到了有關中國電力短缺、天然氣短缺的報道，這影響了一些高能源密集產業，包括化學工業。我們也看到房地產市場放緩。那麼您能否評論一下這對第四季的影響，特別是對化學品業務的影響？

[Interpreted] Thank you for your [3] macro questions, and you are absolutely right that we keep pretty strong cash flow of the company's operations by the end of the third quarter. And our -- we have more than CNY 200 billion cash in our balance sheet. So this is a significant amount. However, we also have quite a significant ambitious development plan for the [4 to 5] years' supply. And that we -- in that time, we are going to further increase or enhance of the foundation of the resources, including investment. A lot of investment will be allocated on the natural gas parts that will help the whole nations as well as China. The company change of our portfolio is that part to provide more cleaner burn fuels to fight against -- to be contributor in those natural neutralities initiatives. And in some time, we also will build several integrated chemical facilities in China to meet the domestic Chinese market need in the -- for those high-performance compounding materials in particular. And we -- in the next several years, you can tell our ethylene's production may grow by 8% annually. And apart from that, we also commit to some investment in those -- in the energy transition in the hydrogen part that will be also a significant part of this investment.

[解釋]感謝您提出[3]宏觀問題，您說得對，我們到第三季末公司營運的現金流量仍相當強勁。我們的資產負債表上有超過 2000 億元的現金。所以這是一個很大的數字。然而，我們對於[4至5]年的供應也有一個相當雄心勃勃的發展計劃。到那時，我們將進一步增加或加強基礎資源，包括投資。大量投資將分配到天然氣部分，這將有助於整個國家以及中國。公司對我們產品組合的改變是為了提供更清潔的燃燒燃料來對抗——成為這些自然中立倡議的貢獻者。在一段時間內，我們還將在中國建造多個綜合化學設施，以滿足中國國內市場的需求，特別是高性能複合材料的需求。在接下來的幾年裡，我們的乙烯產量可能每年增加 8%。除此之外，我們也承諾對這些領域進行一些投資——氫部分的能源轉型，這也將是這項投資的重要組成部分。

So this is -- those investments need the cash flow -- needed cash flow support. We expect in the next several years that companies will try to manage the stable cash flow to support that. At that moment, we do not have a buyback initiative, given that in the Hong Kong Stock Exchange as well as China stock exchange, they have a strict stimulations in that part and those initiatives are subject to the approval of the shareholders. So a lot of those cash will be allocated in our investment as few as to maintain a stable dividend payout. So that is the use of those cash. And we are very pleased to see this cash had been stable in the past 3 years, at those levels of 180 to 200, [this is] pretty challenging marketing situations.

所以這就是——那些投資需要現金流——需要現金流支持。我們預計在未來幾年，公司將努力管理穩定的現金流來支持這一點。目前我們還沒有回購計劃，因為香港聯交所和中國證券交易所對這部分有嚴格的激勵措施，而且這些計劃需要得到股東的批准。因此，大量現金將分配到我們的投資中，以維持穩定的股息支付。這就是這些現金的用途。我們很高興看到這筆現金在過去 3 年裡一直穩定在 180 到 200 的水平，[這是]相當具有挑戰性的行銷情況。

The second question regarding the short of the power sort of the supply of the energy that occurred, start from the October, and you can tell those have placed lots of the business as well as the government tax [imports on its own] part and a lot of the policies and the activities related in those areas under the power shortage have been eventually lifted, and the shortage of coal, hiking of coal prices have been coming down a bit significantly in the past week.

第二個問題是關於發生的能源供應的電力短缺，從10月份開始，你可以看出那些已經投入了大量的業務以及政府稅收[自行進口]部分和電荒地區的許多政策和活動最終都被取消了，煤炭短缺、煤價上漲的情況在過去一周也有了明顯的緩解。

So we can see those area will be -- although it's going to be tight, but I fully believe the market as well as plus the government can have proper mining results situation in China. And the funding in the chemical area and the current situation, that is still very in good shape. Just like previous questions, in the third quarter, saying, we have declined the EBIT contribution in the chemical side in comparing with the second quarter but we still deliver more than CNY 5 billion EBIT in that business.

所以我們可以看到這些地區將會——雖然會很緊張，但我完全相信市場以及政府可以在中國有適當的採礦結果情況。化工領域的資金和現狀仍然非常良好。就像之前的問題一樣，第三季我們說，與第二季度相比，我們在化工方面的 EBIT 貢獻有所下降，但我們在該業務中仍然實現了超過 50 億元人民幣的 EBIT。

And then in the fourth quarter, the feedstock cost will be -- is going to be high for the chemicals but the chemical products price today is still at a relatively high level. The margin, chemical margins, still be there in China, given that the demand continues very strong in the first 3 quarters. The demand for the chemical products grow by some 8%, is a significant year-on-year growth in terms of demand. So we are seeing the fourth quarter demand will be continuous, will be strong in that part, that going to help us to deliver a good result in the chemical area. Thank you.

然後在第四季度，化學品的原料成本將會很高，但目前的化學品價格仍處於相對較高的水平。鑑於前三個季度的需求持續強勁，中國的化學品利潤率仍然存在。化工產品需求成長約8%，較去年同期需求成長顯著。因此，我們看到第四季的需求將持續、強勁，這將有助於我們在化學領域取得良好的成果。謝謝。

The next question comes from Toby of Citibank.

下一個問題來自花旗銀行的托比。

[Interpreted] So the question was from Citibank. So the first one is that considering the energy shortage, including the diesel shortage. So while the company also increased to optimize the slate of the production and to increase the output of the diesel in the future, especially in the 4Q. And in addition, I also noticed that the size of the direct sales of diesel also increased recently. So what is the impact on the company's performance?

[解讀] 這個問題是花旗銀行提出的。所以第一個是考慮到能源短缺，包括柴油短缺。因此，該公司也加大力度優化生產佈局，並在未來增加柴油產量，特別是在第四季。另外，我還注意到，近期柴油直銷規模也有所增加。那麼對公司業績有何影響呢？

[Interpreted] So the supply of diesel in domestic market was tight recently, especially in October. And we also take the countermeasures to compete with the current situation. And we also optimized the slate of the production to increase the output of diesel, and we will also decrease the exportation of diesel to increase the supply to the domestic market. And we also -- and we will take advantage of our integrated, and we will make the full use of integrated advantages to counter the current situation, and we are confident that we will achieve a better performance in the 4Q. Thank you.

【解讀】因此近期國內市場柴油供應偏緊，尤其是10月。我們也採取了應對當前情勢的對策。我們也優化生產結構，增加柴油產量，同時減少柴油出口，增加國內市場供應。我們也——我們將利用我們的綜合優勢，我們將充分利用綜合優勢來應對當前的形勢，我們有信心在第四季度取得更好的業績。謝謝。

Next question comes from Lawrence of BOCI.

下一個問題來自中銀國際的勞倫斯。

(foreign language)

（外語）

[Interpreted] Okay. There are 3 questions from the BOCI. The first one is that I've noticed that the operating profit in the marketing segment was down by more than 30%. So could you please elaborate the reasons? And could you also elaborate the outlook in the 4Q of this year? And the second question is that is there any inventory gains in the refining segment and could you elaborate the number? The third question is that did we also increase the selling price of natural gas in domestic market?

[解釋]好的。中銀國際有3個問題。第一個是我注意到行銷部門的營業利潤下降了30%以上。那您能詳細說明一下原因嗎？您能否詳細介紹今年第四季的展望？第二個問題是，煉油部門是否有庫存增加，您能否詳細說明這個數字？第三個問題，國內天然氣銷售價格是否也提高了？

So the answer for the first question is that the operating profit in the third quarter of the marketing segment was around CNY 5.6 billion, and the increase -- and then decreased CNY 2.5 billion Q-on-Q speaking. And the major reason is that the inventory gains in the third quarter decreased to CNY 1.3 billion Q-on-Q speaking. And the second question, the second reason is that impacted by the COVID-19 pandemic upgrade and also the flood disasters in some provinces, the throughput of the refined the sales volume of refined oil products decreased for around [2,860,000 points] and this decreased the profit for around CNY 1.1 billion.

所以第一個問題的答案是，第三季行銷板塊營業利潤約56億元人民幣，較上季增加，然後減少25億元。主要原因是第三季庫存增量較上季減少至13億元。第二個問題，第二個原因是，受COVID-19疫情升級以及部分省份洪澇災害影響，成品油銷量吞吐量下降了【286萬點】左右，導致成品油銷量下降。

Okay. For the second question, my answer is that in order to maintain the solid, stable operation, the company normally keep the inventories up, crude oil and the refining products at the 20 days process volume level and 15-day level, respectively. So in the first 3 quarters due to the increasing of crude oil price, the inventory seen was around CNY 32.4 billion, including the Refining, Marketing and Chemicals segments and increasing for around CNY 63.1 billion compared with the same period of last year. And the number for the third quarter was CNY 7.1 billion, including the marketing coming through refining and chemical segment. Thank you.

好的。對於第二個問題，我的回答是，為了保持穩健、穩定的經營，公司通常保持庫存，原油和煉油產品分別保持在20天工藝量水準和15天水準。因此，前三季度，受原油價格上漲影響，庫存約324億元，其中煉油、銷售、化工板塊庫存較去年同期增加約631億元。第三季的銷售額為71億元，其中煉化板塊的行銷收入為71億元。謝謝。

And as for the third question is that the company always focus on the sales price of the natural gas. And for the first 3 quarters, the price of natural gas was -- the sales price of natural gas was up by around 17.4% and currently speaking, the domestic market was into the peaking season, especially in the winter season. And we anticipate that in the 4Q, the price of natural gas will be up by 20%.

至於第三個問題，公司始終關注天然氣的銷售價格。而前三季度，天然氣價格——天然氣銷售價格上漲了17.4%左右，目前來看，國內市場已進入旺季，尤其是冬季。我們預計第四季天然氣價格將上漲20%。

Due to time constraints, now we have last 2 questions.

由於時間有限，現在我們有最後兩個問題。

Due to time constraints, we invite last investors to ask questions. The last question comes from [Lu Chang] of CICC.

由於時間有限，我們邀請最後一位投資者提問。最後一個問題來自中金公司的[陸昌]。

[Interpreted] So there are 2 questions from CICC. So the first one is regarding the new material business of the company. So could you elaborate the EVA capacity currently and the future strategy on the EVA business? And the second question is that the company has some other new material business strategy?

[解讀]中金公司有2個問題。所以第一個是關於公司的新材料業務。那麼能否詳細介紹EVA業務目前的產能以及未來的策略？第二個問題是公司還有其他新材料業務策略嗎？

[Interpreted] Thank you for your question. So currently, we have around 360,000 tonnes of capacity for EVA and for the EVA and for the capacity of EVA use in the photovoltaic generation was around 160,000. And there are also -- there are those 2 projects will come to in the next year, which is (foreign language). So at that time, the total EVA for photovoltaic generation will be well reached around 560,000 tonnes.

[解釋]謝謝你的提問。目前，我們的EVA產能約為36萬噸，用於光伏發電的EVA產能約為16萬噸。還有──明年將有兩個項目，分別是（外語）。屆時，光電發電EVA總量將達56萬噸左右。

And for your second question, I would like to say that the company will always focus on the new material business construction and development, and we will focus on the construction capacity construction on new high-end materials including the [POE], the needle coke, the [R element] and as well as the high-end [plastic]. So I would expect that in the next 5 years, the new material business of the company will have -- will show a good performance and deliver sound results in the next 5 years. Thank you.

關於你的第二個問題，我想說的是，公司將始終專注於新材料業務的建設和發展，我們將重點關注包括【POE】、針狀焦在內的高端新材料的產能建設。 【R元件】以及高端【塑膠】。所以我預計，未來5年，公司的新材料業務將會呈現出良好的表現，並在未來5年取得良好的表現。謝謝。

Thank you again for attending Sinopec's announcement and your continued support. If you have any further questions, please contact our Secretaries and IRP based in Beijing, Hong Kong and Houston. That concludes today's announcement. Thank you.

再次感謝您參加中國石化公告並一直以來的支持。如果您還有任何疑問，請聯絡我們位於北京、香港和休士頓的秘書和 IRP。今天的公告到此結束。謝謝。

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

[本文字記錄中標記為[已翻譯]的部分是由現場通話中的口譯員朗讀的。