Sinopec Shanghai Petrochemical Co Ltd (SPC), the country's largest ethylene producer, yesterday said it would report a profit in the first quarter of this year, compared with a loss of 200 million yuan in the same period last year, helped by falling oil prices and increased domestic refined oil products prices.

The company will come out with its quarterly numbers on April 20. It had reported a loss of 6.36 billion yuan and sales of 60 billion yuan for 2008.

"We have been able to reduce costs in tandem with the falling crude prices," the company said in a statement. It did not disclose any figures, but said the widening margin between crude and product prices has helped improve profitability.

The Shanghai-based oil refiner said its chemicals business has bottomed out after an earlier bout of panic-selling and hefty price falls due to the financial crisis. "The prices of some products have begun to recover," the statement said.

The company's A shares rose 1.05 percent to close at 6.75 yuan yesterday, the highest since July 31, 2008.

"It is within our expectations that SPC will post profit in the first quarter as we have seen the recovery of its chemicals and refining businesses this January and late February due to increased domestic sales," said Qiu Xiaofeng, analyst, China Merchants Securities. What's more, the company has also completed its de-stocking process, he said.

"SPC's profits will recover if the new pricing scheme works as planned," Qiu said.

SPC's parent company Sinopec also said in a preliminary report that its profit for the first quarter of this year would rise more than 50 percent from a year earlier. It attributed the gain to "the improved pricing scheme that has cushioned the refining sector's operating losses".

The National Development and Reform Commission (NDRC) adopted the new pricing system since Jan 1 this year. Following the new scheme, NDRC raised the benchmark retail prices of gasoline and diesel by 290 yuan and 180 yuan per ton respectively from March 25, in response to the global oil price changes.

"The price hike will strengthen market confidence, but its impact on the full-year earnings of oil refiners are limited," said Fang Jun, analyst, Essence Securities.

(China Daily April 9, 2009)