Sinopec spin-off touts edge through efficiency push

Sinopec Engineering, a China Petrochemical spin-off, is going to be publicly traded for the first time. The company said its listing will boost overall efficiency and profitability through its on-going consolidation of eight subsidiaries.
The company, which was created in September 2012, promises reasonable returns for investors through a mix of organic and inorganic growth models as some advanced technologies may be obtained through overseas acquisitions.
“The listing of Sinopec Engineering will propel our efficiency and competitiveness in the global market while bringing in a more compelling compensation scheme to retain talent,” Cai Xiyou, chairman of Sinopec Engineering, told a media briefing in Singapore on May 9. The listing was timed with the firm’s plan to internationalize its business but it needed to match the company’s earnings target, Cai said.
The state-owned firm, which builds petrochemical and refining plants, plans to raise about US$2.1 billion through its Hong Kong initial public offering. About 40% of the fresh capital will be used to fund engineering and construction operations, while 23% will finance research and development.
Seven cornerstone investors have pledged to commit a total of US$ 50 million to the new Sinopec Engineering shares.
Yan Shaochun, president of Sinopec Engineering, said the firm planned to expand overseas revenues and look for acquisition targets that could provide complements to existing business. Yan declined to elaborate on potential deals, but Chinese firms in general face a shortage of advanced petrochemical and oil-refining technology.
Demand for oil and oil products in China have been soaring, with the country overtaking the U.S. as the world’s biggest net importer of oil. The company forecasts that China’s petrochemical engineering market will expand by an average of 15.2% in the five years ending 2016.
(May 10, 2013)