SHANGHAI PECHEM: The level of crude oil inventory is reasonable and may not be able to fully pass on the cost of oil prices

Shanghai Petrochemical (00338.HK) stated that it expects the petrochemical industry to face challenges this year, including rising costs, supply fluctuations, and logistics risks. At the same time, the industry is also experiencing energy diversification, supply chain optimization, reform, and upgrading. Amid the US-Iran conflict, oil prices have surged, and the restructuring of international production and supply chains has accelerated.

Executive Director, Vice General Manager, and Chief Financial Officer Du Jun stated that the company's crude oil inventory is currently maintained at a reasonable, slightly lower limit level. Among the crude oil purchased by the company last year, 65.75% came from the Middle East; Du Jun indicated that the company will seek more resources in different regions in response to market changes.

Regarding the pass-through of oil price costs, the company stated that it will depend on market conditions and government regulation, as there may be a time lag between the two. Additionally, the state regulates the distribution of domestic petroleum products, for example, some of the group's refined products must be sold to designated customers. Therefore, the group may not be able to fully offset the rise in crude oil prices through price increases.

Furthermore, the company guided a refining production volume of 12 million tons for 2026, compared to 12.613 million tons in 2025; capital expenditure is expected to be 6 billion yuan. Du Jun stated that the company will make good use of bank loans and national policies to reduce financing costs to meet capital expenditures. Regarding dividends, he emphasized that the company's dividend policy remains unchanged, with a payout ratio of 30% of net profit as long as it meets the company's operational needs