Sinopec Posts 36.8% Net Profit Drop in 2025 Amid Weak Petrochemical Margins and Energy Transition Pressures

China Petroleum & Chemical Corporation, widely known as Sinopec and listed as Class H shares on the Hong Kong Stock Exchange (HK:0386), reported a significant decline in its 2025 annual earnings. Net profit attributable to shareholders dropped 36.8% to 31.8 billion yuan (approximately $4.62 billion), according to a filing submitted to the Shanghai Stock Exchange. The company attributed the downturn to weakening petrochemical margins and increasing substitution from new energy alternatives, reflecting the broader shift reshaping China's energy landscape.

On the operational front, refinery throughput dipped 0.8% to 250.3 million metric tons. Gasoline production declined 2.4% while diesel output contracted sharply by 9.1%, consistent with softening domestic fuel demand. In contrast, kerosene production bucked the trend with a 7.3% year-on-year increase, driven largely by recovering aviation activity. Sales figures followed a similar pattern, with gasoline and diesel volumes falling in line with production, while average selling prices across major fuel products also declined.

Refining margins showed modest improvement despite the headwinds, largely due to stronger contributions from by-products such as sulfur and petroleum coke, which partially offset rising crude import costs and freight expenses.

On the upstream side, Sinopec's domestic crude oil output edged up 0.7% to 255.75 million barrels, while natural gas production grew 4% to 1,456.6 billion cubic feet, signaling the company's continued pivot toward cleaner energy sources. Management expects oil production to remain relatively stable in 2026, with natural gas volumes continuing to grow.

In the chemicals division, external sales revenue fell 9.6% to 378 billion yuan, primarily due to lower product prices across the segment. Looking ahead, Sinopec plans to invest between 131.6 billion and 148.6 billion yuan in capital expenditure for 2026, prioritizing upstream oil and gas development, crude capacity expansion, and storage and transport infrastructure improvements.