(Bloomberg) -- Sinopec plunged in Hong Kong trading after earnings missed estimates as the impact of Covid curbs on fuel demand slashed profit from the producer’s flagship chemicals and refining unit.

China Petroleum & Chemical Corp., as it’s officially known, posted net income of 66.2 billion yuan ($9.64 billion) for 2022, according to international financial reporting standards. That compared with a near-record profit of 72 billion yuan a year earlier, the company said in an exchange filing Sunday. 

Covid Zero restrictions reduced road and air traffic in China last year, denting demand for fuels. Prices of chemical products have also waned on the industry’s downward cycle, Chairman Ma Yongsheng said in an annual report. 

Sinopec shares fell as much as 7.7% in Monday trading in Hong Kong, and were 2.8% lower as of 11:04 a.m. local time.

“Refining and particularly the chemicals business were the major misses to our estimates,” Morgan Stanley analysts including Jack Lu wrote in a note dated Sunday. Sinopec had a loss of 10.1 billion yuan in its chemicals unit in the fourth quarter, the worst performance since the second quarter of 2014, the analysts said. 

Sinopec plans to add 165.8 billion yuan in capital expenditure this year, after it reported spent 189.1 billion yuan for 2022. The company had targeted record capital expenditures of 198 billion yuan last year. 

To compensate for the increased cost of drilling and petrochemical facilities, the firm has been lobbying authorities for higher export quotas to take advantage of stronger diesel margins overseas.

The Week’s Diary

(All times Beijing unless noted.)

Monday, March 27

  • Sinopec earnings briefing at 14:15 in HK
  • CNPC releases annual research report in Beijing, 14:30
  • EARNINGS: Anhui Conch

Tuesday, March 28

  • Boao Forum in Hainan, China, day 1
  • EARNINGS: WH Group, BYD Co., Kunlun Energy, TCL Zhonghuan

Wednesday, March 29

  • CCTD’s weekly online briefing on China’s coal market, 15:00
  • Cnooc earnings briefing at 17:00 in HK
  • International Iron Ore Market Seminar in Qingdao, Shandong
  • Boao Forum in Hainan, China, day 2
  • EARNINGS: PetroChina, Cnooc, Ganfeng Lithium, Metallurgical Corp.

Thursday, March 30

  • Fenwei China coking coal summit in Taiyuan, Shanxi
  • Boao Forum in Hainan, China, day 3
  • PetroChina earnings briefing at 16:30 in HK
  • EARNINGS: Maanshan Steel, Angang Steel, Shandong Steel, Tianqi Lithium, Xinjiang Goldwind, GCL Tech, Cosco Shipping

Friday, March 31

  • China official PMIs for March, 09:30
  • China weekly iron ore port stockpiles
  • Shanghai exchange weekly commodities inventory, ~15:30
  • Boao Forum in Hainan, China, day 4
  • EARNINGS: Citic Ltd.

On The Wire

Trading in London Metal Exchange nickel contracts resumed Asian-hours trading on Monday, marking a crucial step in efforts to repair the market after last year’s unprecedented turmoil.

Profits at industrial firms in China plunged in the first two months of the year as factories had yet to fully recover from a Covid-induced slump and prices continued to decline.

--With assistance from Jeanny Yu and Dan Murtaugh.

(Updates with analyst comment in fifth paragraph.)

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