Morning, ladies and gentlemen. This is Jane Liu of PR China. Welcome everyone to Sinopec Corp's earnings conference call for the third quarter of 2021. Please be reminded that the results of presentation for the third quarter of 2021 can be downloaded at www.sinopec.com. All lines have been placed on mute to prevent background noise. After the presentation, there will be a question-and-answer session. Please follow the instructions given at that time if you would like to ask a question. Now I would like to transfer the call to Mr. Zhang Zheng, Head of Board Secretariat of Sinopec Corp. Mr. Zhang, you may begin.
Thank you, Jane. Good morning, ladies and gentlemen. Welcome to Sinopec Q3 results announcement, and thank you for joining us today. This meeting is attended by Mr. Huang Wensheng, Vice President and the Secretary to the Board, Mr. Song Zhenguo, Deputy Head of Finance Department, and Madam Li Li, Deputy Head of Operation Management Department. First, I would like to give the floor to Mr. Chen Yang, Deputy Head of Board Secretariat, to present to you the performance of Q3. Mr. Chen, please.
Thank you, Mr. Zhang. Good morning, ladies and gentlemen. Firstly, I will brief on our third quarter results. In the first three quarters, China's GDP grew by 9.8% year-on-year. International crude oil prices kept growth. Domestic demand for natural gas continued to grow rapidly, with apparent consumption up by 16.6% year-on-year. Domestic demand for refined oil products recovered steadily, and demand for major chemicals sustained growth. Confronted with the environment where the international oil price went up and the demand for petrochemical products recovered steadily, the company stressed on improving our system, expanding markets, and controlling costs, and eventually achieved good results. EBIT of the first three quarters was CNY 102 billion, up by 124% year-on-year, and also 32% higher than the same period in 2019. Profit attributable to shareholders was CNY 60.7 billion, up by 149%. EPS was CNY 0.5.
We kept optimizing debt structure and increased low-cost financing. Gearing ratio was 51.8%, maintaining a sound financial position. As of September 30th, net assets attributable to shareholders of the company were CNY 768.4 billion, up by 3.6% compared with the beginning of the year. In the first nine months, the company enhanced management of inventory, receivables, and payables and optimized the payment of bills. Net cash generated from operating activities was CNY 116 billion, up by 37.4%. Cash used in investing activities was around CNY 100 billion. Net cash used in financing activities was CNY 12 billion. In E&P sector, we continued to promote high efficiency exploration and profit-oriented development, consolidated resource base, and increased production and profits. In terms of exploration, we strengthened risk exploration in new regions and new sectors, which led to new discoveries in key basins and major breakthroughs in continental facies shale oil exploration.
In terms of production, we enhanced the efforts in capacity building and output of major natural gas and crude oil products, and the natural gas production increased by 13.7%. Realized price of crude in the first nine months was $60.9 per barrel, up by 59% year-on-year. Natural gas was $6.7 per Mcf, up by 26.7%. Lifting cost was $16.2 per barrel. The EBIT of upstream was CNY 10.9 billion, up by 37.6% year-on-year. In refining, the company actively responded to market changes, increased throughput, kept high utilization rate, actively adjusted product slate, and maximized profits along the industrial chain. We optimized crude oil allocation and cut procurement cost.
We insisted on the strategy of shifting from oil to chemicals, lowered refined oil products yield, and increased production of light chemical feedstock. We increased production of higher value-added products and specialties, built six sets of hydrogen purification units, developed high-end needle coke products, and domestic market share of low sulfur bunker fuel ranked the first. In the first three quarters, the company processed 191 million tons of crude oil, up by 9.3% year-on-year, and produced 109 million tons of refined oil products, up by 3.2% year-on-year. The refining margin was $11.8 per barrel, up by 248%. Cash operating cost was $3.96 per barrel. EBIT of refining segment totaled CNY 54.3 billion, made a turnaround, and increased by CNY 56 billion. In marketing, the company leveraged our advantage of integration to expand markets and adopted a targeted marketing strategy, resulting in an increase of scale.
We consolidated our resources of customers and marketing throughout the country and continuously improved the quality of our services. We optimized the network layout to reach end users, accelerated the construction of integrated energy service stations, offering petrol, gas, hydrogen, power, and non-fuel services, and put our first carbon neutral station and the BIPV station into operation. In the first three quarters, the total domestic sales volume of refined oil products was 128 million tons, up by 3.8% year-on-year. The company strengthened the development and marketing of branding merchandise, actively sped up the development of non-fuel businesses. Non-fuel business profit was CNY 3.4 billion, up by 10.8%. EBIT for the marketing segment was CNY 24.3 billion. In chemicals, by adhering to following the market and centering on profits, the company sped up the advanced capacity building and structural adjustment. We fine-tuned chemical feedstock to reduce costs.
We adjusted the structure of the facilities and optimized maintenance schedule to raise the utilization of profitable facilities. We enhanced integration of production, marketing, and research, and continuously increased the ratio of higher value-added products, raising the ratio of synthetic resin, synthetic rubber, and synthetic fiber by 1.4 percentage points, 3.7 percentage points, and 1.6 percentage points respectively. In the first three quarters, ethylene production reached 9.75 million tons, up by 10% year-on-year. By consistently optimizing the structure of feedstock, products, and facilities, we achieved a strong growth margin.
Chemical segment EBIT was CNY 23 billion, up by 228% year-on-year. For CapEx, we kept improving the investment management system and raising the quality and efficiency of investment. The CapEx was CNY 89.7 billion in the first three quarters. CapEx for E&P was mainly for oil and gas capacity building and storage, as well as transportation facilities construction.
In refining, we focused on construction of Zhenhai and Anqing refining structural upgrading projects. CapEx for marketing was mainly for construction of petrol stations, integrated energy stations, and logistics facilities. For chemicals, was mainly for construction of Zhenhai and Hainan projects. That is all for the presentation. Now, we are pleased to take your questions. Thank you.
Thank you, Mr. Chen. We now open the floor for Q&A.
Ladies, gentlemen. This concludes the prepared remarks for today, and we are now ready for questions. If you would like to ask any questions, please press star one. To cancel your questions, press star two.
The first question comes from Parsley of JP Morgan. Please go ahead. Thank you.
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There are two questions from JP Morgan. The first one is regarding the national government has proposed a policy on carbon neutrality. I want to know the impact of the company and what is the future policy or strategy of the company. The second question is regarding the natural gas price escalation recently. What is the impact on the company's LNG business, and what is the future strategy on the company's natural gas business strategy? Thank you.
Thank you for your two questions. For the carbon peak and the carbon neutrality has been one of the major missions for the company. Start from the September of last year when President Xi Jinping makes such a commitment. Each of the business is working on their targets and their missions and their execution plans respectively. We are very pleased to find that the central government give us some guidance. The national, the whole nation's activities, objectives. That is the guideline for the companies to realize. For our observations, based on our business, we sell some of 50% of the gasoline, diesel, and jet fuels to the Chinese market. That is our current market share.
From our operation, we find the diesel part have been peak out in the year 2017, and we expect that the gasoline may peak out at around the 2025 or 2026. But we have seen the transition of the electrifications in the transportation area. Those are battery electric vehicle, and from long-term perspective, the fuel cell cars can replace some of the use of the gasoline and the diesels. That is going to be a bit threat to our existing business, but it also provide a lot of opportunities for the companies. Up to now, the whole nation's capacity of refining is around some 900 million metric tons. Based on the guidance that is 1 billion. There's still some room, but I personally don't expect that China may reach that capacity given some of the small default refineries.
They may knock down based on such a severe situation. Even for my company, we do not have any interest to further increase our capacity. We do a lot of the upgrading of the existing facilities, and even change some operations of some smaller refineries to some feedstock supplier of our chemicals, and integrated those operations with our existing chemical facilities. In the refining side, we do not see a lot of threat, but we see a lot of the opportunity in those areas, given we have been upgrade of refining at a pretty low cost, and we are leveraging the company's logistics advantage and management advantage, produce better, cleaner burn of the fuels at a lower cost. For the marketing business, it's going to be a threat. The threat major come from the transition.
We are now trying to do a lot of infrastructures to support those transitions. Likewise, we are now exploring the swap opportunities for the battery, for the EV cars in our existing stations. We also build some hydrogen filling stations to change the filling stations to be integrated service stations, including serve not only the gasoline and diesel, but we are going to add some of the gas, the natural gas, the hydrogens, and the battery services. For the chemicals, as you may know, in China, the demand in the chemicals were pretty strong. Even though our operations of the chemicals operated at full load, 100% at a higher capacity in this year, it is going to be 12.5 million metric tons.
China still imports more than 40% of the chemical downstream products in China, and we have ambitious plans to build some new capacity in the upcoming five years to meet the strong market need in China, and we see a lot of opportunity there. You can tell from our CapEx in this year, we have allocated more capacity in the chemical area. For the business overall, we feel this carbon peak and the carbon neutrality is going to be a threat and going to be an opportunity. We see more opportunities for the companies. Thank you for the first questions.
The second question for the market, for the natural gas, you are absolutely right, China is deficit in terms of the natural gas supply. In my company, we sell more than 60 billion cubic meters of the natural gas per annum in this year we expected. You can tell more than 50% come from our existing production, and roughly 45%-50% come from the import. Today, the escalation of the natural gas has been bringing a lot of pressure for the earnings in our natural gas business. They took a lot of measures, including hedging some of their trading, and increased their long-term contract proportion.
Even for the stock, they use a lot of hedging activities, and at the same time, they negotiate with the downstream customers, trying to pass on some of the higher costs to the customer. We believe from their activities, we feel they really did a great job, and it is going to suffer loss for the import part. But the good news is that from two days ago, the natural gas price internationally has declined a bit. Yesterday, the JKM declined more than 10%. Similarly, the TTF also declined significantly. We are supplying this part. We may see the opportunities, try hard to manage the cost escalations. Thank you very much.
The next question comes from Kelly She of Morgan Stanley. Please go ahead. Thank you.
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There are two questions from Morgan Stanley. The first one is regarding the profits of the company's chemical segment was down Q-on-Q speaking, which was a little different from the performance of the third-party refineries in China. I want to know the reason and please elaborate the reason. The second question is that the profit of the minority shareholders was also different on Q-on-Q speaking. Could you also please elaborate the reasons? Thank you.
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For the chemical segment in the third quarter, the realized profit was around CNY 2.6 billion and decreased around CNY 3.3 billion, Q-on-Q speaking. There are two main reasons. The first one is that impacted by the crude oil price escalation, the price of chemical feedstock also increased. The margin between the chemical feedstock and the chemical product also increased for around CNY 160 per ton. This led to the profit decrease around CNY 2.2 billion. The second reason is that we also arranged the facilities maintenance to enhance the chemical segment, which increased the cost for around CNY 0.6 billion. Thank you.
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Okay. The company also reinforced the management of the tax. This year, the income tax of the company for the first three quarters was up by 22%. In the third quarter, the minority of the shareholders also kept slide. Thank you.
The next question comes from Neil of Bernstein. Please go ahead. Thank you.
Thank you very much. Just a couple of questions. Picking up on the carbon neutrality question, the company is generating very strong free cash flow. You have a cash balance of over CNY 200 billion. Most companies at this stage would start buying back their own stock, which is not something I expect you to do. Can you elaborate more on what opportunities you see to deploy this cash within low carbon businesses, which are clearly going to be a significant part of energy growth as we head into the energy transition?
My second question is really around how you are seeing the fourth quarter. We have seen reports of power shortages in China, gas shortages in China, and that has impacted some of the highly energy-intensive industries, including chemicals. We are also seeing a slowdown in the housing market. Can you comment a little bit about how you see this impacting the fourth quarter, particularly on the chemicals business? Thank you.
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Thank you for your pretty macro questions. You are absolutely right, we keep pretty strong cash flow of the company's operations by the end of this third quarter, and we have more than CNY 200 billion cash in our balance sheet. This is a significant amount. However, we also have quite a significant and ambitious development plan for the 14th five years plan. In that plan, we are going to further enhance the foundation of the resources, including a lot of investment will be allocated on the natural gas parts that will help the whole nation as well as the company change our portfolio in that part to provide more cleaner burn fuels to be contributor in those natural neutralities initiatives.
At some time, we also will build several integrated chemical facilities in China to meet the domestic Chinese market need for those high performance compounding materials in particular. In the next several years, you can tell our ethylene production may grow by 8% annually. Apart from that, we also are committed to some investment in the energy transition, in the hydrogen part, that will be also a significant part of the investment. Those investments need cash flow support. We expect in the next several years, the company will try to manage the stable cash flow to support that. At the moment, we do not have a buyback initiative, given in the Hong Kong Stock Exchange as well as Shanghai Stock Exchange, they have strict stipulations in that part. Those initiatives subject to the approval of the shareholders.
A lot of those cash will be allocated in our investment as well as to maintain the stable dividend payout. That is the use of those cash. We are very pleased to see this cash has been stable in the past three years at those level of the 180 - 200. This is a pretty challenging marketing situations. The second question regarding the short of the power, short of the supply of the energy, that occurred start from October. You can tell lots of the business as well as the government taxing policies on part and a lot of the policies and the activities related those area and the power shortage have been eventually lived. The shortage of coal, hiking of coal price, have been coming down a bit significantly in the past week.
We can see those area, although it's going to be tight, but I fully believe the market as well as the government can have the proper manage those situation in China. In the chemical area and the current situation, that is still very in good shape. Just like previous questions in the third quarter saying we have declined the EBIT contribution in the chemical side in comparing with the second quarter, but we still deliver more than CNY 5 billion EBIT in that business. In the first quarter, the feedstock cost is going to be high for the chemicals, but the chemical products price today still at a relatively high level.
The chemical margin still be there. In China, given the demand is continuous, very strong in the first three quarters, the demand for the chemical products grow by some 8%. It has a significant year-on-year growth in terms of demand. We are seeing in first quarter demand will be continuous, will be strong in that part. That's going to help us to deliver a good result in the chemical area. Thank you.
The next question comes from Toby of Citibank. Please go ahead. Thank you.
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The question was from Citibank. The first one is that, considering the energy shortage, including the diesel shortage, will the company also increase to optimize the slate of the production and to increase the output of the diesel in the future, especially in the 4Q? In addition, I also noticed that the price of the direct sales of diesel also increased recently. What is the impact on the company's performance? Thank you.
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The supply of diesel in domestic market was tight recently, especially in October. We also take the countermeasures to compete with the current situation. We also optimize the slate of the production to increase the output of diesel. We will also decrease the exportation of diesel to increase the supply to the domestic market. We will take advantage of our integrated, and we will make the full use of our integrated advantages to counter the current situation. We are confident that we will achieve a better performance in the 4Q. Thank you.
The next question comes from Lawrence of BOCI. Please go ahead. Thank you.
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Okay. There are three questions from the BOCI. The first one is that I've noticed that the operating profit in the marketing segment was down by more than 30%. Could you please elaborate the reasons? Could you also elaborate the outlook in the Q4 of this year? The second question is that, are there any inventory gains in the refining segment? Could you elaborate the number? The third question is that, did we also increase the selling price of natural gas in domestic market?
The answer for the first question is that the operating profit in the third quarter of the marketing segment was around CNY 5.6 billion, and decreased CNY 3.5 billion Q-on-Q speaking. The major reason is that the inventory gains in the third quarter decreased to CNY 1.3 billion, Q-on-Q speaking. The second reason is that impacted by the COVID-19 pandemic outbreak and also the flood disasters in some provinces. The throughput of the sales volume of refined oil products decreased for around 2,860,000 tons and this decreased the profit for around CNY 1.1 billion.
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Okay, for the second question, my answer is that in order to maintain the stable operation, the company normally keeps the inventory of crude oil and refining products at a 20-day processing volume level and 15-day level respectively. So in the first three quarters, due to the increasing of crude oil price, the inventory gains was around CNY 32.4 billion, including the refining, marketing, and chemical segments, increasing for around CNY 163.1 billion compared with the same period of last year. The number for the third quarter was CNY 7.1 billion, including the marketing, refining, and chemical segments. Thank you.
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As for the third question, the company always focus on the sales price of the natural gas. For the first three quarters, the sales price of natural gas was up by for around 17.4%. Currently speaking, the domestic market was into the peaking season, especially in the winter season. We anticipate that in the 4Q, the price of natural gas will be up by 20%. Thank you.
Due to time constraints, now last two questions. Thank you.
Due to time constraints, we invite last investor to ask questions. The last question comes from [Luchen] of CICC. Please go ahead. Thank you.
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There are two questions from CICC. The first one is regarding the new material business of the company. Could you elaborate the EVA capacity currently and the future strategy on the EVA business? The second question is that if the company has some other new material business strategy. Thank you.
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Thank you for your question. Currently we have around 360,000 tons of capacity for EVA, and for the capacity of EVA used in the photovoltaic generation was around 160,000 tons. There are also two projects will come stream in the next year, which is ZhongKe and Gulei. At that time, the total EVA for photovoltaic generation will reach for around 560,000 tons. For your second question, I would like to say that the company will always focus on the new material business construction and development, and we will focus on the capacity construction on new high-end materials including the POE, the needle coke, the alpha-olefins, and as well as the high-end plastics. I would expect that in the next five years, the new material business of the company will show a good performance and deliver sound results in the next five years. Thank you.
Thank you again for attending Sinopec's announcement and your continuous support. If you have any further questions, please contact our Secretary and IR people based in Beijing, Hong Kong, and Houston. That concludes today's announcement. Thank you.