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Exhibit 99.1

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IMPORTANT MESSAGE

In 2021, the net profit attributable to equity shareholders of the parent company amounted to RMB2,000,506 thousand under CAS (net profit of RMB2,073,431 thousand attributable to shareholders of the Company under IFRS). According to the 2021 profit distribution plan approved by the Board on 23 March 2022, the Board proposed to distribute a dividend of RMB0.1 per share (including tax) (the “Final Dividend”) based on the total number of issued shares of the Company as at the record date for distributing dividend. The 2021 profit distribution plan will be implemented subject to approval of the Company’s 2021 annual general meeting (the “AGM”). The date and time of the AGM and book closure arrangement will be announced later. The notice of the AGM will be announced separately in accordance with the provisions of the Articles of Association of the Company. The notice of the AGM, the accompanying circular and proxy form will be dispatched to holders of H shares in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Hong Kong Listing Rules”).

If the Final Dividend is declared by the approval of the resolution by the shareholders of the Company at the AGM, the Final Dividend on H shares is expected to be distributed on or around Thursday, 28 July 2022 to shareholders whose names appear on the Register of Members of the Company’s H shares at the close of business on Tuesday, 5 July 2022. The Final Dividend is denominated and declared in Renminbi. The Final Dividend payable to the holders of the Company’s A shares shall be paid in Renminbi while those payable to the holders of the Company’s H shares shall be paid in Hong Kong dollars. The amount of Hong Kong dollars payable shall be calculated on the basis of the average closing exchange rates for Hong Kong dollars as announced by the Foreign Exchange Trading Centre of the PRC for one calendar week prior to the approval of the Final Dividend at the AGM.

The Company is expected to close the Register of Members of the Company’s H shares from Thursday, 30 June 2022 to Tuesday, 5 July 2022 (both days inclusive) in order to confirm the shareholders’ entitlement to receive the Final Dividend. The holders of the Company’s H shares who wish to receive the Final Dividend should lodge the completed transfer forms and relevant share certificates with Hong Kong Registrars Limited, at Shops 1712-1716, 17/F, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong on or before 4:30 p.m. on Wednesday, 29 June 2022.

The record date for dividend distribution, distribution procedures and time for the distribution of dividends applicable to holders of the Company’s A shares will be announced separately.

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Forward-looking statements such as future plans and development strategies contained in this report do not constitute any substantive commitments of the Company to investors. The Company has alerted investors on the relevant investment risks.

Potential risks are elaborated in this report. Please refer to Section II “Management Discussion and Analysis” under “Report of the Directors” for details of the potential risks arising from the future development of the Company.

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Definitions

In this report, unless the context otherwise specifies, the following terms shall have the following meanings:

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As one of the major integrated petrochemical enterprises in China with an integrated refinery and petrochemical capacity, the Company possesses competitive business scale and strength, which have made it a major manufacturer of refined oil, intermediate petrochemical products, synthetic resins and synthetic fibres. It also has self-owned utilities and environmental protection systems, as well as sea transport, inland shipping, rail transport and road transport ancillary facilities.

Located at Jinshanwei in the southwest of Shanghai, the Company is a highly integrated petrochemical enterprise which mainly processes crude oil into a broad range of petroleum products, intermediate petrochemical products, resins and plastics and synthetic fibers. The Company sells most of its products within the PRC domestic market and derives most of its revenues from customers in Eastern China, one of the fastest growing regions in the PRC.

The Company’s high-quality development is supported by the ever-increasing demand in the PRC for petrochemical products. Relying on the competitive advantage of its high degree of integration, the Company is optimizing its product mix, improving the quality and variety of its existing products, upgrading technology and increasing the capacity of its key upstream plants.

In July 1993, the Company became the first company incorporated under the laws of the PRC to make a global equity offering, and its shares were listed on the Shanghai Stock Exchange, the Hong Kong Stock Exchange and the New York Stock Exchange.

Since the listing of its shares, the Company has strived to continuously improve and enhance its operation and management efficiency with an aim to become a world-class petrochemical enterprise.

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Main Financial Indicators

After the first exercise of the Company’s Share Option Incentive Scheme in August 2017, the total number of issued shares of the Company increased by 14,176,600 shares.

After the second exercise of the Company’s Share Option Incentive Scheme in January 2018, the total number of issued shares of the Company increased by 9,636,900 shares.

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Main Financial Indicators (continued)

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Main Financial Indicators (continued)

For detailed differences between the financial statements prepared under CAS and IFRS, please refer to supplements to the financial statements prepared under CAS.

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Main Financial Indicators (continued)

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Principal Products

The Group produces more than 60 different products, including various specifications of synthetic fibers, resins and plastics, intermediate petrochemical products and petroleum products.

The Company is a highly vertically integrated petrochemical company. Most of the petroleum products and intermediate petrochemical products produced by the Company are used in the production of the Company’s downstream products.

The following table sets forth the net sales of the Group’s major products in 2021 as a percentage of total net sales and their typical uses.

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Principal Products (continued)

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Change in Share Capital of Ordinary Shares and Shareholders

The Company had no changes in share capital of ordinary shares during the Reporting Period.

Please refer to item (13) under Section IV of Report of Directors for details of the Group’s issuance of non-financial enterprise debt financing instruments during the Reporting Period. Apart from that, the Company issued no shares during the Reporting Period.

The Company had no changes in the Company’s total number of ordinary shares, shareholding structure and the Company’s assets and liabilities resulted in reasons such as stock dividend and dividends distribution during the Reporting Period.

The Company had no employees shares as at the end of the Reporting Period.

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Change in Share Capital of Ordinary Shares and Shareholders (continued)

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Change in Share Capital of Ordinary Shares and Shareholders (continued)

Note on connected relationship or acting in concert of the above shareholders:

Among the above-mentioned shareholders, Sinopec Corp., a State-owned legal person, does not have any connected relationship with the other shareholders, and does not constitute an act-in-concert party under the Administrative Measures on Acquisition of Listed Companies. Among the above-mentioned shareholders, HKSCC (Nominees) Limited is a nominee and HKSCC Limited is the nominal holder of the company’s Shanghai-Hong Kong Stock Connect. Apart from the above, the Company is not aware of any connected relationships among the other shareholders, or whether any other shareholder constitutes an act-in-concert party under the Administrative Measures on Acquisition of Listed Companies.

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Change in Share Capital of Ordinary Shares and Shareholders (continued)

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Change in Share Capital of Ordinary Shares and Shareholders (continued)

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Change in Share Capital of Ordinary Shares and Shareholders (continued)

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Change in Share Capital of Ordinary Shares and Shareholders (continued)

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Change in Share Capital of Ordinary Shares and Shareholders (continued)

As at 31 December 2021, HKSCC (Nominees) Limited held 3,453,839,030 H shares of the Company, representing 31.91% of the total number of issued shares of the Company.

Based on the public information available to the Board, as at 23 March 2022, the Company had a public float which is in compliance with the minimum requirement under the Hong Kong Listing Rules.

As at 31 December 2021, so far as was known to the Directors or chief executive of the Company, the interests and short positions of the Company’s substantial shareholders (being those who are entitled to exercise or control the exercise of 5% or more of the voting power at any general meeting of the Company but excluding the Directors, chief executive and Supervisors) in the shares and underlying shares of the Company who are required to disclose their interests pursuant to Divisions 2 and 3 of Part XV of the Securities and Futures Ordinance (the “SFO”) or as recorded in the register of interests required to be kept under section 336 of the SFO were as set out below:

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Change in Share Capital of Ordinary Shares and Shareholders (continued)

Interests in ordinary shares of the Company

(L): Long position; (S): Short position; (P): Lending Pool

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Change in Share Capital of Ordinary Shares and Shareholders (continued)

Note:

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Change in Share Capital of Ordinary Shares and Shareholders (continued)

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Change in Share Capital of Ordinary Shares and Shareholders (continued)

(3.4.1) 16,808,715 H shares (long position) are held by Aperio Group, LLC.

Save as disclosed above, as at 31 December 2021, the Directors have not been notified by any person (other than the Directors, chief executive and Supervisors) who had interests or short positions in the shares and underlying shares of the Company which would fall to be disclosed to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO or as recorded in the register of interests required to be kept by the Company under section 336 of the SFO.

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Report of the Directors

Section I Business Overview

Located at Jinshanwei in the southwest of Shanghai, the Company is a highly integrated petrochemical enterprise which mainly processes crude oil into a broad range of petroleum products, intermediate petrochemical products, resins and plastics and synthetic fibres. The Company sells most of its products within the PRC domestic market and derives most of its revenues from customers in Eastern China, one of the fastest growing regions in the PRC.

China’s growing market demand for petrochemical products is the basis for our high-quality development. The Company utilizes its highly integrated advantages to actively adjust the product structure, while constantly improving the quality and variety of existing products, optimize technology and improve the ability of key upstream devices.

For details on the industry in which the Company operates its business, please refer to Section III of this chapter “Analysis on Operational Information of the Chemical Industry”.

As one of the major integrated petrochemical enterprises in China with an integrated refinery and petrochemical capacity, the Company possesses competitive business scale and strength, which have made it a major manufacturer of refined oil, intermediate petrochemical products, synthetic resins and synthetic fibres. It also has self-owned utilities and environmental protection systems, as well as sea transport, inland shipping, rail transport and road transport ancillary facilities.

The Company’s major competitive advantages include quality, geographical location and its vertically integrated production. The Company has 50 years of petrochemical production and management experience, and has accumulated extensive resources in the petrochemical industry, which has garnered multiple quality product awards from the central and local governments. Located at the core region of Yangtze River Delta, the most economically active region in China with a strong demand for petrochemical products, the Company built a comprehensive logistics system and supporting facilities to tap its geographic proximity with most of its clients and the convenient coastal and inland shipping. This gave it a competitive edge in terms of transportation costs and timely delivery. The Company has leveraged its advantages in integrated refinery and petrochemical capacity to actively strengthen product structure, while continuously developing new products and improving products quality and variety. It has also improved production technology and boosted capacity of key upstream equipment to maximize the use and the efficiency in the utilisation of its corporate resources, and is therefore able to achieve strong and sustainable development.

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Report of the Directors (continued)

Section II Management Discussion and Analysis

(Unless otherwise specified, the financial information included in this “Management’s Discussion and Analysis” section has been extracted from the financial statements prepared under IFRS.)

The year 2021 was a year of rapid recovery since the global economy experienced its biggest recession after World War II, but the economic recovery of countries and regions is severely differentiated. Among advanced economies, the economic growth rate of Germany and Japan was much slower than that of the United States and Eurozone. Asia has seen the strongest economic recovery among the emerging market and developing countries, while the sub-Saharan Africa’s economic growth performance was less than expected. China has maintained a worldwide leading in economic development and epidemic prevention and control, and the overall national economy is running in an appropriate range. Throughout 2021, China’s Gross Domestic Product (GDP) increased by 8.1%, an increase of 5.8 percentage points over the previous year, becoming a leader of global economy recovery. The petrochemical industry development maintained stable, and the major economic indicators grew rapidly. From the perspective of trend, it shows a feature of “high before and low after”, indicating the increase of the market volatility and downward pressure.

In 2021, facing the profound changes and epidemic that unseen in a century, the Group promoted the operation of the Health, Safety and Environment (HSE) management system, focused on system optimization, reform management, technological innovation and completed the production and operation goals and tasks relatively well. The total volume of crude oil processed for the year was 13.7644 million tons, a year-on-year decrease of 6.18%; the volume of refined oil produced for the year was 7.9688 million tons, representing a year-on-year decrease of 4.90%; the total volume of goods within the main commodities categories was 13.4468 million tons, representing a year-on-year decrease of 3.66%. In 2021, the Company’s turnover was RMB89,198 million, representing a year-on-year increase of 19.53%. The product sale rate was 100.05% and the payment return rate was 100%. Product quality continued to be well maintained and stable.

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Report of the Directors (continued)

In 2021, the Group launched a special safety campaign, released the HSE management system, and promoted the deepening of the system. The Group strictly implemented the production and operation management rules, continued to promote operation limit management, process alarm management and change management, strengthened preventive maintenance, and carried out in-depth investigation and management of invisible dangers. The annual general device operation rate reached 97.84%; unplanned lockout happened 8 times, decreased by 52.94%.

The Group continued to fight against pollution, conducted Leak Detection and Repair (LDAR) testing work and established tracing mechanism of the Volatile Organic Cornpounds (VOCs) boundary pollutant alarm. The annual average value of VOCs concentration at plant boundary reached 104.09 mircrograms per cubic meter. The Group intensified efforts to conserve energy and reduce carbon emission, implemented energy efficiency improvement projects and carried out energy-saving renovation of heating furnaces. The energy consumption per RMB10,000 in output value was reduced by 7.12 percentage points, the carbon emission intensity was reduced by 9.08 percentage points and 2.13 million tons of water was saved. The Group managed to reduce carbon emission compliance costs by RMB20.95 million. In 2021, the Company’s total comprehensive energy consumption was 6.323 million tons of standard coal. The comprehensive output value consumption was 0.991 tons of standard coal/RMB10,000, representing 49.02 million tons reduce over last year. The annual Chemical Oxygen Demand (COD) emissions decreased by 1.92%, sulfur dioxide emissions decreased by 4.96% and nitrogen oxide emission decreased by 12.78%, as compared with the same period last year. The comprehensive compliance rate of effluent wastewater was 99.95%, the compliance rate of controlled waste gas was 100%, and the rate of proper treatment and disposal of hazardous waste was 100%.

The Group successfully completed overhaul transformation through carefully confirming the shutdown plan, approving the maintenance project, implementing the contractor, and purchasing key materials. The Group realized zero confirmed or suspected confirm case by implementing the routine Covid-19 control measures and promoting the vaccination, the vaccination rate of employees was 91.01%.

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Report of the Directors (continued)

Driven by factors such as the imbalance between supply and demand and the excessive issuance of currency, the domestic oil and petrochemical products price rose significantly, and the price of some major chemicals hit a record high. As of 31 December 2021, the weighted average prices (excluding tax) of the Company’s synthetic fibers, resins and plastics, intermediate petrochemical products, and petroleum products had increased by 38.58%, 14.89%, 43.12% and 31.43%, respectively as compared with the previous year.

In 2021, the international crude oil prices was on a volatile upward trend, the oil demand drove up the price. The disturbance brought by the epidemic was difficult to stop the process of demand recovery.

As of 31 December 2021, the Company had processed a total of 13.7644 million tons of crude oil (of which 404.7 thousand tons were processed on order), indicating a year-on-year decrease of 6.18%, mainly due to the implementation of the largest overhaul in the Company’s history this year. The cost of crude oil processing for the year 2021 was RMB3,232.29/ton, representing an increase of RMB852.27/ton or 35.81% year-on-year.

The total cost of crude oil processing for the year increased by RMB9,222 million, or 27.15%, compared with the same period last year, accounting for 58.12% of the total cost of sales.

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Report of the Directors (continued)

In 2021, the Group prioritized effectiveness and emphasized the optimization of the whole chain of production, purchase, sale, storage and transportation. The Group adjusted the proportion of light and heavy crude oil procurement, and improve the flexibility and processing alternatives of the crude oil procurement. In order to ensure the energy supply, adjustments were introduced timely into plant operation, product structure, production in jet fuel, diesel oil and liquefied gas, and the fuel blending scheme for low-sulfur heavy ships was optimized. While the crude oil processing volume dropped by 6.18%, the gasoline production increased by 123,400 tons year-on-year; the diesel-gasoline ratio was 1.00, representing a year-on-year decrease of 0.22; the high-grade gasoline accounted for 43.17% with an increase of 8.19 percentage point year-on-year.

By optimizing the production plan, adjusting product structures, increasing the output and proportion of high value-added, new and differentiated products, and effectively utilizing the production capacity of profitable devices, the Group successfully increased production of propylene to 6,838 tons, hyperbaric polyethylene to 7,493 tons, and ethylene oxide to 22,600 tons and increased the yield of chemical light oil by 0.75 percentage points. The Group further deepened the integration of production, marketing, research and application, broadened sale channels of new products. The Group realized its first export of No.92 automotive gasoline and low-sulfur aviation coal with a total export of 39,100 tons and 46,500 tons respectively. The Groupcontinued to conduct cost control, improved the efficiency of input and output of costs, strengthened the management of funds at all levels, and refined the overall planning of funds. By accelerating the promotion of smart warehousing, Since April 2021, plastic products were fully used in shared trays.

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Report of the Directors (continued)

In 2021, the Group issued the 14th Five-Year Plan Outline, specifying the development strategy of oil refining to chemical industry, chemical industry to materials production, materials production to high-end quality, and parks to ecology. The oxidation carbonization production line in 1,500 tons/year PAN-based Carbon Fiber Phase II Project was completed in May 2021, and the trial loading of the hydrogen fuel battery supply centre (phase I) was complete by the end of December 2021. The Group completed the mass production of the carbon fiber torch, Feiyang, in Beijing 2022 Winter Olympics. The carbon fiber composite material was certified by the aerospace quality management system, and was successfully applied to the high-speed rail for the first time. The demonstration photovoltaic power station was successfully connected to the grid for power generation, creating a new engine for the transformation and development of the company.

In 2021, the Group established a carbon fiber company, a joint laboratory for Hydrogen Energy was established with East China University of Science and Technology, and a joint innovation laboratory with Donghua University. A total of 21 strategic cooperation agreements have been signed, and the pace of Industry, Academia, Research and Application has been accelerated. The Group adopted on-site safety control projects to help standardize the construction operation billing process, and officially put intelligent robots into use to improve the fine management of the warehouse.

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Report of the Directors (continued)

In 2021, the Group comprehensively promoted the three-year action of deepening reforms, deepened the management improvement actions based on the world-class standard, expanded the connotation of Do It Right Now, and improved the level of information-based management. The Group comprehensively promoted the construction of standardized teams, standardized sites and standardized positions, started 5S (SEIRI, SEITON, SEISO, SEIKETSU and SHITSUKE) management work, and improved the appearance and working environment.

In 2021, the Group adjusted and optimized the management system, established a carbon fiber industry development center, completed the integration of the polyester department and the plastic department, and optimized the organizational management system and operation mechanism of the Refining Department, in order to improve the efficiency of organization operation. The Group also optimized and adjusted management functions and organizational structures such as joint ventures and cooperation, retiree management, and business research, etc.

In 2021, the Group explored the professional manager system, formulated the business performance assessment and salary management measures of management members, and completed the term system and contract signing of members of the management of the Company. The Group developed the construction of cadre competence model and improved the mechanism of open recruitment for cadres. The Group also explored a new mechanism of salary distribution for researchers, promoted market compensation benchmarking, and formulated an incentive implementation plan for the project chief responsibility system.

As of 31 December 2021, the net reduction of employees of the Group was 236 (including voluntary resignation and retirees), accounting for 2.79% of the total 8,466 employees registered at the beginning of the year.

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Report of the Directors (continued)

The Group’s financial conditions and the results of its operations are susceptible to accounting methods, assumptions and estimates applied in preparing the financial statements. Such assumptions and estimates are based on the historical experience of the management of the Group and on various other assumptions that the management believes to be reasonable, and form the basis for the management to make judgements about matters that cannot be confirmed by other sources. On an on-going basis, the management evaluates its estimates. Actual results may differ from those estimates as the actual circumstances, environment and conditions change.

The selection of key accounting policies, the judgements and other uncertainties in the course of applying of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors to be considered when reviewing the financial statements. The principal accounting policies are set forth in the financial statements. The Company’s management believes that the following critical accounting policies involve the most significant judgements and estimates used in the preparation of the financial statements.

The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows. The Group determines the business model for managing financial assets at the level of the financial asset portfolio. The factors considered include the way to evaluate and report the performance of financial assets to key management personnel, the risks affecting the performance of financial assets and their management methods, and the way for relevant business management personnel to obtain remuneration, etc.

When evaluating whether the contractual cash flow of financial assets is consistent with the basic lending arrangements, the Group has the following main judgments: whether the time distribution or amount of the principal may change in the duration due to prepayment and other reasons; whether the interest only includes the time value of money, credit risk, other basic lending risks and the consideration of cost and profit. For example, does the amount of prepayment only reflect the outstanding principal and the interest based on the outstanding principal, as well as the reasonable compensation paid for the early termination of the contract.

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Report of the Directors (continued)

Inventories are valued at the lower of cost and net realizable value. The net realizable value is determined based on the estimated selling prices in the ordinary course of business less the estimated costs to completion, and other costs necessary to make the sale. These estimates are based on the current market condition and historical experience of selling products of similar nature. It could change significantly as a result of competitor actions in response to changes in market conditions.

Management reassesses these estimations at the end of each reporting period to ensure inventory is shown at the lower of cost and net realizable value.

At the end of each reporting period, the Group estimates the recoverable amount of an asset or a cash-generating unit (“CGU”) (a portion of which related to certain production facilities), at the higher of its fair value less costs of disposal and its value in use, to determine the impairment losses. If circumstances indicate that the carrying amount of the asset or CGU may not be recoverable, the asset or CGU may be considered “impaired”, and an impairment loss may be recognized.

The recoverable amount of assets or CGUs is the higher of the fair value less costs of disposal and value in use. As the fair value of certain assets or CGUs may not be publicly available, the Group uses all readily available information in determining an amount that is a reasonable approximation of recoverable amount, including estimates based on reasonable and supportable assumptions for projections of product sales and operating costs and discount rate. In particular, in determining the value in use of the Group’s specific CGUs, significant judgements are required on the accounting estimates which are based on the assumptions relating to product sales growth rates, related costs growth rates and discount rate applied.

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Report of the Directors (continued)

Property, plant and equipment, are depreciated on a straight-line basis over the estimated useful lives of the assets, after taking into account the estimated residual value. Management reviews the estimated useful lives and estimated residual value of the assets annually in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives are based on the Group’s historical experience with similar assets, taking into account anticipated technological changes. The depreciation expense for future periods is adjusted if there are significant changes from previous estimates.

The following table sets forth the Group’s sales volumes and net sales (net of sales taxes and surcharges) for the years indicated:

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Report of the Directors (continued)

The following table sets forth a summary of the Group’s consolidated statement of profit or loss for the years indicated (prepared under IFRS):

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Report of the Directors (continued)

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Report of the Directors (continued)

Comparison between the year ended 31 December 2021 and the year ended 31 December 2020 is as follows:

In 2021, net sales of the Group amounted to RMB75,888.8 million, an increase of 23.27% from the previous year’s RMB61,560.9 million. As of 31 December 2021, the weighted average prices (excluding tax) of synthetic fibers, resins and plastics, intermediate petrochemical products and petroleum products of the Group increased by 38.73%, 15.08%, 43.19% and 42.87% year-on-year respectively.

In 2021, the Group’s net sales of synthetic fiber products amounted to RMB1,374.8 million, representing a decrease of 6.63% from the previous year’s RMB1,472.4 million, which was mainly due to the reduction in production resulted from the overhaul and perennial loss of acrylic fiber, and the lower sales during the Reporting Period resulted from the decrease of sales of synthetic fiber products. Sales volume of synthetic fibers decreased by 32.69% year-on-year, while the weighted average sales price increased by 38.73%. Meanwhile, the sales volume of acrylic fibers, the main product of the synthetic fibers segment, decreased by 36.90% year-on-year. Net sales of acrylic fibers, polyester fibers and other products accounted for 84.10%, 12.11% and 3.79% of the total sales of synthetic fibers segment respectively.

Net sales of synthetic fibers accounted for 1.8% of the Group’s net sales in the current year, representing a decrease of 0.6 percentage points from the previous year.

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Report of the Directors (continued)

In 2021, the Group’s net sales of resins and plastics products amounted to RMB9,962.7 million, an increase of 5.76% from the previous year’s RMB9,419.7 million, which was mainly due to the scene of the downstream market rebounded, and the sales prices of resin and plastic products generally rose, resulting in the increase of sales during the Reporting Period. The weighted average sales price of resins and plastics increased by 15.08%, while the sales volume of resins and plastics products decreased by 8.09% year-on-year. Meanwhile, the weighted average sales price of polyethylene and polypropylene increased by 18.23% and 11.68%, and the weighted average sales price of polyester chips increased by 28.93% year-on-year. The sales of polyethylene, polypropylene, polyester chips and other products accounted for 43.23%, 36.57%, 16.89% and 3.31% of the total sales of resins and plastics segment respectively.

The net sales of resins and plastics accounted for 13.10% of the Group’s net sales in the current year, a decrease of 2.2 percentage points from the previous year.

In 2021, the Group’s net sales of intermediate petrochemical products amounted to RMB10,780.5 million, an increase of 31.38% from the previous year’s RMB8,205.8 million, which was mainly due to the rise in unit price of intermediate petrochemical products driven by the sharp rise in international crude oil prices. The weighted average sales price of intermediate petrochemical products increased by 43.19% year-on-year, and its sales volume decreased by 8.25% year-on-year. The sales of p-xylene, ethylene oxide, pure benzene, ethylene glycol and other products accounted for 24.24%, 20.52%, 17.01%, 1.78% and 36.45% of the total sales of intermediate petrochemical products respectively.

The net sales of intermediate petrochemical products accounted for 14.2% of the Group’s net sales in the current year, an increase of 0.9 percentage points from the previous year.

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Report of the Directors (continued)

In 2021, the Group’s net sales of petroleum products amounted to RMB41,884.4 million, an increase of 38.97% from the previous year’s RMB30,139.6 million, which was mainly due to the rise in the price of petroleum products driven by the sharp rise in international crude oil prices. The weighted average sales price of petroleum products increased by 42.87% year-on-year, and sales volume decreased by 2.73%.

The net sales of petroleum products accounted for 55.2% of the Group’s net sales in the current year, an increase of 6.2 percentage points from the previous year.

In 2021, the Group’s net sales of trading of petrochemical products amounted to RMB11,051.4 million, a decrease of 4.54% from the previous year’s RMB11,577.3 million. Mainly due to the decrease in customer purchase demand of the subsidiary China Jinshan Associated Trading Corporation and Shanghai Jinshan Trading Corporation, the sales of this year decreased by RMB57 million and RMB769 million respectively.

The net sales of trading of petrochemical products accounted for 14.6% of the Group’s net sales in the current year, a decrease of 4.2 percentage points from the previous year.

In 2021, the Group’s net sales of other products amounted to RMB835.0 million, an increase of 11.92% from the previous year’s RMB746.1 million.

The net sales of other products accounted for 1.1% of the Group’s net sales in the current year, a decrease of 0.1 percentage points from the previous year.

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Report of the Directors (continued)

Cost of sales and expense consist of cost of sales, sales and administrative expenses, other operating expenses and other operating income, etc.

In 2021, the Group’s cost of sales and expenses amounted to RMB74,456.6 million, an increase of 20.04% from RMB62,027.1 million in 2020. Cost of sales and expenses of synthetic fibers, resins and plastics, intermediate petrochemical products, petroleum products, petrochemical products and other products amounted to RMB2,228.9 million, RMB9,910.5 million, RMB11,415.6 million, RMB38,917.4 million, RMB11,007.7 million and RMB976.5 million respectively, representing an increase of 21.36%, an increase of 21.49%, an increase of 49.73%, an increase of 20.34%, a decrease of 4.57% and an increase of 82.49% year-on-year respectively.

Compared with the last year, the cost of sales and expenses of synthetic fibers, resins and plastics, intermediate petrochemical products, petroleum products, petrochemical products increased this year, which was mainly due to the sharp increase in crude oil prices and thus the increase in corresponding costs.

In 2021, the Group’s cost of sales amounted to RMB74,298.0 million, an increase of 20.03% from previous year’s RMB61,901.1 million, which was mainly due to the rise in crude oil prices leading to the rise in costs and the lower-than-expected operating benefits of certain production facilities in 2021, and a number of production facilities were idle or backward production technology, resulting in the provision for impairment of long-term assets of RMB587.6 million. Cost of sales accounted for 97.90% of the net sales this year.

In 2021, the Group’s sales and administrative expenses amounted to RMB368.2 million, a decrease of 24.29% from the previous year’s RMB486.3 million. This was primarily due to the handling and miscellaneous handling fees with amount of RMB120.9 million were reclassified to cost of sales.

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Report of the Directors (continued)

In 2021, the Group’s other operating income amounted to RMB125.3 million, a decrease of 15.74% from previous year’s RMB148.7 million. This was mainly due to the decrease of RMB25 million in subsidies of R&D projects, leading to a reduction in other operating income.

In 2021, the Group’s other operating expenses amounted to RMB44.7 million, an increase of 80.97% from previous year’s RMB24.7 million. This was primarily due to an increase in other operating expenses as a result of the increase of RMB17.0 million for the purchases of rights of carbon emission during the year.

In 2021, the Group’s operating profit amounted to RMB1,432.2 million, an increase of RMB1,898.4 million from the operating loss of RMB466.2 million in the previous year. Profit from operations was significantly higher as a result of the increase in the price of crude oil and the impact of the domestic economy recovers from COVID-19’s influence on downstream demand.

In 2021, the operating loss of synthetic fibers amounted to RMB854.1 million, an increase of RMB489.9 million from the operating loss of RMB364.2 million in the previous year. The weak market demand of the textile industry, the downstream market of synthetic fibers segment, together with the low-capacity utilization rate impacted from major overhaul resulted in increase of operating losses in the synthetic fibers sector during the Reporting Period. Due to a number of production facilities were idle or backward production technology, the long-term asset impairment provision of RMB135.7 million was made for the synthetic fiber segment in 2021.

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In 2021, the operating profit of resins and plastics amounted to RMB52.2 million, a decrease of RMB1,209.9 million from the operating profit of RMB1,262.1 million in the previous year. The decrease in operating profit in the year was mainly because the rise in international crude oil prices resulted in the sharp rise in costs while the supply in the downstream market was saturated, and thus the increase in sales price was lower than that in cost price.

In 2021, the operating loss of intermediate petrochemical products amounted to RMB635.1 million, a decrease of RMB1,216.7 million from the operating profit of RMB581.6 million in the previous year. The decrease in gross profit of petrochemical products as compared with the previous period was mainly because the rise in international crude oil prices resulted in the sharp rise in costs while the supply in the downstream market was saturated, and thus the increase in sales price was lower than that in cost price. In 2021, provision for impairment of long-term assets of RMB296.3 million was made for some devices as increasing production cost is not expected to be covered by the estimated selling price of the products due to deteriorating market conditions.

In 2021, the operating profit of petroleum products amounted to RMB2,967.0 million, an increase of RMB5,165.7 million from the operating loss of RMB2,198.7 million in the previous year. The increase in operating profit in the year was mainly due to an increase of sales price driven by a rise in international crude oil price.

In 2021, the operating profit of the trading of petrochemical products amounted to RMB43.7 million, an increase of RMB1.7 million from the operating profit of RMB42.0 million in the previous year, which was no significant change compared with the previous year

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Report of the Directors (continued)

In 2021, the Group’s other operating loss amounted to RMB141.5 million, a decrease of RMB352.5 million from the other operating profit of RMB211.0 million in the previous year, this was primarily due to higher gross loss on spontaneous power sales driven by the rise of coal prices.

In 2021, the Group’s net financial income amounted to RMB414.6 million, an increase of RMB82.3 million from the net financial income of RMB332.3 million in the previous year, mainly due to an increase in the average balance of deposit during the Reporting Period, resulting in an increase of our interest income by RMB77.6 million from RMB431.2 million in 2020 to RMB508.8 million in 2021.

In 2021, the Group’s profit before taxation amounted to RMB2,721.1 million, an increase of RMB2,130.3 million from the profit before taxation of RMB590.8 million in the previous year.

The income tax expense of the Group amounted to RMB644.5 million in 2021 and the income tax benefit amounted to RMB65.6 million in 2020. This was primarily due to an increase in the profit before taxation of the Company which lead to a rise in tax payable.

In accordance with The Enterprise Income Tax Law of the PRC (amended in 2018), the income tax rate applicable to the Group in 2021 is 25% (2020: 25%).

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Report of the Directors (continued)

In 2021, the Group’s profit after tax amounted to RMB2,076.6 million, an increase of RMB1,420.2 million from the profit after tax of RMB656.4 million in the previous year.

The Group’s primary sources of capital are operating cash inflows and loans from related parties and banks, The Group’s primary uses of capital are costs of goods sold, other operating expenses and capital expenditure.

In 2021, the Group’s net cash inflows generated from operating activities amounted to RMB3,950.0 million, representing an increase of RMB2,270.2 million from the net cash inflows of RMB1,679.8 million in the previous year. During the Reporting Period, with profitability in operating, the Group’s cash inflows generated from operating activities in 2021 amounted to RMB4,411.7 million, representing an increase of RMB2,416.6 million from the cash inflows generated from operating activities of RMB1,995.1 million in the previous year. The income tax was paid in 2021 amounted to RMB351.6 million, an increase of RMB107.7 million from the income tax payment of RMB243.9 million in the previous year.

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Report of the Directors (continued)

By the end of 2021, the Group’s total borrowings decreased by RMB2,306.0 million to RMB2,259.8 million as compared to the end of last year, mainly due to the decrease of short-term bonds and short-term borrowings by RMB3,017.8 million and RMB8.0 million, respectively, and the increase of long-term borrowings by RMB700.0 million as well as the increase of long-term borrowings due within one year by RMB19.8 million.

The Group managed to maintain its gearing ratio at a safe level by strengthening its management of liabilities (such as borrowings) and enhancing its control over financial risks. The Group generally does not experience any seasonality in borrowings. However, due to the fact that the Group’s capital expenditure is, by nature, planned in advance, long-term bank loans can be suitably arranged in advance of expenditures, while short-term borrowings are used to meet operational needs. The terms of the Group’s existing borrowings do not restrict its ability to distribute dividends for its shares.

As of 31 December 2021, the Group’s gearing ratio was 35.26% (2020: 34.25%). The ratio is calculated using this formula: total liabilities/total assets multiply by 100%.

The Group owns various technology development departments, including Advanced Materials Innovation Research Institute, Petrochemical Research Institute, Plastic Research Institute and Environmental Protection Research Institute, which are responsible for research and development of new technologies, products, processes, equipment and environmental protection. The Group’s research and development expenses for 2019, 2020 and 2021 amounted to RMB93.0 million, RMB110.6 million and RMB94.3 million, respectively. The decrease was mainly due to the decrease in material cost for research and development of technology in equipment and products.

The Group does not rely on any patents, licenses, industrial, commercial or financial contracts or new production processes in any material respect.

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Report of the Directors (continued)

Please refer to note 35 to the financial statements prepared under IFRS in the full text of the 2021 Annual Report for details of the Group’s capital commitments. The Group did not provide any guarantee to external parties during the Reporting Period.

The following table sets forth the Group’s obligations to repay loan principal in future as at 31 December 2021:

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Report of the Directors (continued)

As at 31 December 2021, the Company had more than 50% equity interest in the following principal subsidiaries: