Chairman’s Statement

Dear Shareholders and Friends,

On behalf of the Board, I would like to report to the shareholders of the Company (“the Shareholders”) on the Company 2018 annual report and express our sincere thanks to the friends supporting the development of the Company.

Never forget why you started and keep forging ahead. In 2018, in the face of the complicated and ever-changing political and economic trends at home and abroad, the Company seized opportunities, worked hard against challenges and acted proactively and thus achieved optimal business performance with its major performance indicators all realizing significant growth. For the year 2018, the Company’s revenue was RMB47.019 billion, representing an increase of 29.9% on a year-on-year basis. The net profit was RMB1.680 billion, representing an increase of 48.6% on a year-on-year basis. The asset-liability ratio remained low and cash flow performance remained strong. The total value of its new contracts was RMB50.927 billion, representing an increase of 30.4% on a year-on-year basis, which means a successful attainment of the target of new contracts in 2018. As at the end of 2018, the Group’s backlog was RMB94.935 billion, representing an increase of 4.3% on a year-on-year basis. After due consideration of the Company’s earnings, return to our shareholders and the needs for future sustainable development as a whole, the Board recommended a final dividend of RMB0.124 per Share for the year 2018. After taking into account the interim dividend of RMB0.100 per Share, the total dividend for the year will be RMB0.224 per Share, representing an increase of 12.0% on a year-on-year basis.

In 2018, the management of the Company led all employees to expand market, consolidate foundation and prevent risks, control cost, push forward optimization and improvement, and achieved stability in the development trend. In respect of the market development, taking the successive commencement of construction of some projects of the “seven major national petrochemical industry bases” and Sinopec Group to build four “world-class refining bases” as the opportunities, we seized possible chances in the market and exerted our competitive advantages to maintain and expand our market shares. In respect of the implementation of projects, by virtue of overall planning and optimizing resources, we worked hard to control the cost of subcontracting and procurement, ensuring that ongoing projects to be carried out smoothly and safely while the quality and progress of the projects fully controlled. In respect of our overseas business, we mainly focused on the sustainable development of the markets we have already accessed to and entered into a series of new contracts in Saudi Arabia, Kuwait and Malaysia. When we cemented recognition from overseas owners by our exceptional performance, we still closely tracked market opportunities in other countries along the Belt & Road, so as to lay foundation for exploiting new overseas markets. In scientific and technological innovations, we worked hard to successfully organise the collaboration of major technologies and the implementation of technological innovation projects, made full use of the distinctive advantages of the R&D center in the development of engineering technology and continuously strengthened the collaboration with famous licensors in the world. We have also created new accomplishments, whereby two of our projects were awarded the 2017 National Prize for Progress in Science and Technology (First Class) and one project was awarded the 2017 National Prize for Progress in Science and Technology (Second Class).

In 2018, the Board earnestly complied with applicable PRC laws and regulations, the articles of association of the Company (the “Articles of Association”) and the responsibilities vested by the Shareholders and ensured the implementation of the resolutions of the general meeting. We strengthened our corporate governance to maximize the return to Shareholders. Our work of all respects obtained satisfactory results. Under the strong support of its independent Directors and Shareholders, the Company obtained the approvals from the independent Shareholder meetings for the relevant continuing connected transactions from 2019 to 2021 as part of the standardized operation thereof through entering into supplementary agreement related to the continuing connected transactions. In October 2018, the term of the second session of the Board and the Supervisory Committee expired. The members of the third session of the Board were then successfully elected and the senior management members were reappointed. Mr. LING Yiqun, the chairman of the second session of the Board and two Directors, Mr. LI Guoqing and Mr. WU Derong did not seek reappointment. During their services at the second session of the Board, they worked diligently and fufilled their duties by platying significant roles in scientific decision-making, corporate governance and the reform and development of the Company. On behalf of the Company, I am sincerely grateful for their hard work and great contributions!

In 2018, the Company proactively performed its social responsibilities. The Company developed, promoted and utilised upgraded refined oil products and new environmental protection and energy saving technologies, and thus promoted in the sustainable development of the Company. This will also make due contribution to the sustainable growth of the energy and chemical industry. The Company fully implemented QHSE (quality, health, safety and environment) management, adhered to the peopleoriented principle, and cared for employees. The Company also paid much attention to the protection of the legitimate interests of stakeholders, such as customers and suppliers, in the areas where the projects are operated and thus promoted the harmonious and stable development of local society. Meanwhile, in response to the regulations of the Hong Kong Stock Exchange on disclosure of environmental, social and governance matters, we released our 2018 Environmental, Social and Governance Report concurrently with this annual report to meet the needs and expectations of investors and all sectors of the society for the relevant information of the Company.

Recently, the international landscape is undergoing complicated and profound changes. Trade protectionism is on the rise and economic globalization encounters many challenges. The flow of international capital, technologies, and talents is slowing down. While developed countries are generally haunted with domestic conflicts, the development of emerging economies have been faithing. And there are, hence, uncertainties existing in the recovery of the global economy. At the same time, there have been great development potential in the world’s technology fields and industries and new technologies, new industries and new mode are booming. In China, the economic development is also experiencing profound changes. The traditional fast-growth mode featured by low-cost factors and large-scale input and at the expense of ecological environment is gradually transformed. This has brought new challenges to the energy engineering industry. Meanwhile, the domestic supply-front reform is further promoted and the industrial structure, consumption structure and energy structure are constantly opitimized. The reform and innovation momentum have been released and the vitality of open economy is bursting out. This has provided the enterprises with favourable environment to promote its fast development.

Never forget why you started and then your mission can be accomplished. Look forward to the future, an important and profound reform is being fermented in the petroleum and petrochemical industries. As China’s economy is transforming towards a highquality development mode, we will stick to the vision of “building a world first-class engineering company”, and adhere to the development strategies of “taking energy and chemical as our basis and seeking innovation driving, global development and value focusing”. We will actively ride the reform waves, follow development requirements, improve development quality, accelerate new market exploration and new business development, and to strengthen the reforms in fields of quality, efficiency and development drivers. Also, we will promote, with all our strength, the Company to stride towards comprehensively sustainable and high-quality development, and thus make contributions to the society, Shareholders and empolyees by our exceptional performances.

YU Baocai

Chairman of the Board

Beijing, the PRC

8 March 2019