HPCL net profit dips 3 pc in Q2 on lower refinery margins

Hindustan Petroleum Corp Ltd (HPCL) on Thursday reported a 3 percent drop in its second-quarter net profit as refinery margins halved and the company posted lower inventory gains. Net profit at Rs 1,052 crore in the July-September 2019 quarter was lower than Rs 1,092 crore net profit in the corresponding period a year ago, HPCL Chairman and Managing Director M K Surana told reporters here.

HPCL, which operates two refineries at Mumbai and Visakh in Andhra Pradesh, earned USD 2.83 on turning every barrel of crude oil into fuel during the September 2019 quarter as compared to a gross refining margin (GRM) of USD 4.81 per barrel last year, he said adding that the margins were lower also because of a planned shutdown at Visakh unit. The company recorded an inventory gain of Rs 53 crore in July-September, compared to Rs 1,276 crore gain posted a year ago.

A company records inventory gain in its books when it buys raw material (crude oil) at a particular price but by the time it is able to ship it to India and process it into crude oil, the international rates have gone up. And, because pump rates are benchmarked at international prices, the company records inventory gains. Inventory loss happens when the reverse happens. He said the September 2019 quarter gross refining margin without the inventory impact would be USD 2.55 a barrel, compared with USD 2.69 a year ago.

During July-September 2019, the domestic sales of petroleum products increased to 8.95 million tonnes, registering a growth of 1.3 percent over the corresponding quarter of the previous year. The sales of petrol increased by 6.3 percent, LPG by 11.2 percent, and that of bitumen by 8.1 percent over the corresponding period of the previous financial year. The refineries at Mumbai and Visakh processed 4.56 million tonnes of crude during July-September 2019, against 4.76 million tonnes during July-September 2018. "Lower thruput at refineries was mainly due to planned shutdown at Visakh Refinery in September 2019," he said.

HPCL enhanced its pipeline network length and capacities during the quarter. Its Visakh-Vijayawada-Secunderabad-Pipeline (VVSPL) capacity expansion project has been commissioned ahead of schedule and put into operation. The project has enhanced VVSPL capacity from 5.38 million tonnes per annum to full-design capacity of 7.7 MMTPA.

The 168.45 km Uran-Chakan LPG Pipeline has also been completed during the quarter which shall lead to enhanced logistics efficiencies in addition to the environmental benefits. HPCL strengthened the supply infrastructure by the completion of various projects during the quarter including 60,000 tonnes of bottling capacity augmentation both at Jatni (Odisha) and Gandhinagar (Gujarat) LPG plants and tank wagon decantation facilities at Kolkata Terminal.

ATF (jet fuel) supply infrastructure has been enhanced with the commissioning of new aviation service facilities at Ranchi and Kolhapur. LPG cylinders storage facility to store about 34,000 filled LPG cylinders has been completed in Leh to ensure continued availability of LPG cylinders for distribution in the Ladakh region during the winter period. During the quarter, a total of 268 new retail outlets were commissioned taking the total retail outlet network to 15,739 as of September 30, 2019. Also, 87 new LPG distributorships were commissioned taking the total LPG distributorships to 5,979 as of September 2019.

"HPCL refineries are being upgraded to produce transportation fuels meeting BS-VI (Euro-VI emission grade equivalent) specifications and HPCL will be ready to roll-out BS-VI fuel on a pan-India basis as per the scheduled date," he said adding the company's Visakh refinery modernization project and Mumbai refinery expansion project are in progress. For the April-September period, HPCL recorded a profit after tax of Rs 1,863 crore as compared to a net profit of Rs 2,811 crore during the corresponding six months' period of the previous financial year 2018-19.

"Profits for the current period are stable in spite of inventory losses, reduced cracks (or margins) on petrol and LPG," he said. Gross sales revenue for the corporation stood at Rs 1,40,694 crore during the April-September 2019 period as compared to Rs 1,45,988 crore a year ago.

The combined GRM for the April-September 2019 period was USD 1.87 per barrel as compared to USD 5.93 per barrel in the corresponding period of the previous year, mainly due to the planned shutdown of the Mumbai refinery during April-June and of Visakh refinery in September, he added.

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