Essar Oil Ltd’s financial performance for the quarter ended September (Q2) was hit because the rupee fell sharply against the dollar.
For the quarter, the firm incurred a forex loss of Rs 407 crore; it had gained Rs 115 crore in the same period last year. That was a key reason for the weak operating performance. Operating profit fell 77% year-on-year to Rs 137 crore.
Fuel oil tanks at Essar Oil’s refinery complex at Vadinar.
Essar Oil’s total revenue rose 19% to Rs 13,026 crore. The firm reported an improvement in the gross refining margins (GRMs) for the September quarter. Refining margin is the difference between the total value of petroleum products produced by an oil refinery and the price of crude oil.
Core GRMs, which are without the sales tax benefit, rose to $5.1 (around Rs 252 today) a barrel from $4.7 in the same period last year and $4.2 in the June quarter.
Also See | Quarterly performance (PDF)
Although refining margins were better, interest and depreciation costs, along with the weak operating performance, ate into profitability. As a result, it posted a net loss of Rs 166 crore against a net profit of Rs 130 crore a year ago.
Essar Oil’s refinery throughput declined sequentially due to shutdown for 13 days during the quarter. The company has completed a 35-day planned shutdown as a part of its phase-I expansion to 18 million tonnes per annum (mtpa).
Essar Oil said a “ramp-up of all new expansion units with increased refinery throughput of 18 mtpa will commence in the March 2012 quarter”.
Analysts expect the firm to post healthy GRMs from the next fiscal. Meanwhile, the stock has underperformed the BSE-100 and the oil and gas index since the beginning of this fiscal year.
A key trigger for the stock will be an improvement in earnings after the company’s first phase of expansion is commercialized.