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Business News/ Market / Mark-to-market/  Petronet LNG: lower volumes weigh on December quarter
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Petronet LNG: lower volumes weigh on December quarter

Volume processed in the quarter stood at 141.41 tBtu, against 150.47 tBtu in the September quarter, as demand remained relatively weak

The Dahej terminal operated at the highest capacity utilization of 117% in the September quarter, which declined to 110% in the December quarter, says the company. Premium
The Dahej terminal operated at the highest capacity utilization of 117% in the September quarter, which declined to 110% in the December quarter, says the company.

After a fantastic September quarter, Petronet LNG Ltd’s results for the December quarter are disappointing, to say the least. Sure, net profit increased by 20% over the same period a year ago to 162 crore, but fell by 38% compared with the September quarter. Also, it’s worth noting that year-on-year (y-o-y) net profit growth got a boost from a decline in depreciation costs and interest expenses and slower rate of growth in tax outgo. Operating profit in the December quarter declined by 2.6% y-o-y to 341 crore.

One reason that affected the company’s financial performance is the fact that volumes dropped sequentially. Petronet LNG’s total volume processed in the December quarter stood at 141.41 trillion British thermal units (tBtu), against 150.47 tBtu in the September quarter, as demand remained relatively weak. Analysts maintain that the September quarter was exceptionally good for the company and cannot really be a benchmark. The company maintains that its Dahej terminal operated at the highest capacity utilization of 117% in the September quarter, which declined to 110% in the December quarter.

Moreover, Petronet LNG did not earn any marketing margins on its spot volumes, point out analysts. In fact, that measure was in the negative territory last quarter. According to Dhaval Joshi, analyst, Emkay Global Financial Services Ltd, Petronet LNG’s marketing margin on spot volumes was a negative 70 cents a million British thermal unit (mmBtu) compared with 32 cents per mmBtu in the September quarter.

Analysts may well have to clip their earnings estimates after the results. The Petronet LNG stock has gone up by 34% so far this fiscal year, which is not bad. The company is expanding its Dahej terminal capacity to 15 million tonne per annum (mtpa) from 10 mtpa. This capacity expansion is expected to be completed by the end of 2016.

Meanwhile, worries about lower capacity utilization and slower-than-expected volume ramp-up at Petronet LNG’s Kochi terminal continue to persist. The Kochi terminal made an Ebitda loss of 33 crore in the December quarter. Ebitda is short for earnings before interest, taxes, depreciation and amortization. Currently, spot LNG prices are lower.

Investors would do well to watch out whether demand improves at these price levels. Unfortunately, lower prices did not lead to better demand in the December quarter.

The writer doesn’t own shares in the above-mentioned companies.

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ABOUT THE AUTHOR
Pallavi Pengonda
Pallavi is a deputy editor at Mint and heads the Mark to Market team. This column covers wide-ranging topics related to the stock markets, offering an in-depth analysis of financial reports of companies. She writes and edits across verticals, covering the breadth of the Indian stock market. Pallavi has done her master of management studies, specializing in finance.
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Published: 05 Feb 2015, 08:01 PM IST
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