BPCL Q2 profit jumps 58% on refining margins, inventory gains2 min read . Updated: 29 Oct 2020, 06:07 PM IST
- The company had an inventory gain of ₹2,503 crore in July-September
- The refinery operating strategy has ensured that it does not have to import petrol to meet the rise in demand currently
Privatisation-bound Bharat Petroleum Corp Ltd (BPCL) on Thursday reported 58% jump in September quarter net profit on the back of inventory gains and a rise in refining margin.
Consolidated net profit at ₹2,589.52 crore in July-September compared to ₹1,502.63 crore in the same period a year ago.
"We had excellent results both physical and financial. First-quarter refinery performance was dismal due to COVID-19 lockdown. Our strategy of buying crude oil prices at low prices in May and June has resulted in substantial refinery margin," BPCL Director (Finance) N Vijayagopal told reporters.
The company earned USD 5.8 on turning every barrel of crude oil into fuel in the second quarter of the current fiscal as compared to a gross refining margin (GRM) of USD 3.38 per barrel.
The company had an inventory gain of ₹2,503 crore in July-September as compared to an inventory loss of ₹26 crore in the year-ago period, he said.
An inventory gain happens when a company buys crude oil at a particular rate but by the time it is able to process it, the prices have gone up. And since the retail rates are benchmarked at prevailing prices, an inventory gain is booked. An inventory loss happens in case of a reverse event.
He said the company's finance cost has come down primarily because of total borrowing coming down by about ₹10,000 crore to ₹27,850 crore as of September 30 and foreign exchange fluctuations.
BPCL's refineries processed 5.63 million tonnes of crude oil in July-September, up from 5.14 million tonnes in the preceding three months but lower than 7.66 million tonnes processed in the year back period.
Sales fell almost 13% to 8.94 million tonnes in the second quarter.
"Sales have come back to the pre-COVID-19 level," he said adding petrol is back to pre-lockdown levels in October while diesel is 94% of the normal levels.
These are expected to improve with the festive season kicking in and improve over the third quarter, he said adding a growth might be visible in the fourth quarter (January-March).
The company's refineries too have increased throughput to 85% in October from 77% in September.
BPCL's strategy, he said, has been to operate its refineries at Mumbai, Kochi in Kerala and Bina in Madhya Pradesh at levels that would be sufficient to meet domestic demand in the country.
The operating rate could be increased to over 100% but that would require exporting diesel, he said.
Also, the refinery operating strategy has ensured that it does not have to import petrol to meet the rise in demand currently.
It could raise the petrol throughput at Kochi from 15% of all products in April to 25% to meet this demand, he said.
"Our strategy has been not to import petrol and not to export diesel," he said.
BPCL has planned a capital spending of ₹8,000 crore in the current fiscal to March 31, 2021. Of this ₹2,500 crore has been spent in the first half.
"We hope to spend all the planned capex and even exceed it," he said adding the spending had been marred due to lockdown in the first quarter.
Revenue from operations was down to ₹65,912.49 crore in July-September from ₹75,056.63 crore a year back.
This story has been published from a wire agency feed without modifications to the text.