HPCL Q1 net profit dips 56% on lower margins

New Delhi: Hindustan Petroleum Corp Ltd (HPCL) on Friday reported 56 percent drop in the June quarter net profit on account of lower refining margins and inventory losses.

Net profit of the state-owned company in the April-June quarter was Rs 925 crore, lower than Rs 2,098 crore in the year-ago period.

"We had an inventory loss of Rs 1,595 crore in first quarter of current fiscal as compared to an inventory gain of Rs 1,935 crore in the corresponding period of the previous fiscal," HPCL Chairman and Managing Director M K Surana told reporters here.

The company earned USD 5.86 on turning every barrel of crude oil into fuel during April-June, 2017-18 as compared to a gross refining margin of USD 6.83 per barrel in the same period of 2016-17, he said.

Inventory loss occurs when the oil prices fall after procurement and before marketing.

For example, if crude oil is purchased at say USD 50 per barrel price, an inventory loss would arise if by the time it is refined and marketed the price falls below that. The loss would be booked as the market rates of products are fixed based on the current global crude oil price.

An inventory gain would be booked if reverse happens -- product prices rise after procurement and before marketing.

Revenue soared to Rs 59,891 crore from Rs 51,600 crore in the first quarter of the previous year.

He said HPCL's Mumbai and Visakh refineries processed 4.49 million tons of crude oil in the quarter, almost unchanged from the previous year.

"Both the refineries are supplying 100 percent of BS-IV grade (Euro-IV emission norm compliant) petrol and diesel with effect from April 1, 2017," he said.

HPCL recorded highest ever market sale of 9.20 million tons of fuel in the quarter, 3.5 percent higher than 8.89 million tons in Q1 of previous fiscal.

"The market sales growth of 3.5 per cent is higher than industry (PSU plus private) growth of 3.4 percent. In the PSU category, HPCL has gained market share of 0.20 percent," he said adding petrol sales rose 9 percent while diesel was up 2.5 percent.

Inventory losses arose because the price of basket of crude India buys, known as Indian Basket, dropped by USD 4.56 per barrel during April-June as against increase of USD 10.89 a barrel in the same period of 2016.

Surana said 83 petrol pumps were commissioned during Q1 taking the total retail outlet network to 14,495. Electronic data capture (EDC) services and mobile wallets for digital transactions is available at more than 96 per cent of the total retail fuel stations as of June.

The expansion of the company's joint venture refinery at Bhatinda in Punjab has been completed raising the capacity to 11.3 million tons from 9 million tons.

For the 2017-18, HPCL plan to invest about Rs 7,100 crore.