Essar Oil posts Rs 200 cr profit in Q4 on higher refining margins

Essar Oil returns to profit in Q4

Higher refining margins helped India’s second largest private refiner, Essar Oil, report  net profit of Rs 200 crore in the March quarter as compared to a loss of Rs 608 crore a year ago.

The company said in a statement that Essar Oil earned $9.06 on turning every barrel of crude oil into fuel during January-March quarter as compared to $4.60 per barrel gross refining margin in the same period a year ago.

The almost doubling of refining margin reflected “the higher complexity benefits post completion of expansion and optimization projects”, it said.

Revenues were up 34 per cent
 at Rs 25,757 crore as the company’s only refinery at Vadinar in Gujarat processed 26 per cent higher crude oil at 5.08 million tonnes.

During the quarter, Vadinar Refinery processed 5.08 million tonnes of crude, and continues to function at over its nameplate capacity of 20 million tonnes per annum with all units stabilised.

Share of Ultra Heavy Crude in refinery’s crude diet rose to 62 per cent from 24 per cent in the corresponding quarter in FY12.

“Overall, the refinery processed 88 per cent of heavy and ultra heavy crude in Q4FY13. Production of valuable Middle and Light distillates improved to 84 per cent of the refinery’s product slate from 69 per cent over the same period last year,” it said.

For the full financial year ended March 31, 2013 (FY13), gross revenue was up 53 per cent at Rs 96,797 crore. Essar cut net loss to Rs 1180 crore in the fiscal from Rs 1,285 crore net loss in 2011-12.

It earned a gross refining margin (GRM) of $7.96 per barrel in fiscal as against $4.23 per barrel in FY12.

Essar Oil Managing Director & CEO L K Gupta, “We had a very eventful year in FY13 during which we have achieved a number of milestones.”

Vadinar Refinery, at 20 million tonnes per annum capacity and 11.8 complexity is India’s second largest single site refinery and amongst the most complex globally, set up at a very competitive capex of approx Rs 24,000 crore, whose replacement cost today is between 1.75-2 times that figure.

“The refinery has demonstrated excellent operating performance with a very strong focus on safety and has consistently outperformed the benchmark IEA margins, as was targeted,” he said.

Company CFO said Suresh Jain said, “Benefit of expanded capacity and complexity was available for only three quarters of the year and the performance of the refinery post completion of expansion has been consistent.”

“Our primary focus is now to align our asset liability mismatch by dollarising our debt, which will also lower our interest cost, and in turn improve our free cashflows significantly,” he said.

Going forward, as the government continues with its drive to get diesel prices at par with market rates, the company will also focus more on retail in the domestic market, Gupta said.

Essar Oil’s share of the domestic business grew to 69 per cent of the total revenue pie from the preceding quarter’s 65 per cent and Jain said it will aim at stabilising the number in the 65-70 per cent range in FY14.

On the issues surrounding dealings with Iran, which has been placed under global sanctions, Gupta said Essar Oil is complying with the existing guidelines on import limits and payments as prescribed by the Indian government.

“We are importing within the permissible limits set by the government guidelines. Last year, we imported 40 per cent of our total crude from Iran, but this year, with the expansion, it came down to 20 per cent,” Gupta said, but declined to elaborate due to the sensitivity of matter.

There was also a Rs 111-crore one-time exceptional item which ate into the company’s bottom line and Jain described it as the interest rate impact following the corporate debt restructuring. The company exited the CDR mechanism in March 2013.

Source : Business Today.

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