LOWER government support in the form of oil bonds and lesser discounts from oil producing companies have badly hit HPCL, the third largest oil marketing company in the country, during the second quarter of the current fiscal.
The company continued to suffer from under-recoveries as prices of petroleum products in the local markets remained stable during the quarter despite substantial rise in crude oil prices globally. Discounts from the upstream petroleum companies fell 24%. Further, the spurt in other income was negated by a rise in depreciation and interest costs. As a result, net profit declined 30% compared to the year-ago level. Even though net sales increased by 2%, total revenue including oil bonds fell by a tad 0.5%. Oil bond support from the government dropped by 19%.
A large chunk of HPCL’s sales are derived from the traded goods. The company’s owned refining capacity is significantly lower compared to its market sales. The company has to make these purchases at market rates, which are dollar-denominated. The appreciation in rupee over last 12 months has helped the company in containing its losses despite rising prices of crude oil and petroleum products. The crude throughput of HPCL’s two refineries at Mumbai and Vizag put together was around 3% higher at 4.3 million tonne during the quarter ended September 2007. The gross refining margins at both the refineries improved marginally on Y-o-Y basis. However, the margins were sizably lower compared to June 2007 quarter.
The company, which currently has nearly 16.8 million tonne per annum (MTPA) of refining capacity, has plans to add another 24 MTPA capacities within next five years. This would increase the amount of surplus products for exports making the company less vulnerable to the price regulations in the domestic market. Until these capacities come on stream, HPCL’s future performance will largely depend upon the government policies.
The company continued to suffer from under-recoveries as prices of petroleum products in the local markets remained stable during the quarter despite substantial rise in crude oil prices globally. Discounts from the upstream petroleum companies fell 24%. Further, the spurt in other income was negated by a rise in depreciation and interest costs. As a result, net profit declined 30% compared to the year-ago level. Even though net sales increased by 2%, total revenue including oil bonds fell by a tad 0.5%. Oil bond support from the government dropped by 19%.
A large chunk of HPCL’s sales are derived from the traded goods. The company’s owned refining capacity is significantly lower compared to its market sales. The company has to make these purchases at market rates, which are dollar-denominated. The appreciation in rupee over last 12 months has helped the company in containing its losses despite rising prices of crude oil and petroleum products. The crude throughput of HPCL’s two refineries at Mumbai and Vizag put together was around 3% higher at 4.3 million tonne during the quarter ended September 2007. The gross refining margins at both the refineries improved marginally on Y-o-Y basis. However, the margins were sizably lower compared to June 2007 quarter.
The company, which currently has nearly 16.8 million tonne per annum (MTPA) of refining capacity, has plans to add another 24 MTPA capacities within next five years. This would increase the amount of surplus products for exports making the company less vulnerable to the price regulations in the domestic market. Until these capacities come on stream, HPCL’s future performance will largely depend upon the government policies.
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