ONE of India’s leading oil marketing companies, Hindustan Petroleum (HPCL), reported a net loss for the quarter ended December 2007, despite higher refining margins and increase in government assistance in the form of oil bonds and higher discounts by public sector upstream oil companies.
They were, however, inadequate to fully compensate for the under-recoveries on retail sale of petroleum products. The losses on this acc o u n t continued to pile up thanks to high crude oil p r i c e s during the December 2007 quarter. HPCL’s shares lost 2.9% to close at Rs 264.85 on BSE on Monday. The scrip has lost 34% from its 52-week high of Rs 399.45 achieved on January 3, 2008.
The operating margins of the company in Q3 declined to an abysmally low level of 0.5% of its net sales. As the discounts from upstream oil companies increased, HPCL’s cost of raw materials consumed in proportion to net sales came down slightly. However, the cost of products purchased for resale moved up. This was mainly on account of the fact that nearly one-third of HPCL’s market sales were sourced from other refiners.
During the quarter, HPCL sold 6.43 million tonne of petroleum products as compared to the refinery throughput of 4.32 million tonne. In the Indian petroleum industry, refining of crude oil is a profit-making business, but marketing of those refined products is loss-making due to a cap on selling prices. Thus, HPCL’s efforts to gain market share hit its bottomline. HPCL’s consolidated results for the Q3 have registered net profits of Rs 45.7 crore. This was mainly due to better performance by Mangalore Refinery (MRPL), in which HPCL holds over an one-sixth stake. HPCL’s 50:50 JV with Total of France, to manufacture bitumen emulsion Hindustan Colas, also performed well and contributed to the higher consolidated profits.
HPCL is banking on help from the government in the last quarter to reduce its losses. The government decisions, however, have their dynamics and we can’t be sure until it is official. Till then, the management and their shareholders can only pray for better days ahead.
They were, however, inadequate to fully compensate for the under-recoveries on retail sale of petroleum products. The losses on this acc o u n t continued to pile up thanks to high crude oil p r i c e s during the December 2007 quarter. HPCL’s shares lost 2.9% to close at Rs 264.85 on BSE on Monday. The scrip has lost 34% from its 52-week high of Rs 399.45 achieved on January 3, 2008.
The operating margins of the company in Q3 declined to an abysmally low level of 0.5% of its net sales. As the discounts from upstream oil companies increased, HPCL’s cost of raw materials consumed in proportion to net sales came down slightly. However, the cost of products purchased for resale moved up. This was mainly on account of the fact that nearly one-third of HPCL’s market sales were sourced from other refiners.
During the quarter, HPCL sold 6.43 million tonne of petroleum products as compared to the refinery throughput of 4.32 million tonne. In the Indian petroleum industry, refining of crude oil is a profit-making business, but marketing of those refined products is loss-making due to a cap on selling prices. Thus, HPCL’s efforts to gain market share hit its bottomline. HPCL’s consolidated results for the Q3 have registered net profits of Rs 45.7 crore. This was mainly due to better performance by Mangalore Refinery (MRPL), in which HPCL holds over an one-sixth stake. HPCL’s 50:50 JV with Total of France, to manufacture bitumen emulsion Hindustan Colas, also performed well and contributed to the higher consolidated profits.
HPCL is banking on help from the government in the last quarter to reduce its losses. The government decisions, however, have their dynamics and we can’t be sure until it is official. Till then, the management and their shareholders can only pray for better days ahead.
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