Mangalore Refinery and Petrochemicals (MRPL), India’s leading standalone refinery, came out with better-than-expected December quarter results. The company’s net profit nearly tripled to Rs 350 crore. The growth was driven by improvement in gross refining margins (GRMs), which rose to around $7.7 per barrel as against a mere $1 in the December 2006 quarter. Gross refining margin is the differential between the cost of crude oil and the realisation from sale of refined products.
The quarter witnessed higher margins for the refiner on diesel and naphtha. The numbers provide a broad direction as what to expect from other petroleum refining companies, when they publish their quarterly results later. MRPL’s topline during the period grew 11%. The company could process only 3.02 million tonne of crude, which was 10% lower compared with the 3.36 million tonne processed during the December 2006 quarter. The loss of production was caused by a 25-day maintenance shutdown at its hydro-cracker and hydrogen generation units.
Substantial expansion of margins doubled MRPL’s operating profit. Other income more than halved, but a drop in interest costs helped the company more than double its pretax profits. A fall in the effective tax rate also helped in the PAT spurt. Profit growth was also aided by sale of value-added products such as mixed xylene and crumb rubber modified bitumen (CRMB).
Going forward, MRPL will benefit from its full refining capacity. However, it is too early to guess how the refining margins will behave in the coming months. While the Asian market remains comfortable, the US market is showing signs of weakness in GRMs. It is not yet clear whether the weakness could extend to other regions in the future.
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