Essar Oil makes profits in second year of operation

Essar Oil, whose parent firm is seeking a listing on the London Stock Exchange, today reported net profits in its second year of operations and said it was on track to expand the capacity of Vadinar refinery to 18 million tonnes.

Essar Oil reported a net profit of Rs 29 crore in 2009-10 fiscal against a net loss of Rs 514 crore in the previous year, the company in a press statement here.

Its 10.5-million-tonne a year refinery on Gujarat coast made $4.38 on processing every barrel of crude oil in the fiscal as opposed to $7.69 gross refining margin (GRM) earned in the 11-month operation in 2008-09 fiscal.

Last week, Essar Oil's parent firm Essar Energy had said it plans to raise $2.5 billion (about Rs 11,250 crore) through an initial public offer (IPO) and would list on the London Stock Exchange soon.

Essar Energy holds over 88 per cent stake in Essar Oil.

Net sales dropped marginally to Rs 37,319 crore in the fiscal from Rs 38,055 crore in the previous year.

"We saw refining margins bottoming out in the last quarter. With the margins improving this quarter, we are hopeful that the refining business is gradually coming out of the doldrums," Essar Oil Managing Director Naresh Nayyar said.

The company reported a near 73 per cent drop in net profit at Rs 180 crore in the fourth quarter ended March 31 compared to Rs 660 crore net profit in the corresponding period a year ago.

Net sales in Q4 stood at Rs 10,650 crore against Rs 6,985 crore of the same period last fiscal.

The company said it has tied up funds for expanding the unit to 18 million tonnes by March 2011.

"Essar Oil has received an equity contribution of Rs 2,000 crore from the promoters and has tied up the entire Rs 4,600 crore of debt (for the expansion)," the statement said.

Additionally, sale of CBM gas from the company’s Raniganj block is expected soon.

"Customers for the initial gas have already been tied up, and a longterm contract for sale of 2.8 million standard cubic meters per day of gas has been signed with Matix Fertilisers and Chemicals. Customer sales will commence shortly," it said.

Essar said it sold 13.17 million tonnes products in FY2010. "Retail sales of diesel and petrol were the highest ever recorded since Essar Oil entered the retail business."

The company with over 1,300 fully operational petrol pumps, continues to augment its marketing network.

Vadinar refinery operated at 129 per cent of its installed capacity to process 13.5 million tonnes of crude oil.

"Essar Oil has commenced the production of Euro-III petrol and Euro-III and Euro-IV grade diesel," it said.