Essar Oil posts Rs 166 cr loss for July-Sept

Essar Oil today reported a net loss of Rs 166 crore in the second quarter ended September 30 after it made Rs 407 crore provision for liability arising from foreign exchange fluctuations.

Essar Oil loss of Rs 166 crore in July-September period was against Rs 130 crore net profit in the same period a year ago, the company said in a press statement.

The sharp depreciation of the rupee against the US dollar resulted in Essar provisioning Rs 407 crore for forex liabilities in Q2. Of this, Rs 236 crore was realised in sales that happened in October and in effect neutralised the loss.

"We are fully hedged against the rupee fluctuations," Essar Oil CEO Naresh Nayyar said in a conference call after the results were announced.

But for the forex provisioning, the company reported good operational performance, earning %7.22 per barrel on turning every barrel of crude oil into fuel in Q2 as against gross refining margin of %6.49 per barrel in the same period a year ago.

This GRM is second best behind %10.1 per barrel of Reliance Industries.

"The company is at the threshold of achieving a quantum jump in its GRM as our Vadinar refinery expansion project is now under start-up. The expanded refinery with much higher complexity will be fully operational in Q1 of 2012 calendar year.

"This will give a boost to our overall cash flow and bottom line, giving us strong operational and financial flexibility," he said.

Nayyar said Essar has completed mechanical construction of most of the units that form part of Phase-I expansion of its Vadinar refinery to 18 million tons a year from current 14.5 million tons.

"In fact since yesterday, the refinery is operating at 16 million tons capacity. By Q1 2012, we will be operating at 18 million tons capacity and doubling the complexity of the refinery from 6.1 to 11.8," he said.

The increase in complexity of the refinery would allow Essar to process a much higher percentage of heavy and ultra heavy crude oils and the production of a higher value product mix.

Further the refinery would be expanded to 20 million tons capacity by September 2012, he said.

Sales rose to Rs 13,805 crore in July-September from Rs 12,415 crore in Q2 of 2010-11 fiscal.

"Though Essar Oil continues to focus on the domestic market because of better price realisation, the percentage of domestic sales declined during the quarter because of lower throughput due to the refinery shutdown," he added.