HPCL Q1 net profit dips 53% to Rs 811 cr over decline in refining margin

The decrease in profit is due to sharp decline in crude prices in the month of May and June 2019 leading to inventory losses both at refinery and marketing

State-run Hindustan Petroleum Corporation (HPCL) posted a 53 per cent drop in net profit for the first quarter of the financial year 2019-20 to Rs 811 crore compared to Rs 1,719.2 crore during the April to June period a year ago owing to decline in refining margin and inventory losses.

However, gross sales for the first quarter saw an increase of 2.2 per cent to Rs 74,530 as compared to Rs 72,923 crore during the corresponding quarter of the previous year. The combined gross refining margin (GRM) during Q1FY20 came in at $0.75 a barrel as compared to $ 7.15 a barrel during the corresponding period of the previous financial year.

“During the quarter, there was a sharp decline in crude oil prices. On the other hand, the lower gross refining margin was due to planned shutdown in some refineries – including the Mumbai refinery,” said M K Surana, chairman and managing director of HPCL.

The decrease in profit was due to a sharp decline in crude prices in the month of May and June, 2019, leading to inventory losses both, at the refinery and in marketing, and also lower average cracks for all products except for LPG and fuel oil. The company had an inventory loss of Rs 535 crore during the quarter under review, as compared to an inventory gain of Rs 2,332 crore during the same period last year.

During Q1FY20, HPCL achieved a domestic sales volume of 9.82 million tonnes with a growth of 1.7 per cent. The sales of motor spirit (petrol) increased by 8.4 per cent, high speed diesel by 1.7 per cent, value added lubes by 11 per cent and bitumen by 13 per cent as compared to the Q1FY19.

The refineries at Mumbai and Visakhapatnam processed 3.92 Million Metric Tonnes (MMT) of crude in the Q1FY20, as against 4.52 MMT during the Q1FY19. Lower throughput at refineries was mainly due to planned shutdowns. The company said that after adjusting for inventory gains/losses in both quarters, the core GRM during current was $ 3.30 a barrel as compared to $ 3.27 a barrel during the corresponding period of the previous year.

During the quarter, total borrowings of HPCL fell to Rs. 20,427 crore as against Rs. 27,240 crore during the same quarter of the previous year. In Q1FY20, a total of 31 new retail outlets were commissioned taking the total retail outlet network to 15,471 as of June 2019. HPCL has signed an agreement with the State Trade Corporation of Bhutan Limited (STCBL) for supply of fuel in Bhutan and also for providing expertise in the design, construction, commissioning and operation of retail outlets.