MRPL net tanks 92% on inventory loss

Mangalore Refinery and Petrochemicals (MRPL), a subsidiary of Oil and Natural Gas Corporation (ONGC), reported a 92 per cent decline in net profit for the second quarter ended September 2008, as falling crude oil prices resulted in an inventory loss of Rs 646 crore.

Net profit for the quarter was Rs 24.92 crore, compared with Rs 331.74 crore in the corresponding quarter a year ago. Turnover increased 5.89 per cent to Rs 13,464.88 crore, up from Rs 7,655.29 crore a year ago.

The company, which operates a 9.69-million-tonne per year refinery at Mangalore in Karnataka, maintains an inventory of crude oil and petroleum products for 25 days. As prices of crude oil and oil products started falling from August, the value of this inventory fell, eroding the over Rs 600 crore inventory gain in the first quarter of the current financial year.

The inventory loss pulled down the refinery margins to $2.34 per barrel compared with $6.11 per barrel in the corresponding previous quarter.

MRPL Finance Director LK Gupta said the outlook for the third quarter ended December looked depressed as refinery margins have taken a hit because of fall in oil prices.

The company, which buys crude oil primarily from Saudi Arabia, Iran and ONGC’s Videsh’s oil field in Sudan, has also reduced the capital expenditure planned for this financial year.

The capital expenditure has been reduced to Rs 542 crore from the earlier estimated Rs 825 crore. Much of this expenditure was to be for expanding the refinery to 15 million tonne from the current 9.69 million tonne.

The cost of expanding the refinery is also likely to increase to around Rs 12,000 crore from the previously estimated Rs 8,000 crore.

The project, financed at a debt-equity ration of 2:1, is likely to be completed by October 2011.

Mangalore Refinery plans to spend Rs 3,180 crore as capital expenditure in 2009-10.