Essar Oil profit at $244 mn in FY16; enters UK's retail market

Essar Oil UK, which owns and operates the Stanlow refinery, today said its net profit rose over three-fold to $244 million in 2015-16, aided by cost optimisation measures.

The firm controlled by the Mumbai-based Ruia family had clocked a net profit of $70 million in the previous fiscal.

"Stanlow continued to benefit from its optimised single train site operation, which increased the yield of high margin products such as gasoline and middle distillates, whilst reducing production of lower margin products like naphtha and fuel oil," Essar Oil said in a statement.

However, its gross revenues for the 12 months fell by 34% to $4.99 billion against $7.62 billion reported in 2014-15, primarily due to the lower crude oil price which fell 44% year-on-year average.

Essar Oil UK Executive Chairman Naresh Nayyar said: "This was a good year for the business, with the strong financial and operational performance reflecting the significant improvements made by Essar in optimising Stanlow since acquiring the refinery."

The market was supportive and the firm's reliability and flexibility ensured it could capture those opportunities, he added.

"Looking forward, our ongoing margin improvement initiatives, major capex investment project and ambitious plans for downstream integration through the UK retail sector will deliver a truly sustainable and successful future for us," Nayyar said.

Stanlow, which produces 16% of the UK's transport fuel demand, processed 8.97 million tonnes of crude during the last fiscal, a 5% increase on the previous year's 8.54 MT.

"EBITDA was a record $359 million for the year, against the $177 million reported for 2014-15," it added.

Essar Oil UK CFO Sampath P said: "This is a business in a strong financial position with no long term debt and strategic plans in place to further improve our refining margins."

Essar Oil UK moved into downstream integration, with a highly successful entry into the UK fuel retail market.

"With seven sites already operational, the business has confirmed ambitious plans to grow its retail network within the UK market to 400 sites over the next three years," it added.

The firm is also committed to a significant capex investment of about $137 million in project Tiger Cub for major improvements to key units at Stanlow which will deliver further reduction in crude costs and improved yields across the product slate, it said.

The Ruia family-controlled Essar Oil had in 2011 acquired the Stanlow Refinery in Cheshire from Shell and has spent $545 million in capital investment programme.