HPCL Q3 net profit drops 87 pc on inventory losses

Hindustan Petroleum Corp Ltd (HPCL) Tuesday reported an ?87 per cent drop in net profit to Rs 248 crore in the December 2018 quarter, owing to inventory losses and lower refinery margins.

It had posted a net profit of Rs 1,950 crore in the corresponding period a year ago, HPCL Chairman and Managing Director Mukesh K Surana told reporters here.

"The decrease in profit is mainly due to inventory losses caused by falling crude oil prices and higher fuel and loss component," he said.

Inventory loss occurs when a company buys raw material (crude oil) at a particular price but by the time it is able to process it and convert it into fuel?, the rates have fallen. Inventory gains occur when the opposite happens.

Surana said the company lost Rs 3,465 crore because of inventory losses during the third quarter, compared with an inventory gain of Rs 1,477 crore a year ago.

HPCL earned USD 3.72 on turning every barrel of crude oil into fuel in December 2018 quarter, compared with a gross refining margin (GRM) of USD 9.04 per barrel a year ago.

Without inventory losses, GRM was USD 10.01 per barrel in the quarter. This would compare to USD 6.11 a barrel net margin in the year-ago period after stripping of the inventory gains.

He said fuel losses were 7.5 per cent.

In value terms, sales were up to Rs 76,884 crore, from Rs 62,832 crore in the corresponding quarter of the previous fiscal.

In volume, fuel sales increased to 9.4 million tonne, registering a growth of 2.5 per cent year-on-year. Petrol sales rose 6 per cent while diesel was up 0.4 per cent. LPG was almost flat while jet fuel (aviation turbine fuel) sales jumped 27.4 per cent, he said.

HPCL's Mumbai and Visakh refineries processed 4.56 million tonne of crude oil during October-December 2018, against 4.52 million tonne in the year-ago period.

He said the company board declared an interim dividend of Rs 6.50 per share.