State-run oil sector giant Indian Oil Corporation on Wednesday disclosed a 47 per cent fall in net profit for the first quarter of the ongoing financial year (Q1FY20), primarily due to lower refinery margins and inventory gains compared to the same period of the previous year. Total revenue, meanwhile, remained flat at Rs 1.53 lakh crore.
The public sector oil marketing firm reported a consolidated net profit of Rs 3,737.50 crore, or Rs 4.07 per share, compared with Rs 7,092.42 crore, or Rs 7.48 a share, in the corresponding period a year ago. “The variation is majorly on account of lower inventory gain during the quarter,” it said in its statement. The company had recorded an inventory gain of Rs 7,065 crore gain in the April-June 2018 period of last year, compared to just Rs 2,362 crore during Q1FY20.
Oil refiners record inventory gains when a company buys raw material (crude oil in case of IOC) at a given price but by the time it is able to process and convert it into consumable products, prices have increased. Meanwhile, inventory loss occurs when the reverse happens.
Meanwhile, the company’s refining margins also tanked sharply during the period. The company earned USD 4.69 on turning every barrel of crude oil into fuel in April-June, down from USD 10.21 per barrel average gross refining margin (GRM) in the corresponding quarter of the previous financial year. “GRM excluding inventory gain/loss and price lag for Q1 is USD 2.27 per barrel as compared to USD 5.18 a barrel in Q1 2018-19,” the statement said.
IOC Chairman Sanjiv Singh pointed out that the company sold 22.66 million tonne of products, including exports, during the first quarter of the financial year 2019-20. Its refineries processed 17.28 million tonne of crude oil and the pipelines network transported 21.85 million tonne during the quarter.
Meanwhile, Singh also said that the company is planning to invest around Rs 2 lakh crore over the next 5-7 years “to evolve into a future-ready company that provides comprehensive energy solutions to diverse user groups”. In his address to shareholders, Singh noted that the company’s board has approved several capacity enhancement projects. Among those is a proposed plastics park at Paradip through a joint venture with industrial development corporation of Odisha and a joint venture textiles project in Bhadrak, Odisha, for which the state’s Industrial Promotion and Investment Corporation has allotted 60 acres of land to IOCL.
IOCL is also aiming to move into horizon technologies like 2G (2nd generation) and 3G ethanol, bio-fuels, coal gasification, Hydrogen fuel cells, battery technologies etc. “IOCL is also targeting its own equity oil and gas of 7 million metric tons per annum (MMTPA) from its exploration and production assets by 2023-24 from 4.39 MMTPA currently,” Singh said.
Aggressive expansion
The company’s board has approved several projects, among which is a proposed plastics park at Paradip through a joint venture with industrial development corporation of Odisha and a joint venture textiles project in Bhadrak, Odisha, for which the it has been allotted 60 acres by the state government.