NEW DELHI: Indian Oil Corporation Ltd (IOC) on Friday reported a net profit of Rs 1,911 crore for the first quarter of FY2020-21 (FY21), a 47 per cent drop year-on-year compared to the same period of the previous fiscal.
But, while the precipitous drop in revenues from operations during the quarter reflected the impact the lockdowns had on demand, the company also recorded an inventory loss due to the collapse of the crude oil markets in the month of April.
According to the company, its income from operations fell to Rs 88,936.54 crore in April-June from Rs 150,136.70 crore a year ago. “The company’s sales during the month of April 2020 were impacted significantly by the nationwide lockdown and consequently capacity utilisation of the plants was lower. However, the same has come back close to normal levels by the month of June 2020,” IOCL said. IOC Chairman Shrikant Madhav Vaidya told reporters that the oil marketing company recorded an inventory loss of Rs 3,196 crore in Q1 as compared to inventory gain of Rs 2,362 crore a year back.
Inventory losses are recorded booked when a company buys raw material at a certain price, but by the time it is able to process it into finished product, prices have fallen. Since refinery prices are determined by prevailing international oil prices, an inventory loss is recorded by marketing companies like IOCL.
The official also said that Covid had impacted capacity utilisation during the quarter, with the company’s refineries averaging 69 per cent. This has risen to to 93 per cent in July but subsequent lockdowns by states have lowered the capacity utilisation to 75 per cent. “We won’t get back to normal times in the near future” due to way pandemic was spreading, the company’s chairman said.