Gross refining margins (GRMs) dipped in line with global margin contraction. Substantial inventory losses ate away the quarter’s profitability.
After weak results from Indian oil corporation (IOCL) and Hindustan petroleum corporation (HPCL), Bharat petroleum corporation (BPCL) also reported a weak performance in Q3. Despite an uptick in revenue, the operating and net margins declined sharply both year-on-year and sequentially. Gross refining margins (GRMs) dipped in line with global margin contraction. Substantial inventory losses ate away the quarter’s profitability.
-GRMs for the nine months from April to December were at $5.25 per barrel (9MFY18: $6.97). GRM for the quarter was $2.78 per barrel (Q3FY18: 7.89), a sharp dip YoY. While there has been a weakness in GRMs globally with the Singapore benchmark at $4.5 per barrel (Q2: $6.1), BPCL’s GRMs saw a much greater impact
-Earnings before interest, tax, depreciation and amortisation (EBITDA) declined 77 percent YoY (-69 percent sequentially) due to high inventory losses, and input costs, employee expenses and finance costs.
-A sharp uptick in crude prices since October 2018 led to high inventory losses during the quarter which was single main reason for the contraction in profits and margins. This also indicates a not-so-weak core performance.
-Other expenses includes a foreign exchange gain during the quarter of Rs 659 crore (Q3FY18: Rs 172 crore gain) which led to a noticeable decline in the expenses.
-Volumes in the export business grew 55 percent sequentially (YoY: +36.2 percent)
-Domestic volumes were largely flat YoY, while there was 6 percent sequential improvement
-The overall performance of the company appears weak much in line with expectations and other oil marketing companies. With volatile crude prices, upcoming central elections and tweaking of marketing margins around elections, we remain cautious on the company’s performance.
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