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Standalone refineries: Good FY03 - Views on News from Equitymaster
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  • Jun 9, 2003

    Standalone refineries: Good FY03

    Standalone refineries have risen on the bourses in the past month. To put things into perspective, among the major gainers last month were Mangalore Refinery (MRPL - up 90%), Bongaigaon Refinery (BRPL - up 57%), Chennai Petroleum (CPCL - up 20%) and Kochi Refinery (KRL - up 21%). This was on account of better than expected results posted by them. Lets take a look at the consolidated results of the standalone refineries.

    (Rs m) FY02 FY03 Change
    Net Sales 185,498 270,683 45.9%
    Other Income 1,440 3,483 141.9%
    Expenditure 180,345 251,599 39.5%
    Operating Profit (EBDIT) 5,154 19,085 270.3%
    Operating Profit Margin (%) 2.8% 7.1%  
    Interest 9,528 7,946 -16.6%
    Depreciation 5,871 6,227 6.1%
    Profit before Tax -8,806 8,394  
    Tax (1,007) 3,139  
    Profit after Tax/(Loss) (7,798) 5,256  
    Net profit margin (%) -4.2% 1.9%  
    No. of Shares 1279.5 2246.9  
    Diluted earnings per share -3.5 2.3  
    P/E Ratio   11.4  

    The topline of standalone refineries (MRPL, BRPL, CPCL and KRL combined) increased by 46%. This was on account of increase in volumes of petroleum products sold. Some of the refineries like Mangalore Refineries have increased their capacity utilization and this further added to the growth in the topline. Also with deregulation, companies were free to align petroleum products prices in line with increasing crude prices. It should be noted that petroleum product prices saw highest increase in prices during FY03 in the past decade.

    Expense increase in last year was on account of hike in the raw material (crude oil) cost. Crude oil prices remained strong during the year (up 45% YoY). Though the expenses increased by about 40%, this was lower as compared to the increase in topline. As a result of this, operating margins of refineries increased by about 430 basis points, thus operating profits increased by about 270%.

    In FY02, consolidated performance of these refineries was in the red. However in FY03, refineries like Bongaigaon actually saw a turnaround while Mangalore Refinery saw 16% decline in its net losses. Other refineries like KRL and CPCL saw a boost in net income. On an overall basis, the refineries posted a net profit in the current year as compared to net losses during last year.

    Apart from topline surge, increase in net profit was on account of declining interest expenses as a result of prevailing low interest rates. Also MRPL, which has a huge debt burden, started its debt restructuring exercise by allotting equity shares of Rs 3.6 bn and preference shares worth Rs 92 m to its lenders. Other income of the refineries also increased by about 141%, which further added to increase in net profit.

    Thus it becomes clear that standalone refineries performed well in the current financial year. APM dismantling seems to have improved their performance. Going forward, we expect the refineries to perform well backed by increasing capacity utilisation and support from their parents.



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