BPCL: One time costs hit margins

Performance summary

• Topline increases by 64% YoY during 1QFY09.

• EBITDA margins fall by 2.9% due to under recoveries of high input prices.

• Other income declines by 37% YoY during the quarter.

• Bottomline plunges into the red owing to operating losses.
  
  

  Standalone Financial snapshot

  (Rs m)	1QFY08	1QFY09	Change
  Net sales	238,694	390,220	63.5%
  Expenditure	236,634	397,913	68.2%
  Operating profit (EBDITA)	2,060	(7,693)
  EBDITA margin (%)	0.9%	-2.0%
  Other income	4,341	2,757	-36.5%
  Interest	1,240	3,016	143.2%
  Depreciation	2,276	2,691	18.2%
  Profit before tax	2,885	(10,643)
  Tax	958	24
  Profit after tax/(loss)	1,927	(10,667)
  Net profit margin (%)	0.8%	-2.7%
  No. of shares (m)	361.5	361.5
  Diluted earnings per share (Rs)*		8.9
  Price to earnings ratio (x)*		34.9

  * On trailing twelve months
  
  

  What has driven performance in 1QFY09?

  • The gross refining margin for BPCL during 1QFY09 was US$ 9.29 per barrel (US$ 6.50 per barrel in 1QFY08) for its Mumbai refinery and US$ 18.65 per barrel (US$ 7.97 per barrel in 1QFY08) for its Kochi Refinery.

  • On the volumes front, the market sales for BPCL during 1QFY09 have increased to 6.96 m tonnes (MMT) from 6.33 MMT during 1QFY08. The increase is mainly due to increase in volumes of diesel (19%), petrol (13%), Jet fuel (12%), LPG (7%) and Naphtha (6%). It was offset by reduction in volumes of furnace oil (-5%) and LSHS (-16%).

  • BPCL’s results for 1QFY09 have been adversely affected due to the impact on account of high crude oil and product prices, which could not be fully passed on to the consumers. The under recovery on diesel, petrol, PDS kerosene and domestic LPG was partially compensated by the upstream oil companies during the quarter. Accordingly, discount of Rs 26.6 bn (Rs 9.6 bn during 1QFY08) was received for the purchase of crude oil, kerosene and LPG from ONGC and GAIL. Moreover, the company has accounted for Rs 57.7 bn of oil bonds for 1QFY09 (Nil for 1QFY08).

  • BPCL claimed subsidy from the government towards sale of PDS Kerosene and domestic LPG amounting to Rs 1.4 bn during 1QFY09 (Rs 1.3 bn in 1QFY08).

    Cost break-up

    (Rs m)	1QFY08	1QFY09	Change
    Raw materials	225,069	368,438	63.7%
    % sales	94.3%	94.4%
    Staff cost	2,800	6,707	139.5%
    % sales	1.2%	1.7%
    Other expenditure	8,765	22,768	159.8%
    % sales	3.7%	5.8%
    Total cost	236,634	397,913	68.2%
    % sales	99.1%	102.0%

  • BPCL’s staff cost has zoomed by 140% on the back of a liability arising from a post retirement monthly fixed ex-gratia scheme to the tune of Rs 3.4 bn accounted for in 1QFY09.

  • BPCL’s other expenditure during 1QFY09 zoomed 160% due to losses on foreign exchange fluctuations to the tune of Rs 4.3 bn. (During 1QFY08, there were gains on foreign exchange fluctuations to the tune of Rs 2.5 bn which were accounted as other Income).