BRPL in the doldrums - Views on News from Equitymaster

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BRPL in the doldrums

Aug 5, 2000

Although, Bongaigon Refinery & Petrochemicals Ltd. (BRPL) has reported a respectable growth in turnover its operating margins have gone for a toss. The tough conditions prevailing in the previous fiscal have continued in 1QFY01. In fact, for BRPL the situation seems to have become worse with OPM's declining sharply. The quarter ended June'00 witnessed firm crude prices with increased volatility. The increase in feedstock prices was not correspondingly matched by an increase in product prices. This led to the sharp drop in margins.

The current industry environment has impacted BRPL more than the oil majors (BPCL, HPCL and IOC). This is because BRPL is a stand alone refinery and its fortunes are entirely dependent on the refining margin cycle. On the other hand the oil majors have marketing rights of controlled products. This function generates additional operating margins, which provides a buffer to the bottomline in case refining margins are hit.

It is imperative that the Government hastens the process of industry deregulation and decides on the fate of the stand-alone refineries and marketing companies. Government apathy towards oil companies has seen their results being adversely impacted. With opening up of the industry to competition the margins will be further impacted and stand alones will not be able to hold their stead.

(Rs m) 1QFY00 1QFY01 Change
Sales 2,395 2,814 17.5%
Other Income 44 39 -10.8%
Expenditure 2,430 3,005 23.7%
Operating Profit (EBDIT) (35) (191) 450.7%
Operating Profit Margin (%) -1.4% -6.8%
Interest 27 33 19.0%
Depreciation 73 72 -0.8%
Profit before Tax (91) (257) 182.3%
Tax - -
Profit after Tax/(Loss) (91) (257) 182.3%
Net profit margin (%) -3.8% -9.1%
No. of Shares (eoy) 200 200
Earnings per share* -1.8 -5.1
(annualised)

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