Mangalore Refineries and Petrochemicals Limited (MRPL) announced its 1QFY04 results. The company reported a 3% increase in topline whereas the losses declined in the first quarter and were at about 860 m.
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MRPL reported a 3% increase in topline growth. Increase in topline seems to be on account of higher capacity utilization. Expenses also increased at a higher pace as compared to increase in topline and this resulted in a decline in operating profit. Increase in raw material seems to be on account of inventory losses. Total expenses as a percentage of sales increased marginally from 97% in 1QFY03 to 98% in 1QFY04. Consequently operating profit margins declined by 150 basis points.
MRPL was able to reduce its Interest expenses by about 39% and this resulted in a decline in the losses during the quarter. According to the debt-restructuring package (DRP), lenders were allotted equity shares as part of their loan. ONGC exercised its option to buy equity shares of lenders in the June 2003 quarter and thereby increased it's holding in the company to 71.49%. Further reduction in interest expenses will help it to improve its bottomline. Also, a 281% increase in other income helped the company to pare its losses to some extent.
Post the management control coming in hands of ONGC, the company has benefited in terms of better capacity utilization. Currently, the company operates at a lower operating margin as compared to its peers, Chennai Petro, Kochi Refinery, etc. However with increase in capacity utilization, operating profit margin is expected to improve further. The company expects that it will operate at 100% capacity utilization in the current financial year and also turnaround going forward. Also, ONGC is coming up with retail outlets and this will add stability in terms of supply of its products. Thus on a long-term basis synergies with the new management (ONGC) is a positive for the company.
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