MRPL: OPM provides glimmer of hope - Views on News from Equitymaster

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MRPL: OPM provides glimmer of hope

Oct 1, 2001

Mangalore Refinery & Petrochemicals Ltd. (MRPL) has shown a sharp spurt in turnover. This is mainly due to commissioning of the expanded capacity of 6 m metric tonnes per annum (MMTPA) on April 10, 2001. The company's aggregate capacity now stands at 9 MMTPA. The expansion is estimated to have cost Rs 37 bn.

(Rs m)1QFY011QFY02Change
Sales 9,274 16,798 81.1%
Other Income 72 97 33.5%
Expenditure 9,146 16,059 75.6%
Operating Profit (EBDIT) 128 739 475.9%
Operating Profit Margin (%)1.4%4.4% 
Interest 816 1,600 96.1%
Depreciation 375 860 129.4%
Profit before Tax (990) (1,624)64.0%
Extraordinary items - 471  
Tax - -  
Profit after Tax/(Loss) (990) (1,153)16.5%
Net profit margin (%)-10.7%-6.9% 
No. of Shares (eoy) 792 792  
Diluted Earnings per share*-5.0-5.8 
*(annualised)   

Another encouraging sign is the non-commensurate growth in operating costs, as compared to sales. This has led to a substantial improvement in operating margins of 300 basis points. The company has stated that numbers have been regrouped wherever necessary to provide meaningful YoY comparison. 1QFY01 unaudited results show an OPM of 3.6%. This indicates that the company has regrouped operating costs. Operating profits have risen sharply on the back of higher sales and better margins.

With commercial production commencing at the enhanced facilities, it seems, the interest and depreciation costs, which were earlier capitalised, are now being passed through the income statement. This has led to a significant jump under these cost heads. Although operating performance has improved it still does not cover interest burden, which keeps alive the debt trap risk. The company needs to undergo capital restructuring to reduce its interest burden and leverage ratios. In fact, MRPL has appointed a merchant banker to chalk out a financial restructuring package.

Extraordinary items include Rs 470.7 m shown as income towards provision for deferred sales tax liability. The bottomline has slipped deeper into the red. Losses increased by 16.5%. The stock trades at Rs 6.2 and has seen some revival with the joint valuation report placing a price of Rs 14 - Rs 17 per share.

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