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BPCL: Under recoveries drag bottomline into the red - Views on News from Equitymaster

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  • Nov 1, 2011 - BPCL: Under recoveries drag bottomline into the red

BPCL: Under recoveries drag bottomline into the red
Nov 1, 2011

BPCL has announced the second quarter results for financial year 2011-2012 (2QFY12).The company has reported a 19.4% year on year (YoY) growth in topline and net loss margins at 7.6%. Here is our analysis of the results.

What has driven performance in 1HFY12?
  • Topline registers a growth of 19.4% YoY during the quarter.
  • The company reported a loss at operating profits level leading to loss margins at 6.4% versus positive margins at 7.0% in the same quarter last year (2QFY11).
  • The company reported a loss at bottomline level, resulting in net loss margins at 7.6%, versus net profit margins at 6.0% in the same quarter last year (2QFY11).
  • The throughput for the quarter came at 5.58 million metric tons (MMT) versus 5.6 MMT last year.
  • The market sales volume at 7.04 MMT was up 5.2% YoY during the quarter.
  • The export sales volumes at 0.94 MMT registered an increase of 21% YoY during the quarter.


Standalone results
(Rs m) 2QFY11 2QFY12 Change 1HFY11 1HFY12 Change
Net sales  354,348 423,019 19.4% 696,673 884,415 26.9%
Expenditure  329,483 449,967 36.6% 685,867 933,005 36.0%
Operating profit (EBDITA)  24,865 -26,948   10,806 -48,590 nm
EBDITA margin (%)  7.0% -6.4%   1.6% -5.5%  
Other income  5,336 3,787 -29.0% 8,545 8,061 -5.7%
Interest  2,780 4,532 63.0% 5,103 7,881 54.4%
Depreciation  4,019 4,600 14.5% 8,026 9,501 18.4%
Profit before tax  23,402 -32,293   6,221 -57,912 nm
Profit before tax margin (%)  6.6% -7.6%   0.9% -6.5%  
Tax  1,980 -   1,980 - nm
Profit after tax/(loss)  21,422 -32,293   4,241 -57,912 nm
Net profit margin (%)  6.0% -7.6%   0.6% -6.5%  
No. of shares (m)          362  
Diluted earnings per share (Rs)*          -129  
P/E ratio(x)*          nm  
*On the basis of trailing 12 months earnings

What has driven performance in 2QFY12?
  • The company registered net sales worth Rs 423 bn during the quarter. This implied a 19.4% YoY in the topline on account of increase in the sales volume. During the quarter, the company registered market sales volumes of 7.04 MMT, up 5.2% YoY.

  • The company reported operating loss of Rs 27 bn during the quarter, with loss margins at 6.4% (versus profit margins at 7.0% during 1QFY11). This was mainly on account of high cost of crude oil and under recoveries on the major petroleum products. The raw material expenses increased 35.7% YoY from 87.1% of sales to 99.0% of sales. While staff costs were down 3.2% YoY, ‘Other expenditure’ was up from 4.6% of net sales in 2QFY11 to 6.4% this quarter.

  • The average gross refining margins (GRMs) for the half year ending September 2011 came at US$ 2.31 per barrel versus US$ 3.19 per barrel, down 28% YoY.

    Cost Break up
    (Rs m) 2QFY11 2QFY12 Change 1HFY11 1HFY12 Change
    Cost of Raw materials 308,482 418,596 35.7% 644,466 881,058 36.7%
    as a % of sales 87.1% 99.0%   92.5% 99.6%  
    Staff costs 4,526 4,381 -3.2% 9,939 10,955 10.2%
    as a % of sales 1.3% 1.0%   1.4% 1.2%  
    Other expenditure 16,475 26,990 63.8% 31,462 40,992 30.3%
    as a % of sales 4.6% 6.4%   4.5% 4.6%  
    Total 329,483 449,967 36.6% 685,867 933,005 36.0%
    as a % of sales 93.0% 106.4%   98.4% 105.5%  

  • The company registered a net loss of Rs 32 bn during the quarter, with net loss margins at 7.6% (versus net profit margins at 6.0% in 2QFY11). The interest and depreciation charges were up 63.0% YoY and 14.5% YoY respectively during the quarter. The loss was on account of lower GRMs and significant under recoveries.

What to expect?
We will incorporate the interim results in our estimates and update our subscribers with valuations post analyst meet.

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