Mumbai, Jun 4 (PTI) A day after reporting heavy inventory losses and near-halving of refining margins in the March quarter, the second-largest oil retailer Bharat Petroleum has guided towards a tough first quarter given the prevailing market condition wherein margins are in deep red for both petrol and diesel.
Two-thirds of the current quarter has been a near-washout for all oil companies when sales and refining dived as the 10-week-old national lockdown confined people into their homes due to the deadly coronavirus pandemic.
BPCL on Wednesday reported Rs 1,819.6 crore net losses on heavy inventory losses, and lower gross refining margins (GRMs) which dived to a low USD 2.50 a barrel in the March quarter from USD 4.58 a barrel a year ago.
It had booked a net income of Rs 3,125 crore a year ago. This has crimped its annual net income to a low Rs 2,683 crore from Rs 7,132 crore in FY2019.
Though I don’t see inventory losses in Q1 as we are not holding any excess stock of crude, on the margins front both for petrol and diesel, the entire Asian market is awash in the red and we aren’t any different.
Today the Singapore crack margin for petrol is minus USD 3.47 a barrel and diesel is down to a fourth at USD 4 a barrel. So this will be reflected in the gross refining margins this quarter, N Vijayagopal, the finance director, told PTI on Thursday without quantifying the GRM, which is what it makes from turning every barrel of crude into a finished product.
He was quick to add though that the quarter may see an overall improvement is GRM as diesel margins are around USD 8 a barrel now, up from under USD 4 in April-May, but way below the January level.
With Brent at USD 40 a barrel now, up from USD 16 in April, and also the supply cut coming into force, I see the GRMs improving and also don’t see, any inventory losses this quarter, Vijayagopal said.
Explaining the reasons for the poor set of numbers in the March quarter, he said the numbers were impacted by the very high stock, one of the worst demand falls in recent decades and the massive fall in prices.
As a result, the company had to book around Rs 2,000 crore in marketing losses, Rs 1,200 crore in forex losses as the rupee sniffed at 78 to a dollar and extremely negative crack prices.
It can be noted that the pandemic lockdown in the US and resultant plunge in demand has seen crude trading in the negative for the first time fuel began to be traded on the Numex over a century ago, on April 20 when it plunged to a minus USD37.64 a barrel as traders and refiners did not have storage to take May delivery.
On the demand and refinery throughput levels, he said as of June 4, refineries were firing at 83 per cent which was a low 36 per cent in April and 55 per cent in May. Overall demand plunged 55 per cent in April which improved to 30 per cent in May.
Meanwhile, brokerage Emkay Global said the bottomline numbers were done in by inventory losses of Rs 2,570 crore but the core numbers are strong. Along with this, there was a Rs 1,080 crore of exceptional inventory loss due to the pandemic driven revaluation on the basis of replacement cost.
Though the reported GRM is USD 0.75 a barrel which led to the inventory loss, BPCL’s core GRM stood at USD 6.5, due to a 122 per cent refinery utilization of the Mumbai refinery, higher distillate yields and price lag impact, the report said.
Blended marketing margin rose 22 per cent to Rs 6.1/kg, which is in line. Domestic sales declined 5 per cent with petrol/diesel down 0.5 and 8 per cent respectively. Gross debt rose 59 per cent sequentially to and 64 per cent annually to Rs 47,820 crore.
Refining declined 0.23 per cent sequentially to 8.39 mt. Revenue dipped 8 per cent to Rs 68,997.8 crore.
BPCL shares closed over 2.3 per cent higher at Rs 357.25 on BSE against the Sensex losing 0.4 per cent.