Revenue Falls On Larger Bills, Lacking Estimates

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Hindustan Petroleum Corp.’s quarterly profit fell, missing estimates as spending rose and demand fell during the second wave of the pandemic.

The oil marketer’s net income declined 40.5% sequentially to Rs 1,795 billion for the quarter ended June, which compares to the consensus estimate of Rs 2,061.7 billion from analysts tracked by Bloomberg.

Revenue fell 3.2% from the previous quarter to Rs 72,443.4 billion, compared to the forecast of Rs 73,830.3 billion.

Highlights (QoQ)

  • Operating profit decreased 31.6% to Rs 3,192.9 billion.

  • Other income decreased 31.7% to Rs 372 billion.

  • The operating margin decreased from 6.2% to 4.4%.

  • Total spending excluding excise taxes decreased 1.3% to Rs.70,418 billion.

  • The gross refining margin – what a company makes by converting a barrel of crude oil into fuel – was $ 3.31 per barrel.

The company’s sales volume declined 14% sequentially to 8.5 million tons as local lockdowns to contain the second wave of the Covid-19 pandemic affected consumption of petroleum products. A planned shutdown of the Mumbai refinery due to capacity expansions resulted in a 42.8% decrease in throughput compared to the previous quarter.

India’s consumption of petroleum products fell 10.4% from January to March, with jet fuel recording the largest drop of more than 30%, according to data released by Petroleum Planning & Analysis Cell. Demand for gasoline and diesel decreased by 13.2% and 10.5%, respectively, in the first quarter of the current fiscal year.

Refining margin was supported by an increase in the benchmark GRM, higher crude oil prices that resulted in inventory gains and improved product spreads. The Singapore GRM benchmark rose 16.7% sequentially to $ 2.1 per barrel in the first quarter. Brent crude oil prices also averaged $ 69.1 per barrel over the period, up 13% over the previous three months. Gasoline, diesel and kerosene spreads rose 44%, 13% and 36%, respectively, compared to the previous quarter.

However, the average marketing margin remained under pressure over the period as retail price hikes lagged the surge in crude oil. Gasoline and diesel prices rose 9% and 10.2%, respectively, between April 1 and June 30, compared with an 18.2% increase for Brent crude.

HPCL’s shares fell over 1% prior to the results announcement, compared to a 1.02% gain for the benchmark BSE Sensex.