BPCL Q2 net profit jumps 58% on refining margins, inventory gains

Privatisation-bound Bharat Petroleum Corp Ltd (BPCL) on Thursday reported 58 per cent jump in September quarter net profit on the back of inventory gains and a rise in refining margin.

Consolidated net profit at Rs 2,589.52 crore in July-September compared to Rs 1,502.63 crore in the same period a year ago.

"We had excellent results both physical and financial. First-quarter refinery performance was dismal due to COVID-19 lockdown. Our strategy of buying crude oil prices at low prices in May and June has resulted in substantial refinery margin," BPCL Director (Finance) N Vijayagopal told reporters.

The company earned USD 5.8 on turning every barrel of crude oil into fuel in the second quarter of the current fiscal as compared to a gross refining margin (GRM) of USD 3.38 per barrel.

The company had an inventory gain of Rs 2,503 crore in July-September as compared to an inventory loss of Rs 26 crore in the year-ago period, he said.

An inventory gain happens when a company buys crude oil at a particular rate but by the time it is able to process it, the prices have gone up. And since the retail rates are benchmarked at prevailing prices, an inventory gain is booked. An inventory loss happens in case of a reverse event.

He said the company's finance cost has come down primarily because of total borrowing coming down by about Rs 10,000 crore to Rs 27,850 crore as of September 30 and foreign exchange fluctuations.

BPCL's refineries processed 5.63 million tonnes of crude oil in July-September, up from 5.14 million tonnes in the preceding three months but lower than 7.66 million tonnes processed in the year back period.

Sales fell almost 13 per cent to 8.94 million tonnes in the second quarter.

"Sales have come back to the pre-COVID-19 level," he said adding petrol is back to pre-lockdown levels in October while diesel is 94 per cent of the normal levels.

These are expected to improve with the festive season kicking in and improve over the third quarter, he said adding a growth might be visible in the fourth quarter (January-March).

The company's refineries too have increased throughput to 85 per cent in October from 77 per cent in September.

BPCL's strategy, he said, has been to operate its refineries at Mumbai, Kochi in Kerala and Bina in Madhya Pradesh at levels that would be sufficient to meet domestic demand in the country.

The operating rate could be increased to over 100 per cent but that would require exporting diesel, he said.

Also, the refinery operating strategy has ensured that it does not have to import petrol to meet the rise in demand currently.

It could raise the petrol throughput at Kochi from 15 per cent of all products in April to 25 per cent to meet this demand, he said.

"Our strategy has been not to import petrol and not to export diesel," he said.

BPCL has planned a capital spending of Rs 8,000 crore in the current fiscal to March 31, 2021. Of this Rs 2,500 crore has been spent in the first half.

"We hope to spend all the planned capex and even exceed it," he said adding the spending had been marred due to lockdown in the first quarter.

Revenue from operations was down to Rs 65,912.49 crore in July-September from Rs 75,056.63 crore a year back.