Improved refining margins will help Chennai Petroleum Corporation Ltd cushion the impact of the customs and excise duty cuts announced recently. The company will be able to sustain its refining margins at the the previous year's level. |
Addressing the annual general body meeting of the Indian Oil Corporation subsidiary, chairman, M S Ramachandran, allayed fears that the bigger customs duty cut (compared to the excise duty cut of three per cent), would not hit the company's profitability in an absolute sense. |
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"At 96 per cent capacity utilisation, global refining capacities are fairly stretched and this will keep the refining margins fairly robust," he pointed out. |
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Later he told media persons that he expects the refining margin to sustain at around the same $4.4 a barrel seen in 2003-04. "At the close of the year our refining margin should sustain at $4.5 or $ 5 a barrel," he projected. |
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While the first quarter of the current year saw the company post a refining margin of $6 a barrel, at the current price of $47 a barrel the company could have seen a refining margin of $7, if not for the customs duty cut. This would make for a notional loss of $2 a barrel. |
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The chairman fielding demands for higher dividend, pointed out that the higher debt-equity ratio (which was 1.4:1 at the close of 2003-04) has not allowed the company to be more generous. At 50 per cent, the company is paying out its highest dividend ever, this year. |
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Having completed its debt restructuring, the company debt costs have been brought down to 6.3 per cent (from 9.4 per cent) on long term loans and four per cent (from 6.9 per cent) on short term loans, S V Narasimhan, managing director, explained. |
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Defending the investment in building a jetty at Nagapattinam, Ramachandran explained that the project is expected to yield the company a saving of about Rs 400 per tonne of crude brought in. |
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The company would also be using the jetty for exporting naphtha. He is also hopeful of getting all the seven clearances required for the proposed desalination plant. |
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