IOC net profit dips 45 pc on inventory losses

Indian Oil Corp (IOC), the nation's biggest oil company, today reported a 45 per cent drop in its June quarter net profit after inventory losses ate into refining margins.
Net profit in the April-June period, at Rs 4,548.51 crore or Rs 9.60 per share, was 45 per cent lower than the Rs 8,268.98 crore (Rs 17.45 a share) net profit in the same quarter of the last fiscal.
"Variation in the net profit is primarily due to inventory losses," IOC Chairman Sanjiv Singh told reporters here.
The state-owned firm lost Rs 4,042 crore in the quarter owing of inventory losses arising from drop in international oil prices.

Inventory loss occurs when the oil prices fall after procurement and before marketing.
For example, if crude oil is purchased at say USD 50 per barrel price, an inventory loss would arise if by the time it is refined and marketed the price falls to less than that. The loss would be booked as the market rates of products are fixed based on the current global crude oil price.

An inventory gain would be booked if reverse happens -- product prices rise after procurement and before marketing.
IOC earned USD 4.32 on turning every barrel of crude oil into fuel in the quarter as compared to USD 9.98 a barrel gross refining margin in the year-ago period, he said.

The company suffered an inventory loss of Rs 2,033 crore on crude oil in Q1 as compared to an inventory gain of Rs 3,785 crore in the same period a year ago, Director (Finance) A K Sharma said. On products, there was an inventory loss of Rs 2,009 crore as compared to Rs 3,695 crore of gain last year.
But for the inventory loss, GRM would have been USD 6.44 per barrel in Q1. This would have compared to USD 3.56 a barrel of GRM without accounting for inventory gain in the same period of previous year.
The slump in profit would have been larger but for Rs 2,808.05 crore write-back after settlement of liability for entry tax in Haryana.

Singh said IOC sold 20.736 million tonne fuel in the domestic market and 1.772 million tonne abroad during the first quarter of 2017-18. This is compared to 20.415 million tonnes domestic sales and 0.963 million tonnes of exports in the same period of 2016-17.
During the quarter, the company accounted for Rs 876.38 crore from the government as subsidy support for selling kerosene at below-market rate.
Revenue soared to Rs 129,418.11 crore in the quarter under review, from Rs 107,670.95 crore a year ago.
Company debt reduced to Rs 34,922 crore as on June 30 from Rs 54,820 crore as on March 31 after it repaid some of the loans.