Indian Oil Corp reports 33% fall in Q4 net profit

Indian Oil Corp, the nation's largest fuel retailer , reported a 33 per cent dip in net profit for the March quarter mainly on account of a lump sum subsidy it had received in the comparable quarter of the previous fiscal.

Net profit in the fourth quarter of 2014-15 was Rs 6,285.35 crore, or Rs 25.89 a share-33 per cent lower than Rs 9,389.85 crore, or Rs 38.67 a share in the year ago period, IOC said.

IOC Chairman B Ashok said, "In the fourth quarter of 2013-14, we had received Rs 7,735 crore fuel subsidy for previous quarters, pushing up the profits. Without this back-quarter compensation, Q4 2013-14 net profit would have been Rs 1,655 crore."

IOC and other state-owned fuel retailers sell domestic LPG and kerosene at government controlled rates and losses thus incurred are made good through cash subsidy and dole from oil producers like ONGC.

The firm earned $8.77 on turning every barrel of crude oil into fuel in the January-March quarter, as opposed to a gross refining margin (GRM) of $2.17 per barrel in the same period of 2013-14.

IOC had lost Rs 3,221 crore in revenue in the fourth quarter of 2014-15 on cooking fuel sales, all of which were compensated.

For the full fiscal ended March 31, 2015, it posted a net profit of Rs 5,273 crore, lower than Rs 7,019 crore in the previous year.

"We had an inventory loss of Rs 15,600 crore in 2014-15 as against an inventory gain of Rs 3,990 crore in the previous year," Ashok said.

IOC refineries processed 53.6 million tonne of crude oil in 2014-15 as compared to 53.1 million tonne in the previous fiscal, he said.

Fuel sales rose to 71.8 million tonne, from 70 million tonne in 2013-14, with petrol (8.3 million tonne) and diesel (34.5 million tonne) leading the charge.

IOC added 950 retail outlets to take total number of petrol pumps to 18,175 and 6,230 mini-petrol pumps called kissan seva kendra.

"The year was indeed very challenging but we have been able to keep out performance up, our spirits up and our service orientation up," Ashok said, adding that the benchmark Brent crude oil fell from high of $115.32 a barrel in mid-June to $45.22 in mid-January.

The fall in oil prices meant the purchase value of crude dipped to Rs 1.95 lakh crore on purchase of 52.4 million tonne in 2014-15, from Rs 2.41 lakh crore on buying 51.4 million tons in the previous year, Ashok said, adding that the dip also led to inventory losses of Rs 15,600 crore.

The inventory loss meant IOC made a GRM of just $0.27 per barrel in 2014-15 as compared to a margin of $4.24 a barrel, he said.

This loss translated into a GRM of $6.46 per barrel, Ashok added.

Inventory losses are incurred when a company buys crude oil at a price and by the time it is able to process and turn it into fuel, international benchmark rates fall, thereby fetching lower realisation.