Weak rupee hit Q1 margins; profits to revive by Q3: CPCL

In an interview to CNBC-TV18 AS Basu, managing director of Chennai Petroleum Corporation (CPCL) said that the company's earni ngs were impacted on the back of sharp rupee depreciation.

Its gross refining margin (GRM) for Q1 stood at USD 4.30 per barrel. Basu hopes to maintain it at current level if crude prices continue to remain stable. He also expects a turnaround in the company's bottomline latest by third quarter (Q3) of current financial year. Also read: Chennai Petro standalone Jun '13 sales at Rs 11,543.76 crore Below is the edited transcript of his interview to CNBC-TV18. Q: While the losses are lower, it is still a loss scenario. What is going so operationally wrong? A: Yes, it is a loss. In the last financial year Q1 it was close to Rs 1,000 crore and ’13-14 Q1 it is down to Rs 377 crore. Although, our gross refining margin is more than USD 4.3 per bbl primarily because of the foreign exchange variations, the losses on account of dollar appreciation, we have been badly affected. In spite of the performance being good both in terms of capacity utilization and distillation-- critical parameters of a refining industry, we are down. But, definitely we are in the field and we hope we are going to improve with market looking positive in the next quarter. Q: Could you quantify what that improvement will look like? Perhaps, in terms of gross refining margins, where they might be headed in the coming quarters? A: Improvement in gross refining margin depends entirely on the market. But we believe that it will be the Q1 the prices have remained. We hope that crude prices continue in the similar region and with that we shall continue to have in the range of USD 4-4.5 per bbl. July is very attractive, it may not be like that but we should be in the range of USD 4 per bbl. Q: Your losses widened at the operational level on sequential basis. How will company perform at an operating level? A: The operating level in the current quarter; if compared with last quarter or last year last quarter or the first quarter of the last year, the operational performance is much better. These are better in terms of capacity utilisation. Q: When will the losses stop? When will you come back in the black? A: We are hopeful during the current financial year that is 2013-14 with the market looking better, Q2 and Q3 should be positive.