State run-Hindustan Petroleum Corporation Ltd (HPCL) reported robust topline growth on the back of high crude oil prices, but the company was unable to pass on the higher cost to the customers, leading to a decline in its net profit in the fourth quarter of 2021-22.
Despite the volatility in the crude oil prices, HPCL plans to spend about Rs 15,000 crore in capital expenditure in 2022-23, as against Rs 16,500 crore spent in the year 2021-22.
HPCL reported a 34 percent decline in consolidated net profit in January-March to Rs 2,019 crore. The company’s revenue for the quarter was at Rs 106,533.84 crore, up 24% from a year ago.
The company’s downstream petroleum business reported revenue of Rs 105,236 crore in Q4FY22, up almost 24% on year. But the business saw its earnings before tax, interest income, interest expenditure, and dividend falling almost 44% year-on-year to Rs 2,261.67 crore.
Commenting on the decline in earnings from the business, Rajneesh Narang, director- finance said, “There have been concerns regarding that. We are looking at how best we can pass on the increased cost in the pricing. We are looking at the integrated margins for the company to take a call on this.”
The other state-run oil marketing company Indian Oil Corporation Ltd also witnessed a dent in its bottom line in Q4FY22 due to a margin squeeze in petrochemicals and a loss in auto fuel sales. For the most part of the March quarter, oil marketing companies left the price of auto fuel unchanged despite the benchmark crude oil prices soaring to a 14-year high of $140 a barrel in early March. While prices of fuel sold to bulk consumers and aviation turbine fuel were raised, retail prices of petrol and diesel were left unchanged for almost 137 days. The OMCs resumed increasing the prices only from March 22.
HPCL management declined to comment on the extent to which they recovered their losses on retail fuel sales due to the freeze on price. They said they have taken a longer-term view on pricing as it is “in the best interest of everyone” given the volatility in crude oil prices.
Crude Oil
The company said that crude oil prices continue to remain volatile given the geopolitical tension, mainly due to the Russian attack on Ukraine.
“We have been utilizing this opportunity (to buy cheap Russian crude). If it makes economic sense, then only we buy that. Also, it should fit into our refinery configuration. We have been doing that and are quite agile in that sense…we are still on the lookout in that sense,” said Pushp Kumar Joshi, Chairman, and Managing Director.
The management also said that if there is a longer-term deal between the governments of India and Russia, HPCL will be a part of it.
Director (finance) Narang said that crude oil, which is currently trading at $107-$108 a barrel, is seen in the range of $105-$115 in June, in the range of $103-$111 in the second quarter of FY23, $98-$109 in Q3FY23, and $89-$105 in Q4FY23.
Capex
HPCL closed fiscal 2021-22 with a capital expenditure of Rs 16,500 crore, of which Rs 6,000 crore was on the refineries, Rs 8,000 crore was on marketing and the rest was on its joint ventures.
The company aims to invest around Rs 14,000 crore-15,000 crore, of which Rs 5,500 crore would be in refineries, Rs 6,000 crore would be in marketing operations, and around Rs 3,400 crore in joint ventures.
“This (FY22) has been the year of consolidation. During the most challenging time last year because of all these constraints, we had a very difficult time consolidating and executing our project. But our teams have been able to do that in the most challenging time and we will reap the rewards of all these expansion and improvements in the years to come” the chairman said.
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