Ruchi Agrawal
Moneycontrol Research
Despite a decent 22 percent year-on-year (YoY) growth in topline, Indian Oil Corporation (IOC) reported a weak Q3 FY19 performance with a sharp and sequential decline in operating and net profit. Gross refining margin (GRM) saw a surprisingly steep fall during the quarter under review. Inventory losses impacted profits.
Result snapshot
- GRM for the 9M FY19 stood at $5.83 per barrel (Q3 FY18: $8.28/bbl). GRM for Q3 stood around $0.95 per barrel, which was much lower than our estimate. While there has been weakness in GRMs globally, with the Singapore benchmark at $4.5 per barrel (Q2: $6.1/bbl), IOC's GRM saw a much greater dip. Given that majority of its revenues accrue from the refining business, profits were negatively impacted.
- After inventory gains in the preceding quarters, sharp fall in global crude prices led to a substantial inventory loss during the quarter under review, which took a toll on Q3 profitability
- Overall earnings before interest, tax, depreciation and amortisation (EBITDA) margin took a strong hit, dipping 853 basis points YoY (100 bps=1 percentage point), with operating margin in the petrochemical business declining 1,442 bps.
- While volumes in the domestic business saw a 2.8 percent decline (8.7 percent sequentially), export volumes dipped 33 percent YoY (down 29.6 percent QoQ)
- Refinery throughput was up 4.1 percent and pipeline throughput was up 3 percent YoY
- Finance costs rose 27 percent YoY
- The company's overall performance appears very weak during the reported quarter and we expect the weakness to continue
- With weak performance, volatile crude prices, upcoming central elections and tweaking of marketing margin around elections, we remain cautious on the company’s performance
For more research articles, visit our Moneycontrol Research page
Disclaimer: Moneycontrol Research analysts do not hold positions in the companies discussed here
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
