Tuesday, April 12, 2011

Essar Oil Q4 net profit up 78% on higher margins, sales...My old call...

Essar Oil’s fourth quarter (January-March) net profit surged 78% year-on-year to Rs 321 crore, driven by strong sales and higher gross refining margins.
Quarterly sales rose 27.4% y-o-y to Rs 13, 564 crore, and gross refining margin was USD 8.15 per barrel compared to USD 5.37 last year.

For the full year, the company clocked a net profit of Rs 654 crore from Rs 29 crore last year, and net sales increased 28.4% to Rs 47,905 crore.
Gross refining margin for the year was USD 6.91 per barrel versus USD 3.70 per barrel last year.
The Ruia-promoted refiner said its GRMs would improve as expansion of its Vadinar refinery in Gujarat will help increase proportion of heavy and ultra-heavy crude.
“Post the expansion to 18 million tons (and then to 20 million tons in 2013-14), Essar Oil’s refinery Nelson Complexity Index will rise to 11.8 (from 6.1) with addition of significant secondary processing capacity — enabling it to capitalise on structurally strong diesel spreads,” brokerage house JP Morgan had said in a recent report.
Margins are also likely to improve due to recent political turmoil in some countries in West Asia and North Africa, apart from the recovery in developed markets and strong growth in developing countries, Essar Oil said in a press release.
"We see the positive trend seen in the last year is likely to continue," Naresh Nayyar, managing director and chief executive officer said in a conference call.
Essar Oil said its refinery at Vadinar processed 14.76 million tonne of crude in 2010-11, its highest yearly throughput ever. In 2009-10, the refinery had processed 13.50 million tonne.
The company said phase-I expansion of the refinery is scheduled to reach mechanical completion in phases between April-September 2011. Most of the additional production from the new unit will start from October-December this year.
However, costs will increase Rs 500 crore, or 6.3% of the original project cost, mainly due to expected delay in commissioning and related interest costs, and pre-operative expenditure, the company said.
The expansion will increase Essar Oil’s production to 375,000 barrels per day from 300,000.
Despite increasing its refining capacity, Essar Oil plans to slowdown expansion of its retail fuel outlets as the government has not yet deregulated diesel prices.
The company currently has 1,381 retail fuel outlets, with a further 254 outlets under construction.
The government had last year announced plans to fully deregulate price of petrol and gradually deregulate diesel price too.
“An increasing oil price has put pressure on the market price of diesel, which in turn has caused the uncertainty regarding government’s plans to deregulate retail prices of diesel. As a result, Essar Oil intends to slow down its plans to increase retail outlets beyond 1,700 until there is a further clarity on diesel deregulation,” the company said in a statement.
Essar Oil shares Monday closed at Rs 135.75 on National Stock Exchange, down 3.8% from previous close.
The stock has risen 14.2% in the last one month.

My Comments:
Essar Oil was my old call and I still stick with it.Buy and hold for 3-4 yrs.It will be a wealth accumalator.......DD is must before buying....

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