Hindustan Petroleum Corporation Ltd (HPCL) on Thursday reported a 37 per cent drop in its second quarter net profit on the back of lower refining margins and foreign exchange losses.

Net profit in July-September fell to ₹1,092 crore from ₹1,735 crore in the corresponding period of previous financial year, HPCL Chairman and Managing Director Mukesh K Surana told reporters here.

“The profit was impacted on account of increase in crude prices and consequent increase in the fuel and loss component besides exchange rate fluctuations,” he said.

The company earned $4.81 on turning every barrel of crude oil into fuel in the second quarter, down from $7.61 per barrel gross refining margin in the year ago period.

Also, the company had a foreign exchange loss of ₹887 crore as compared to a gain of ₹20 crore in July-September 2017, he said.

But, these were balanced by inventory gain of ₹1,276 crore in Q2 as opposed to a gain of ₹792 crore last year.

Inventory gain arise when a refiner buys crude oil at given price but by the time it is able to process it and take the fuel to the market, rates would have gone up. And since the pump rates are benchmarked to prevailing international prices, the fuel gets a higher price, resulting in inventory gain. Inventory loss arises when reverse of this happens.

Because of the rise in oil prices, HPCL saw turnover zoom to ₹73,065 crore as compared to ₹54,143 crore for the period July-September, 2017.

Surana said the domestic sales of petroleum products increased to 8.83 million tonnes registering a growth of 4.8 per cent as against industry average of 4.3 per cent.

The sales of petrol increased by 5.9 per cent, diesel by 2.4 per cent, LPG by 4.5 per cent and Aviation Turbine Fuel (ATF) by 27.3 per cent.

The company’s refineries in Mumbai and Visakh processed 4.76 million tonnes of crude during July-September, 2018 as against 4.64 million tonnes last year.

“GRM has been impacted mainly on account of increase in crude price resulting in higher fuel and loss component and lower cracks for some of the products like LPG, bitumen, lubes, furnace oil and exchange rate fluctuations,” he said.

During April-September, HPCL recorded a net profit of ₹2,811 crore, up from ₹2,659 crore in H1 of previous fiscal.

HPCL, he said, strengthened the supply infrastructure by completion of various projects during the quarter, including bottling capacity augmentation at Unnao LPG plant in Uttar Pradesh and additional tankage at Suryapet terminal in Telangana.

It also signed joint venture agreement with Oil India Ltd (OIL) to set up city gas distribution networks in Kolhapur in Maharashtra and Ambala-Kurukshetra in Haryana. In addition, HPCL has received authorisation for setting up CGD (City Gas Distribution) networks in Jind and Sonipat districts of Haryana.

Surana said the company commissioned 131 new petrol pumps to take the number of retail outlets to 15,255.

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