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Significantly higher inventory loss due to a fall in crude oil price has led Indian Oil Corporation (IOC) to an 80 per cent drop in net profit in the fourth quarter of fiscal 2015-16.
Net profit for the fourth quarter stood at ₹ 1,235.54 crore as compared to ₹ 6,285.35 crore.
The board of directors also approved a final dividend of ₹ 8.5 per share in addition to the ₹ 5.5 per share interim dividend paid during the year.
The company’s net sales during the quarter also fell 14.2 per cent to ₹ 80,449 crore as compared to ₹ 93,830 crore in the same quarter last year.
“We had a substantial inventory loss of ₹ 3,335 crore during the fourth quarter as compared to ₹ 871 crore in the same quarter last year. We also took an impairment charge on certain upstream assets which amounted to ₹ 881 crore. These factors affected our net profit for the fourth quarter,” said B Ashok, Chairman of IndianOil.
Inventory losses are incurred by oil marketing companies when crude oil prices started falling. This is because companies source the crude oil at higher prices and by the time it reaches the refinery for processing and selling products, the prices have fallen. Including both crude oil and products, IndianOil has an inventory of around 60 days as most of its refineries are landlocked.
Due to these factors, IndianOil’s gross refining margin for the fourth quarter came in at $ 3 per barrel as compared to $ 8.77 per barrel in the same quarter last year.
Ashok also said that the company’s Iran dues stood at $500 million of which $250 million has been paid and the remaining will be paid in the 2016-17 fiscal. The company is making the payments using Euros as the currency.
IndianOil also reported the highest ever annual net profit of ₹ 10,399 crore in the fiscal 2015-16. This was 97 per cent higher than ₹ 5,273 crore in the previous fiscal.
Its net revenue for the fiscal dropped almost 20 per cent to ₹ 3,50,603 crore as compared to ₹ 4,37,524 crore in the previous fiscal.
On Friday, IndianOil’s shares closed 3.01 per cent higher on the BSE at ₹ 414.05.
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