London-based Essar Energy today reported a 7 per cent decline in its operating profit to USD 543.7 million in the six months to September, from USD 582.6 million a year ago as a weak rupee offset higher margins at its flagship Vadinar refinery.
The LSE-listed flagship Essar Group company, which is also into power generation, oil and gas exploration apart from refining, said during the reporting period it had to take USD 483 million hit due to the rupee fall.
The newly-appointed Essar Energy chief executive, Sushil Maroo, told reporters in a conference call that pre-tax loss according to IFRS nearly doubled to USD 498.8 million from USD 282 million in the six months to September 2012.
Maroo attributed higher losses to the impact of crude oil volatility on inventory of UDS 83 million, forex loss of USD 483 million on sharp rupee fall from 54 to 63. Much of this is in practice unrealised and will be subsequently recovered through product sales.
The global refining market was very tough during the period, with global industry margins falling sharply in both Asia and Europe. However, Maroo said Essar's Vadinar and Stanlow refineries outperformed the market, but were nevertheless impacted.
However, Maroo sounded optimistic about the future, saying "future is bright and he expects the overall numbers to see major improvement over the next 12-24 months."
Vadinar Refinery's operating profit rose to USD 339.4 million in H1 from USD 311.1 million on higher margins which jumped 9 per cent to USD 6.97 a barrel, against USD 6.41 a barrel a year ago, Maroo said.
The gap between Vadinar's margins and the industry-wide Singapore benchmark margin widened significantly to USD 7.91/barrel, including USD 8.23/barrel in the second quarter, which is above target range of USD7-8/barrel, with Singapore margins at negative USD1.30/barrel in Q2, he added.
The income from the Stanlow refinery fell to USD 65.2 million from USD 197.2 million, while gross refinery margins fell to USD 5.03 per barrel, against UDS 8.03/barrel. This was nevertheless well above industry-wide North West Europe benchmark margins of USD 1.85/barrel, Maroo said.
He said production at Stanlow will be massively cut in H2 following a fire at the furnace. However, he said one unit has resumed and the rest will be resumed in stages.
On the power business, chief financial officer Deepak Maheshwari said operating profit jumped 59 per cent to USD 147 million from USD