HPCL posts 90% decline in Q1 net profit due to falling refining, fuel margins

HPCL Q1 2024: Hindustan Petroleum Corporation Ltd (HPCL) has announced a dramatic 90 per cent drop in net profit for the first quarter of the fiscal year 2024-25, primarily due to a significant decline in refining margins and reduced marketing margins following a cut in fuel prices.

The state-owned oil company reported a consolidated net profit of Rs 633.94 crore for the April-June quarter, a stark contrast to the Rs 6,765.50 crore profit recorded during the same period last year, as disclosed in a stock exchange filing. This represents a substantial sequential decline from the Rs 2,709.31 crore profit reported in the preceding January-March quarter.

The pre-tax earnings from HPCL’s downstream fuel retailing operations fell by 90 per cent to Rs 907.86 crore. This dramatic reduction reflects the broader impact of lower refinery margins and a decrease in fuel price margins.

In the previous year, HPCL, along with other state-owned fuel retailers such as Indian Oil Corporation (IOC) and Bharat Petroleum Corporation Ltd (BPCL), had benefited from holding petrol and diesel prices steady despite declining input costs. This price freeze was aimed at offsetting losses incurred when these retailers refrained from raising prices despite a surge in costs.

However, these gains were largely eroded when petrol and diesel prices were reduced by Rs 2 per litre shortly before the general elections were announced. Additionally, the profitability was impacted by a drop in product cracks, the margins between the cost of crude oil and the final product price, which had been at elevated levels during the 2022-23 fiscal year.

HPCL's gross refining margin, which measures the profit from converting crude oil into fuel, fell to USD 5.03 per barrel in the quarter under review, compared to USD 7.44 per barrel in the same period last year. This significant decrease in refining margins reflects the broader challenges facing the industry amidst relatively stable crude oil prices.

(With PTI inputs.)