Lanka IOC Q1 profit falls with lower oil prices

IOC

Aug 25, 2015 (LBO) – Fuel retailer Lanka IOC said profits in the three months to June fell to 171 million rupees from 1.2 billion rupees in the same period last year amid a sharp drop in international oil prices.

Net profit plunged to 1.8 billion rupees in the full-year to March, from 4.8 billion rupees in the same period last year.

“The slump in profit is due to sharp drop in retail selling price of auto fuels coupled with increase in duties imposed by the Government,” Chairman Indrajit Bose said.

Lanka IOC, Indian Oil’s subsidiary, is the only oil company other than the state-owned Ceylon Petroleum Corporation that operates retail petrol and diesel stations in Sri Lanka.

In the annual report, Lanka IOC said it enjoyed a 28 percent return on capital employed in 2014, but this fell to 10 percent in 2015.

Sales of petrol increased 2 percent and sales of diesel increased 15 percent. XtraPremium 95 octane sales grew a healthier 15 percent, while Lanka Super Diesel grew by 28 percent.

Bunkering operations showed increased sales of 24 percent despite price competition.

“Our bunkering operations are currently facing severe price competition from Indian ports that are able to offer lower prices due to domestic production of fuels, while Lanka IOC has to accommodate the additional costs related to fuel imports,” Subodh Dakwale, the managing director, said.

“However, I am confident our technical expertise and extensive range of services will continue to provide a competitive advantage to ensure sustained revenue growth in the new financial year,” he said.

Bose said one of the strategic priorities for the medium term is to acquire state approval for bonded storage at Trincomalee Terminal. This will enable Lanka IOC to tap bunkering volumes at Trincomalee port “which has a potential of around 8,000 MT 380 CST FO and 500 MT of MGO per month for in transit Vessels in Bay of Bengal.”

In lubes there was an overall growth of 11 percent during the year.

“Lanka IOC signed High Sea Sale agreement with Board of Investment for overseas product trading. It also commenced import of Euro-5 compliant 10 ppm Gasoil from March 2015 for upgrading the LSD quality specifications,” the company said.