Mangalore Refinery and Petrochemicals reports shocking Q2 losses despite record operational capacity and major expansions

Mangalore Refinery and Petrochemicals Limited (MRPL), a subsidiary of Oil and Natural Gas Corporation Limited (ONGC), reported financial results for Q2 FY 2024-25, revealing a mixed bag of achievements. While the company posted an impressive 118.3% capacity utilization, its bottom line remained in the red, showing a notable loss in both the second quarter and the half-year results. This marked a stark contrast to the profits seen in the same period last year.

MRPL’s revenue from operations in Q2 FY 2024-25 surged to ₹ 28,786 Crore, a considerable increase compared to the ₹ 22,844 Crore reported in Q2 FY 2023-24. Despite this revenue jump, the company faced a loss before tax of ₹ 1,041 Crore, which contrasts sharply with a profit before tax of ₹ 1,606 Crore in the previous year’s quarter. The company attributed these financial difficulties to market fluctuations, decreased gross refining margins (GRMs), and higher raw material costs.

The gross refining margin, a key profitability metric, fell drastically to US$ 0.55 per barrel for Q2 FY 2024-25, a substantial drop from US$ 17.11 per barrel in Q2 FY 2023-24. Industry experts suggested that this dip in GRMs was likely influenced by the lower global demand for refined petroleum products coupled with higher crude prices during the quarter.

Operational Milestones and Awards

Despite financial setbacks, MRPL accomplished significant operational milestones. The company commissioned its Devangonthi Marketing Terminal in August, marking an important expansion for the distribution network of high-speed diesel (HSD). Additionally, MRPL made the Elathur depot fully operational, successfully dispensing 15 thousand kilolitres of product on a monthly basis.

MRPL has also achieved record-breaking crude processing for Q2, highlighting a drive for maximum throughput despite financial pressures. The company reported a capacity utilization of 118.3% for Q2 and 117.6% for H1 FY 2024-25, demonstrating its aggressive pursuit of productivity and efficiency amid challenging market conditions.

Expert Insight: Weaker Margins Amid High Production

Industry experts weighed in on MRPL’s performance, stating that while high capacity utilization is commendable, it often places added stress on refining systems. “When a company is operating above 100% capacity, it signifies excellent operational efficiency, but at the same time, it can elevate maintenance costs and stress infrastructure,” one analyst commented.

Another notable observation was the drastic decline in profitability, with some experts attributing this to unfavorable spreads between crude oil costs and the value of refined products. “Refiners like MRPL are grappling with squeezed margins, largely because of the volatile oil prices. High crude oil prices without a corresponding rise in refined product prices typically lead to lower margins,” explained a sector expert.

Awards and Recognitions for Corporate Excellence

On a positive note, MRPL was awarded multiple prestigious accolades in the last quarter, affirming its commitment to sustainability and human resources. The company received the ‘Water Conservation and Horticulture Development Award,’ ‘The Economic Times HR Future Ready Organization Award 2024-25,’ and the ‘Mahatma Award-2024 for Corporate Environment Excellence.’ These awards showcase MRPL’s efforts towards maintaining high standards in environmental and HR practices despite financial hurdles.

Financial Performance Highlights

The second quarter saw an operating revenue increase to ₹ 28,786 Crore, up from ₹ 22,844 Crore year-on-year. However, MRPL experienced a loss before tax of ₹ 1,041 Crore, compared to a profit before tax of ₹ 1,606 Crore during Q2 FY 2023-24. Loss after tax amounted to ₹ 682 Crore, while last year during the same period MRPL had posted a profit of ₹ 1,059 Crore. For H1 FY 2024-25, revenue climbed to ₹ 56,075 Crore, although the company recorded a half-year loss before tax of ₹ 940 Crore.

The figures reflect the broader challenges faced by MRPL in maintaining its profitability while grappling with external market pressures, fluctuating crude prices, and decreased refining margins.

Outlook and Future Prospects

Looking forward, MRPL’s continued focus on capacity maximization and expansion in its logistics and terminal infrastructure could provide avenues for future revenue generation. However, the company will need to adapt to fluctuating global oil dynamics and manage cost controls effectively to return to profitability.

The current downturn is seen by experts as part of the cyclical nature of the oil refining business, with potential for recovery if global economic conditions stabilize, demand for refined petroleum increases, and crude oil prices normalize.