Lanka IOC PLC (LIOC), the local unit of Indian Oil Corporation Limited, turned a net loss of Rs.647.1 million during its January-March quarter (4Q17) from a net profit of Rs.1.55 billion during the corresponding quarter last year, but ended the full year (FY17) with a net profit of Rs.3.1 billion, up 39 percent.
During the quarter under review, the cost of sales at LIOC rose by a sharp 30 percent to Rs.20.4 billion from a year ago as the full impact of the production cuts by the oil producing nations hit the cost base of the company. The growth in revenue was just 10 percent year-on-year (YoY) to Rs.20.3 billion.
As a result, the company made a loss of Rs. 33.5 million before any other expenses were accounted for.
The global oil prices ended last Friday breaking its 3-week losing streak as traders weighed inventory data and looked towards the oil cartel, the Organization of the Petroleum Exporting Countries (OPEC) to extend its 6-month production cut agreed on November 30, 2016, when they meet later this month.
Prices at Brent, the global benchmark rose by 7 cents last week or 0.1 percent to settle at US $ 50.84 a barrel. Early this year, the LIOC anticipated poor performance during the forthcoming quarters as a result of rising international oil prices and higher excise duties imposed locally.
In June 2016, import duty on diesel was increased by Rs.6.00 a litre and in August 2016 the excise duty was also raised by Rs.10.00 a litre. But the company has been unable to pass the cost to the customer as the oil prices are controlled.
LIOC is a frequent victim of administered selling prices by the government and the volatility in the global crude oil prices due to the absence of a pricing formula.
Repeated promises by successive governments to introduce a pricing formula for fuel have now become just a campaign slogan. Fuel is a commodity which can easily be manipulated to take advantage in their re-election bids.
As of March 31, 2017, Indian Oil Corporation Limited held 75.12 percent stake in LIOC while the Employees’ Provident Fund held 0.44 percent stake being the 12th largest shareholder.