Mangalore Refinery and Petrochemicals Limited (500109) Earnings Call Transcript
July 21, 2025
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to Mangalore Refinery and Petrochemicals Limited Q1 FY '26 Results Call hosted by Prabhudas Lilladher Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Swarnendu Bhushan. Thank you, and over to you.
Thanks, Bhavya. On behalf of PL Capital, we would like to welcome all the participants to quarter 1 conference call of MRPL. From the management, we have Managing Director, Mr. M. Shyamprasad Kamath. We have Director, Finance and CFO, Mr. Devendra Kumar. We have Director Refinery, Mr. Anandha Kumar. We have ED Projects, Mr. B.H.V. Prasad; ED, Marketing, Mr. Deepak Prabhakar; and Group General Manager, Finance, Mr. Subhashchandra Pai. I would now like to invite the management to share their opening remarks on the results, post which we will follow the session with the Q&A. Over to you, sir.
Yes. Good afternoon, everyone, and thank you for joining us on this first quarter earnings call. I'm M. Shyamprasad Kamath, Managing Director and CEO of MRPL. Along with my leadership team, I will walk you through our Q1 performance, the operating environment we faced and our near-term priorities. First, on the operating highlights, throughput, we processed 3.52 million metric tons of crude and other feedstocks. Although the volumes were lower year-on-year primarily because of the planned turnaround, on April alone company set a record processing of 1.51 million metric tons, underscoring the inherent capacity of the refinery once all units are online. On fuel and loss and product yields, the distillate yield for the quarter was 80.97%, in line with what we have achieved in our previous quarters. The company posted a fuel and loss of 11.4%. However, our adjusted F&L due to the turnaround, the number would be somewhere around 10.1% for the quarter. Financial performance, revenue from operations came in at INR 2,983 crores, reflecting both the lower throughput and almost a 20% drop in the benchmark crude prices compared to last year's Q1 and an 8% drop sequentially. Gross refining margin averaged at $3.88 per barrel, down from $4.7 per barrel in Q1 previous year and $6.23 per barrel in Q4 '24,'25. Our EBITDA was at INR 218 crores and a PAT loss of INR 272 crores. Roughly, that loss is attributable to the planned shutdowns and the inventory loss; both are transient effects. On the market context, Global refining margins were better during the quarter due to supply disruptions and normal demand growth. Refinery closures in '25, '26 are expected to support the cracks going forward. However, crude price shocks impacted the bottom line in the last quarter. On the domestic front, the diesel demand grew almost at an average of 2% year on year while the gasoline remained resilient at around 7% growth. Both these trends support our marketing focus in southern and western part of the country. All our major units are back in service now. And we expect the throughput in quarter 2 to be above 4.3 million metric tons with the GRMs already showing a stronger in July. If the crude prices do not fluctuate too much, we should be able to post good numbers going ahead in the rest of the remaining quarters of this fiscal. In short, Q1 was operationally challenging, but strategically necessary quarter. The refinery is now positioned to run at historically high levels. Now I hand over the call to our Director of Finance and CFO, to talk about the financial details.
Good afternoon, everyone. This is Devendra Kumar. I will briefly let you know the key numbers and the reasons behind them. The top line contracted largely because of, first, about 0.8 MMT reduction in throughput versus the previous year quarter 1 due to planned Phase 2 shutdown. About 20% year-on-year fall in benchmark crude prices, lower volumes, especially at the time of good cracks in June resulted in lower EBITDA, while depreciation at INR 363 crores and finance costs at INR 255 crores also rose slightly during the quarter. Roughly, the loss is attributable to shutdown turnaround and inventory valuation due to the impact of crude price slide. The refinery returned to full service in late June. July cracks are already above the Q1 average. There are some points which I would like to highlight. Operating expenses came in at INR 601 crores, which is slightly lower than the previous quarter due to shutdown effect. The fuel and loss impact for the quarter is transient as MD sir has already explained in his talk. Finance cost at INR 257 crores rose 6% quarter-on-quarter due to short-term debt, which was raised to fund the turnaround and related activities. Gross debt stands at INR 13,608 crores. Net worth is INR 12,657 crores, giving a debt to equity of 1.08. The ratio is expected to improve as earnings rebound in the coming quarters. Q1 CapEx was INR 537 crores, primarily due to the shutdown expenses. Total Annual CapEx is expected to be around INR 1,000 crores, including the shutdown expenses which have already been incurred. With all units back, we are targeting GRMs in the high single-digit range for Q2, supported by stronger middle distillate cracks and internal fuel loss reduction initiatives. There are specific tasks assigned to the team to bring up cost leadership in the organization. We are also very selective on the CapEx spending and objective is to reduce the debt as far as possible. Despite a deliberately compressed quarter, our financial foundation remains resilient and the refinery is now positioned to deliver materially higher throughput. We remain committed to prudent capital allocation, disciplined cost management and value accretive growth. Thank you for your time. We are happy to take your questions now.
[Operator Instructions] The first question is from the line of Ramesh from Nirmal Bang Equities Private Limited.
My first question, is how much was the inventory loss in dollars per barrel in the first quarter? And if you didn't have the shutdown, what would have been the GRM in first quarter?
The GRM, if the shutdown was not there, we would have been somewhere around $8. So the impact of the inventory loss is around $2 and with no shutdown, it would have been another $2. So overall, it could have been closer to around $8 would have been our GRM.
Okay. So if you're looking at the current crack, since you mentioned high single digits, would it be similar to this $8, higher or lower? What is the kind of current run rate in terms of the crack spreads and GRM?
It could be slightly higher than $8 per barrel.
So if you look at your paraxylene plant, what is the kind of operating rate you had, how much of sales you had in paraxylene, and how much of the profit or loss from paraxylene is included in the first quarter result?
See, we are not operating -- we are operating the complex on a reformate mode. And we continue to operate the complex on reformate mode only. And the margins from the PX complex, while we have operated on the refining margin was around almost $0.5 per barrel.
So out of the reported margin, about $0.50 is from the reformate to paraxylene, okay, fine. So how do you see the paraxylene prospect because right now, it will be the paraxylene, PTA, polyester changes under pressure. So do you really see any plant closures like in refining, do you see any signs of recovery? Or we should count on just the refining business to do well, say, in the next 9 months?
In the short term, the PX outlook appears to be not coming up, as we mentioned, and we do look at the kind of economics on which mode of operation and then take a call.
Understood. Sir, one final thought. In terms of marketing, how many retail outlets you have and what is the kind of retail margin that you've included in the first quarter result? And obviously, there's been some reduction in that. So what's the kind of number of retail stations you plan to add and the growth in retail volumes you can expect in FY '26 and '27.
As on date, we have about 170 retail outlets, which we have commissioned. And during year, we plan to add probably another 100 retail outlets. And our target is to go to closer to 300. But yes, our target immediate short term is to achieve another 100 in this financial year. On the margin front from the retail, we brought in about INR 60 crores during the quarter.
And in the retail sales volume, I can get that information?
About 68,000 KL.
68,000 KL. This is for the quarter, right?
Yes. Yes.
And how do you see that increase by the end of the year? And what can you do, say, in FY '27 once these 270 retail outlets are in place?
We did about 230 TKL last financial year. Our target is to reach at least to go to around 300 to 325 TKL this year.
Okay. And how much would that increase say in FY '27 based on the 270 outlets by the end of the year?
Can you come back on the question, please?
Based on the 300,000, 325,000 liters go to -- by the end of FY '26 what is the kind of growth you can expect in the retail sales volume in FY '27 once you have the 270 retail outlets by the end of FY '26?
So we target to achieve about 500 TKL.
[Operator Instructions] The next question is from the line of Sabri Hazarika from Emkay Global Financial Service.
So I have a few questions. Firstly, you mentioned the net debt number as how much, INR 12,600 crores?
Yes, yes, correct.
So it was INR 12,800 crores, which has come down to INR 12,600 crores Q-o-Q, right?
Yes.
Okay. Second is on your -- if I go -- I mean, how is the polypropylene plant doing currently? Are you -- what kind of like deltas are you realizing? Is it generating any profit? Or still, it is under pressure given that broader margins are not good?
Polypropylene plant at 100% capacity. Even during the quarter 1 also, we could manage to run that plant because the feeding unit was operational and then we were managing it. On the margin front, since the PP is produced through -- from the -- if I can say, through the crude directly, and it's not from the naphtha, the margins are better compared to looking from an ethylene cracker.
So it's like crude-propylene -- polypropylene, right? That is the chain, right?
Yes.
So -- and versus propylene versus polypropylene, the margins are okay or that is not that great?
That is okay. That is okay.
Okay. So stand-alone, if I take that, assuming that your refinery produce supplying propylene is a third party, then how is the plant doing?
You mean to say somebody buying propylene and then producing polypropylene?
Yes. I mean if I separate this plant into a different unit, and I assume that it is buying from your refinery, the propylene, then what is the economics?
That should be a -- we don't look at that kind of a bifurcation because ultimately, when we look at an overall economics, we look at all these things put together.
Okay. Okay. Got it. And last question is on this OMPL. I mean your aromatic complex. So this GAIL PTA plant should be ready, I think, in the next 1 year. So right now, still the PX economics, if that plant comes, still the economics are not great to produce PX and continue with reformate? Or there is a case for like shifting the mode to PX if that GMPL plant comes?
It is, again, subject to economics. If we are able to strike a deal with GMPL, definitely we would like to give it to the next door. But it is all subject to economics and what is the kind of we are able to strike the deal between the 2 companies.
Okay. So right now, it will continue on that reformate mode and you were saying you are getting something like $0.5 per barrel from this?
Yes. If I heard you correctly, the debt stands at 13,608 crores.
Yes, that is gross. Net debt would be?
Same.
Net debt is also same, 13,608 crores?
Yes.
[Operator Instructions] The next question is from the line of Pratyush Kamal from InCred Equities.
So I just wanted to understand this mathematics of $0.5 per barrel whenever you are -- you're getting this benefit through the petrochemical integration. So what is this about? And second was regarding this reformate mode. So when you're saying that you're running this on a reformate mode, what does it actually mean?
See, the complex we can operate -- we can share -- we have shut down the paraxylene parts of the complex and what we do is we operate it to a phase where we make this reformate, which is the base blend stock of either making paraxylene or it can go going for an MS blender. So we are making -- we are operating only part of the complex where we are selling this reformate. And we are extracting some benzene also and adding value to it.
And how is this -- and how is the reformate made? Is it [indiscernible]
I will explain. I'm Anandha Kumar, Director of Refinery. This [ aromatic compound ] reformate is actually the intermediate formed first, then it is further converted to produce paraxylene. So what we are presently doing is we produce the reformate, that the basic first converter unit. And then we pack it as a blend stock and sell it. If PX margins were good hypothetically, then we would have processed further the same reformate and made PX, which is presently that market is not that great. You're asking where the reformate is made? So reformate is intermediately produced in this complex.
Understood. So this reformate is ultimately made from the naphtha or through the raw crude. So how do you actually make the reformate?
It's made from naphtha, actually.
Understood. So -- and just again, so what are the different products other than PX to which you can use this reformate, you can use first in the PX production, other in this MS production or MS blending? So is there anything else also which you can do through this reformate and you can ultimately get the benefit whenever the margins are high in that product?
Presently, yes, your understanding is right. Basically, it can be made for MS blending. PX and other components like basically benzene, which is a byproduct [indiscernible] . So these are the main...
Understood.
We are also producing -- we have also started some amount of Taluene extraction from the complex, and we are -- that also we are selling as a product now.
We just started last year.
Understood, sir. And what is this $0.5 per barrel addition through the petrochemical all about?
So this is the margin, which is being -- which we have estimated coming from the paraxylene complex.
The next question is from the line of Kishan Mundhra from DAM Capital.
Two sort of questions. So firstly, data keeping one, sir. Could you share what is your current -- or what was your Russian crude blending during the quarter? And what was the discount that you realized on this crude.
See, the kind of Russian barrels that we are currently getting is something similar to our average whatever the Indian as a country as we are importing. There's not much difference in that. And the discounts also are in the same range what the Indian other counterparts are getting. Even though the discounts have come down slightly, but yes, it is more or less -- we are in the same lines at what the other Indian refineries are getting.
Which would be like $2.5 to $3 range delivered in year? Would that be a correct assumption?
You can say plus/minus something there.
Okay. Okay. Understood. And sir, the second question, I mean, I know it's early days, but still, if you could share your assessment of the impact of the recent sanctions on the Russian crude that has been imposed by EU. So I mean, what is your assessment as far as your financials are concerned, your business is concerned and the broader market in general.
We are still trying to assess because we need to look at the fineprints. Yes, as of now, the one of the country's refiner's name has come up. But we are still assessing it. It is not just the -- to what extent the price caps are there, how the other things are going to be, how there is impact on the fleet. We are looking at still and trying to assess that thing now. But as we speak, there is -- we don't -- we have not seen any challenges getting the crude at least for the month -- balance month of July part whatever are going to come.
[Operator Instructions] The next question is from the line of [ Naresh Katariya ] from [ Money Curves Analytics ].
I just have one question. What is the share of diesel in your product slate and I believe diesel cracks are higher. Any thoughts if these higher cracks are sustainable due to anything going on globally?
See, our middle distillates, when we say our middle distillates, it is ATF plus diesel, we are at around almost 50%. And again, if I have to further split it as diesel, it is somewhere anywhere between 38% to 40%. So I have -- we have this flexibility of trying to swing some amount of -- between the 2 products. I can go up till, say up to say, stretch it up to around 42% as middle distillates -- as diesel, sorry.
Sure. So my second question on the sustainability of higher diesel cracks, are diesel cracks higher currently? And what do you think would sustain. I've seen analysts predicting higher cracks based on futures traded on U.S. that diesel is going to sustain higher for some time? Any thoughts? And what is the situation?
Currently, the diesel cracks are high compared to what it was even in Q1 also, they are comparatively higher. It all depends on how this -- the recent sanctions are going to turn around. We need to really -- that is why I said we need to relook at those fineprints. And going forward, currently, as if that really sanctions comes in, we expect that the diesel cracks are going to be further higher. And it all further depends on how the -- how U.S. is also going to look at this particular aspect. So it is going to be -- we have to do a watchful on this particular aspect.
Understood. Last question is, I've seen over the years you've reduced your fuel and loss, though it is higher compared to other refineries, but the trend is down. So if the fuel and loss drops by 1%, does it mean you get 1% extra output for the same barrel of crude? Is that a fair understanding?
Yes, you're right.
And that adds to margin, right? Because we've paid for the Brent, we have paid for operations. But you are getting -- you are losing and wasting less.
It adds to your bottom line.
The next question is from the line of Ramesh from Nirmal Bang Equities Private Limited.
You mentioned at the beginning that you're expecting refinery closures. So is there some number you can share in terms of how much of the Asian and global capacities are expected to close this year? And what is the trend you expect between FY '26 and FY '27 in terms of refinery closures?
While we don't expect any closures in the Asian market, there is a closure that has been declared, one in the U.K. and one in the California region.
And what is the kind of capacity in barrels per day or per annum that's been closed now?
Well, I'm sorry, I do I'm not having the numbers right now, but we can share it to you subsequently.
That's okay. So, just dwelling on the refining margin, you have about 10%, which is in the bottom product, right? And if you see VLSFO margins are about $10 [indiscernible]. The interesting thing is compared to the long-term negative margins of $15, HSFO discount is now at about minus $3, minus $5. So in the bottom of the barrel, how do you see your own ability to increase the VLSFO component? Is there going to be an incremental upside to your GRMs?
First of all, the bottom 7% or 8%, it's not 10% now. We are at around 7% to 8% on the bottom. This entire 7% to 8% is not coming from VLSFO. It also includes whatever coke and sulfur also that is produced. And currently, our strategy is not to make VLSFO rather than make more distillates.
And lastly, if I can just ask you on the polypropylene business. Can you share the dollars per barrel that is included in your margins from the polypropylene sales from your FCC unit?
You are asking the sales value of PPP. Margins, I don't think we have separately, no separate margins we have done for the polypropylene.
Going forward, how do you see the economics of this polypropylene business from FCC crackup, because globally, the propylene-polypropylene chain is bleeding. You see whether it is PD, HCP or the traditional crackers. So is there any rationale in running this unit? Or do you expect the recovery in the overall polypropylene spreads and margins going forward in terms of the economics? How do you see that?
What we understand is the polypropylene market is pretty stable. It is a polyethylenes, which are bleeding.
The next question is from the line of Kirtan Mehta from Baroda BNP Paribas Mutual Fund.
Couple of questions. We mentioned that we have a fuel and loss of 10.6% in the quarter. How much reduction we can achieve on this fuel and loss when the plant operation normalizes?
See we on quarter 1, our fuel and loss was around 11.4% and a normalized thing was around 10%. So we will be back to around the 10% range in that is what our outlook is in quarter 2. And we have certain other projects which have lined up for reducing the full and loss. So that is where we are targeting another almost a 1% reduction in the overall fuel and loss going forward.
Another question was about the export. We have the export significant share of diesel. So how much of our diesel is currently placed in the European market?
See our diesel is typically -- we don't directly sell our diesel into the, as I can say, the end customer. It is all picked up by the -- through a tendering process by a trader. So we don't foresee as of now any of our products coming into that kind of a situation. And mostly, our diesel, what we understand it has not been going into the European market.
Right. And one last question was about the isobutyl ethanol project that we have undertaken.
Isobutyl benzene?
Isobutyl benzene. Yes. Could you update us on the project? And what could be the benefit of that plant?
Yes. We have completed the factory acceptance test of the project. Now as we speak, the -- after the test, the system has been dismantled from the factory, and it has been brought in and the erection is in process. We are expecting by end of August to have a mechanical completion and probably start the trial runs, say, by third week of September or end of September.
Okay. And could you also remind us about the capacity of CapEx and what could be sort of the operational margin from this project?
Sorry, it is a pilot plant. It is not a full-scale plant. It is a pilot plant. Demo plant. Pilot-cum-demo plant. It's not a commercial plant. It is a demo plant based on our technology. So once we are able to establish the product quality and get the customer satisfaction, then we will getting into the full scale to a commercial scale.
The next question is from the line of [ Rao Thakur from NVS Brokerage ].
Sir, just wanted to know what are the days of shutdown in this quarter, sir?
In this quarter, there is no shutdown, please. We have completed our turnaround and the complex right now is operating at full capacity.
Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for the closing remarks.
Yes. So [indiscernible] This side, thanks for attending the call on behalf of the management of MRPL. If you have further certain queries, you can contact via mail, and we'll try to answer that as soon as possible. Thank you.
On behalf of Prabhudas Lilladher Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you all.
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