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Transcript
00:00Esh Shankar, Director and Managing Director of Chennai Petroleum joins in and also Meeka
00:04joins me in the studios because she tracks this company in the sector extremely closely.
00:09I'll start with the first question, sir, and try to understand what's happening with the
00:13company, with the industry.
00:15These are truly tough times and I know it's, there's only that much you can do in order
00:19to ensure that you're least impacted, but that is what it is.
00:24Your co-GRMs have declined significantly as compared to historical GRMs that we've seen.
00:31What is going on?
00:32Are you working on ways and means to improve your co-GRMs in the upcoming quarters?
00:37What can we expect in the second half of the year with regard to co-GRMs?
00:41Good morning, everyone.
00:42It's good to share with you the kind of performance that we have done in this Q2 and I just want
00:50to assure the investors and assure the stakeholders that the direction that the company is going
00:55to, I thought I'll just share a couple of insights about the company so that your confidence
01:00in the company will be restored.
01:03I understand fully well from what you have seen and what has been reported is that the
01:08couple of things are very important for the company's growth journey to be understood
01:12upon.
01:13How a standalone refinery like Chennai Petroleum Corporation Limited is going to navigate the
01:18times ahead, that is very important to be understood.
01:20So I want to give this in the perspective of the Q2 that we have done.
01:24So let me give you three important parameters that actually define the company's performance.
01:29One is the crude prices that have to be looked at and you could see that the crude prices
01:34have been extremely volatile during this quarter and from high of about $84 to almost $74 swing
01:41we have seen in this last three months.
01:43And these three months the crude price in our CPCL basket has almost fluctuated by $10,
01:49that is the range that we have seen.
01:51Secondly the crack prices which is also very important.
01:54The crack prices have been almost steady, almost stagnant over this quarter and we compare
01:58it with the last quarter.
02:00But if you compare this crack's position with respect to the last financial year, the last
02:04financial year has been something like $25 we have seen on diesel and we have seen even
02:10in the diesel and ATF also we have seen close to $20.
02:15So looking at those kind of crack positions, the current crack positions in both the Q1
02:20and Q2 of these financial years have been very stagnant and very subdued.
02:24We have seen the diesel cracks hovering around $8 to $10 during this quarter and even the
02:30MS cracks have been left roughly about $5.
02:33So this Q2 has been a very disturbing or very tough time because we have seen single
02:39digit cracks of these very important products.
02:42These two are the areas which are definitely not in the control of the company.
02:46But the third most important parameter is the operational efficiency of the company
02:50and that is where I would like to bring to your notice that during this time when the
02:55cracks are not really encouraging and the crude also is fluctuating.
02:59So we have gone on a maintenance work in the plant.
03:02We have taken almost about two major blocks of our refineries.
03:07We have taken shutdowns and we have completed all the shutdown now and in that scenario
03:12we should be able to look forward to a very robust performance in Q3 and Q4 because we
03:17will be able to do a very high level of operational efficiency and we will bring in a lot of reliability
03:22also to the plant which is foremost important because this third area which I am talking
03:26about as the operational area which is totally something that we need to really control and
03:31we want to be in control of this scenario.
03:33So I would say that although Q2 has been not very encouraging from the perspective
03:38of the numbers, I would say that looking forward the times were bad in Q2 and all the globally
03:44this problem has been faced by many companies.
03:47Right sir.
03:48Yeah.
03:49Sir, we completely resonate with what you are saying and we also understand this is
03:52tough times and there is only that much you can do to insulate yourself from what is happening
03:56globally.
03:57But very quickly, yes Q2 was tough, you know you have worked operationally to enhance performance
04:04which will of course pay out in the next few quarters but do you feel like the second half
04:09of the year will be better than this or do you think the pain will last longer and until
04:13there is, I mean the recovery probably far out will only be in Q4?
04:20Coming to this question of looking forward to the second half, the numbers are slightly
04:25encouraging now, the cracks positions are slightly improving now and despite the cracks
04:31position however it varies, our operational efficiency will bring in lot of good revenues
04:37and we are also trying to maximize our value added products which will give substantial
04:42margin to our overall profitability.
04:45So I think that despite where we are looking at now, I have a very strong feeling and I
04:49have confidence to say that the QH1 will give us much better results than what we have seen
04:55in H1.
04:56H2 will give us much better results than what we have seen in H1.
04:59A better second half of the year in FI25, Mr. Shankar he got this side, I wanted to
05:04ask you in terms of your refining throughput in Q2, where did it stand at and what is your
05:10entire FI25 target and are you confident that the company will meet it?
05:15Yeah see the point is the throughput that we have seen in Q2, we have done more than
05:202 million metric tons and we have a nameplate capacity of 10.5 million metric tons and last
05:25year we did phenomenally well, we did more than 110% of the capacity utilization but
05:30in H1 we have done 94% capacity utilization on the back of the shutdowns that we have
05:35taken in Q2.
05:36So if you look at Q1 per se, it was more than 100% and Q2 we have done something and the
05:41overall H1 we have got 94% and I'm sure that in the H2 we will be able to ramp up our production
05:47capabilities and we will be achieving more than 100% capacity utilization.
05:51In terms of crude prices now they have been very volatile off late, so what was the strategy
05:57looking like in Q2 in terms of your crude sourcing and in terms of Russia as a percentage
06:02of your entire imports, where did it stand and how have you seen the discounts playing
06:06out and where do you see this going next?
06:10See if you look at the way the Russian crude discounts have been panning out, there has
06:16been a steady decline in the discounts that are available and currently we are looking
06:22at very low level, roughly about 1.5 is what we are looking at and that is still a good
06:28opportunity crude available in the market and as per our performance requirement, as
06:32per our refining capability and refining requirements, we will be definitely looking at these opportunity
06:38crudes and we generally have a tie-up of 50% term crude that we use and balance 50% we
06:45use between the spot crude and the local indigenous supply.
06:48So roughly around 35% to 40% of the opportunity crudes we look at every point of time.
06:54So even if one or two dollars are available, nevertheless it is a good benefit for the
06:59company but we cannot really compare it with what we have seen in the past, the kind of
07:04discounts that are available, that is definitely not in the current scenario, we do not have
07:10the discounts anymore.
07:12There have been reports about how the company is planning to help build a major oil refinery
07:18in South India and the company is in talks to raising loans, could you give us some details
07:23on this?
07:24See along with our parent company, Indian Oil Corporation, we are planning a 9 million
07:32metric ton refinery at Nagapattinam, south of Chennai, it is about 350 kilometres from
07:37Chennai, so that is one refinery where we have done about 10% of pre-engineering work
07:42and some pre-project activities we have completed and we are waiting for the final approvals
07:47to come from the Government of India for the infusion of equity in the project.
07:53So as soon as that is done, we will be up and running, our engineering and other activities
07:57have been completed to a great extent and our tenders also are in the market.
08:02So we expect that once the go-ahead is given, the refinery will be up and running very soon
08:07and as compared to the other refining companies that are coming, that's all in a very preliminary
08:11stage.
08:12So I believe that our 10% of engineering progress is a very substantial progress that we have
08:17done.
08:18Last quick question Mr. Shankar, you know debt was significantly higher in the first
08:22half of FY25, over 6000 crores versus 2000 crores a year ago, how does this play out
08:30and what has this been raised for?
08:34Let me assure you here that the kind of debt that we have gone into recently is because
08:40of the low operating scenario and once the refining throughputs increase and we are able
08:47to match up to the production, we are able to ramp up the production capabilities, our
08:51revenue figures will also substantially improve and the debt portion we will plan to bring
08:56it down by another 1500 to 2000 crores in the coming quarter so that we are at a sustainable
09:00level as we were before the Q1 results were announced.
09:04So I think with the new project, the refineries which are going to come up now after the shutdown,
09:10we should be in a comfortable position to bring back our debtivity position to roughly
09:14around 3000, 4000 we should be able to manage.
09:18Thank you very much Mr. Shankar and good luck, it's tough times but we hope that you can
09:23navigate this at best.
09:25Thank you so much.
09:27Thank you, nice talking to you.
09:28With that, the markets are still flat, the bulls are still struggling, 24,400 is turning
09:31out to be quite the level that we should be tracking today, around that but there is
09:36no sustainable material recovery that is visible on the street just yet.
09:41Parts of the market are doing okay on back of earnings, the broader market universe performing
09:45a lot better than the large cap space, HUL is under tremendous pressure on back of disappointing
09:50numbers, SPL Life also not looking good, Hindalco too selling off in trade.
09:55So it's a tough day of trade just like it has been for the last couple of days.
09:59With that we are completely out of time, thanks for watching but there is a lot more
10:01programming on the other side so keep it with us.

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