Essar Energy’s earnings beat expectations

Suzie Neuwirth

INDIA-FOCUSED energy firm Essar Energy yesterday announced better than expected full-year results, due to increased capacity at its oil refineries.

The FTSE 250-listed company said that earnings before interest, tax, depreciation and amortisation (Ebitda) on a current price basis had risen to $1.33bn (£860m) for the year ended 31 March 2013, exceeding analysts’ expectations of $1.16bn.

Essar Energy has changed its year-end to March from December, making the previous period a 15-month one, in which Ebitda was $484m.

Pre-tax losses narrowed to $163m this year, compared to $1.14bn during the 15 months to March 2012.

Margins improved at the firm’s core oil refineries – Vadinar in India and Stanlow in Britain – but Essar’s power business reported losses of $28.5m, compared to profits of $144.6m in the previous period.

“We are starting to reap the benefits of new schemes we have implemented in our oil and gas business,” chief executive Naresh Nayyar told City A.M.

Essar Energy’s shares closed 2.5 per cent up at 122p.

Analyst views | What did you make of essar energy’s full-year results?

“Overall no major surprises but the improvement in the underlying equity story of Essar Energy continues – given the recent pull back in stock and likelihood of some reform momentum from the government of India, we see a favourable risk/reward outlook for this name.

“Essar Energy owns over 600kopd of refining capacity in India and the UK, which have undergone significant upgrading and optimisation. In our view, the market underappreciates the value of these investments and is the main reason we are 15 per cent ahead of consensus for the next three years.

“Essar reported a strong set of results, with an improvement in pre-tax profits to $377m (£245m), from a loss of $104m the prior year. Although reported numbers were strong, we forecast slightly lower margins for the refining business in 2013-14, and still see a difficult backdrop for the power business.