Essar suffers $44m loss as refining margins fall to 2011 low

Essar Energy has reported loss before tax of $44.4m (£27.4m) in the six months ended 30 September, compared to $52.7m (£32.5m) profit in the same period of 2012, reflecting the "tough global refining market environment" and "weak economic conditions in Europe and emerging markets".

Group revenue was up five per cent like-for-like to $13.4bn and earnings before interest, tax, depreciation and amortisation were $543.7m, versus $582.6m a year ago. The company says it "continues to take a positive view of energy market dynamics in India, despite the short term macroeconomic issues which have resulted in the depreciation of the rupee over recent months. Our strategy to focus on meeting India's growing requirements for energy remains unchanged."

An uplift in margins from its Vadinar refinery limited the impact of the challenging market for the Indian-focused oil giant, with the refinery operating at 103 per cent of nameplate capacity. Chief Executive Officer Sushil Maroo said: "Global refining margins have been at their lowest since 2011, but the Vadinar refinery nevertheless managed to maintain its margins above target at a US$7.9 per barrel premium to its Singapore benchmark."

Increased financing and depreciation charges, along with the impact of a depreciating Rupee, meant that Essar's loss before tax was $498.8m, versus $282.2 in 2012.

Maroo continued:

In Europe, margins have fallen to levels where there is clear evidence of pressure on a number of refineries. Stanlow is close to completing a major maintenance turnaround which will position it well for a recovery in margins. Near term, margins are expected to remain under pressure, likely leading to further run-cuts in Europe.

In power, we increased our generation year on year and had good availability from all our plants. We continue to encounter fuel and regulatory challenges which are negatively impacting our business, but these are now reducing and we expect these assets to become profitable in the next one to two years.