GAIL Q3 net profit drops 64% to Rs604 cr as gas prices plummet

State-run gas utility GAIL India Ltd (GAIL) has reported a 64-per cent year-on-year drop in its net profit, at Rs604.08 crore, for the October-December 2014-15 quarter compared to Rs1,679.4 crore in the same period a year ago

GAIL said net profit in October-December nosedived as it could not sell imported gas contracted at a higher price as global prices plummeted.

Lower offtake of liquefied natural gas (LNG)  under a long-term contract by power and fertiliser plants impacted profit, it said.

GAIL imports LNG from Qatar on long-term contract at close to $13 per million British thermal unit whereas the fuel is available in the spot or current market at about $7.

This has lead to a situation where users prefer buying spot LNG rather than Qatar gas.

GAIL buys 60 per cent of the 7.5 million tonnes a year of LNG that Petronet LNG imports from RasGas of Qatar on a 25-year contract.

Pre-tax profit from marketing of natural gas fell to one-tenth.

It was Rs505.36 crore in third quarter of previous fiscal and this year it was just Rs51.14 crore.

Net profit in Q3 was also impacted by Rs500 crore fuel subsidy, the company said.

GAIL and other oil and gas producers like ONGC have to bear a portion of losses of state-owned fuel retailers arising from selling LPG and kerosene at government controlled rates.

GAIL had, in the second quarter ended 30 September 2014, not accounted for the Rs500 crore fuel subsidy, which it has paid in the third quarter.

The company has not provided any subsidy for October-December as it has not received order from the oil ministry for sharing of the under-recoveries or revenue losses for the quarter, it said.

GAIL said its profit was also lower due to reduction in domestic gas availability by over 5 million standard cubic meters per day and higher feedstock cost for petrochemicals.

Revenue fell to Rs15,109.7 crore in the third quarter of current fiscal from Rs16,246.71 crore in quarter ended 31 December 2013.

While sale from petrochemical business increased by 7 per cent to Rs1,246 crore, revenues from LPG and liquid hydrocarbons business fell to Rs1,054 crore from Rs1,933 crore in the corresponding period of last year.

Natural gas sales in October-December were marginally lower at Rs13,167 crore as against Rs13,287 crore in the corresponding period of the previous year. But gas transmission business revenue fell to Rs995 crore from Rs1,189 crore.

GAIL said natural gas sales fell to 74.08 mmscmd from 79.74 mmscmd in third quarter of last fiscal. It said the company board on Friday could not take up payment of interim dividend for the 2014-15.