Essar Oil UK, a part of Essar Energy, which on Monday reported its highest-ever net profit of $244 million in FY 2015-16, up over three-fold from $70 million a year ago, said it will push fuel retailing in England by adding 400 more outlets.
The company now runs seven retail outlets and said the retail plan is part of its effort to improve margins further.
“Retail sales can help us push our margins by $2-3 a barrel of refined fuel, as we can gain on dealer commissions and other areas of downstream integration. We already run seven outlets, and plan to grow this to 400 over the next three years,” Essar Oil UK executive chairman Naresh Nayyar told reporters on a concall.
He also said the retail expansion is capex neutral as they will be just re-branding some already running dealer-owned-dealer-operated outlets.
Essar Energy bought out the then struggling Stanlow Refinery in Ellesmere Port in 2011 and in FY 2015-16 it reported its best-ever gross refining margin of $9.3 a barrel, up from $8.3 a barrel in 2014-15, Nayyar said, adding this pushed up net income by 249 per cent to $244 million.
Nayyar said the good set of numbers come on the back of a general improvement in petrol demand and the resultant increase in output to 8.97 million tonnes, up 5 per cent from 8.54 million tonnes in 2014-15.
The fall in crude prices led to a massive 34 per cent drop in gross revenue at $4.99 billion from $7.61 billion in 2014-15. During the year crude prices fell 44 per cent on an average.
He said the Stanlow Refinery supplies 16 per cent of Britain’s fuel demand, including 3 billion litre of petrol, 4.4 billion litre of diesel and 2 billion litre of ATF per year, processed 8.97 million tonnes crude in 2015-16.
“Stanlow continued to benefit from its optimised single site operation, which increased the yield of high margin products such as gasoline and middle distillates, while reducing production of lower margin products like naphtha and fuel oil,” he said.
On capex, he said the parent company has already committed an investment of $137 million for major improvements at key units at Stanlow which will deliver further reduction in crude costs and improved yields across the product slate.
Since its acquisition of Stanlow Refinery on the south side of the Mersey Estuary near liverpool in July 2011, Essar has invested $694 million, including $350 million in acquisition cost from Shell UK. The Stanlow is the second largest refinery in Britain.