Essar Energy’s Share Price Surges as Earnings Beat Estimates

on Jun 24, 2013
Updated: Feb 27, 2024
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Essar Energy Plc (LON:ESSR), the London-listed oil and gas unit of privately owned Indian conglomerate Essar Group, has released preliminary full-year results with earnings surpassing analyst expectations. Essar Energy’s share price rose more than three percent in early morning trading in London today, June 24. While full-year refining margins rose at the company’s core Essar Oil (NSE:ESSAROIL) business, Essar Oil’s share price plunged more than five percent in intraday trading on the National Stock Exchange of India.

**Essar Energy Reports Surge in Earnings**
This year, the company moved its year-end to March from December, making the previous comparative period a 15-month one.
Essar Energy’s current price earnings before interest, tax, depreciation and amortisation (CP EBITDA) for the year ended March 31, 2013 rose to $1.34 billion (£872.4 million), as compared with 484.5 million (£315.4 million) in the previous reporting period, or an increase of 176 percent. Essar Energy’s earnings came ahead of an analysts’ estimate of $1.17 billion (£761.7 million) provided by the company. Operational EBITDA rose to $1.01 billion (£657.5 million) in the reported period. Underlying net debt increased seven percent to $6.7 billion (£4.4 billion).

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**Refining Margins**
In a statement released today Essar Energy attributed the growth in earnings to improved margins at the Vadinar and Stanlow refineries. Vadinar’s current price gross refinery margins (CP GRM) rose 79 percent to $7.96 per barrel of oil, whereas Stanlow’s CP GRM rose 141 percent to $7.38 per barrel of oil. Essar Energy also reported 144 percent growth in generation capacity, to 3,910MW, from 1,600MW at the end of financial year 2012. Generation output rose 27 percent.

Commenting on the results, Essar Energy’s chief executive officer Naresh Nayyar noted that the recently completed projects at the company’s refining and power businesses were delivering good results.
“The much higher margins seen at our flagship Vadinar refinery reflects the benefit of investment in increased complexity and capacity,” Nayyar said. “Our focus now is to complete our remaining projects, continue optimising our operations, reduce our financing costs and reduce our net debt.”

The company said it expected ongoing high energy demand growth in India, with diesel demand forecast to continue rising at about 6-7 percent per year. Power demand is forecast to keep growing at approximately six percent per year.
!m[LON:ESSR, NSE:ESSAROIL](/uploads/story/3324/thumbs/pic_1_inline.jpg)
In March, the company’s subsidiary Essar Oil shifted exposure from rupee to dollar-based debt to cut financing costs at the parent company. Essar Energy said in the statement that Essar Oil had already refinanced 26.11 billion Indian rupees (£284.4 million) of loans into equivalent foreign currency debt of approximately $481 million (£313.1 million) through the use of external commercial borrowings and swapping rupee loans into US dollars.

**Essar Energy’s share price was 3.57 percent up at 123.25p in London as of 10:16 BST on 24 June 2013. Essar Oil’s share price was 5.02 percent lower at 59.60 Indian rupees in Mumbai as of 15:03 IST.**
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