Thailand IRPC base oil profit stays low

Thai oil refiner IRPC saw profit from its base oils unit stay unusually low in the second quarter as Group I prices struggled to keep pace with high feedstock costs.

The unit’s gross profit of 412mn Thai baht ($11.6mn) in the three months to end-June surged from Bt114mn during the first quarter of the year.

It was still down 83pc from year-earlier levels and the second lowest in more than seven years.

Profit stayed low even as the unit’s sales rose for a seventh straight quarter to their second highest in at least seven years.

Sales rose as regional Group I base oils prices rebounded in the second quarter of the year compared with late 2021 and early this year.

Sales rose even as the base oils unit’s sales volume fell to the lowest since early 2017.

The volume of supplies for overseas markets also fell as the producer boosted its share of sales to domestic buyers to 51pc of total sales.

Sales in the domestic market had lagged sales to overseas buyers in each of the previous four quarters.

Profit remained low as costs outweighed the rise in sales.

The rise in regional Group I base oils prices in the second quarter outpaced higher crude and diesel prices. But the base oils premium to crude and diesel remained unusually low.

The price weakness reflected healthy Group I supply availability in the region, even as IRPC cut back its supplies for overseas buyers. Unexpectedly weak Chinese demand outweighed any drop in supplies.

The base oils unit’s gross profit margin of 5.9pc in the second quarter rose from 2.0pc in the first three months of the year. It was down from 36.1pc during the same period last year.

The gross profit margin of IRPC’s refining unit rose to 13.7pc in the second quarter. The margin was up from 4.8pc during the same period a year earlier and the highest in at least six years.