The local unit of the Indian oil giant, Lanka Indian Oil Company PLC (LIOC), saw its net profit for the quarter ended June 30, 2015 (1Q16) plunging by 86 percent to Rs.171 million from a year ago, as the state-directed fuel price reduction continues to hurt the company’s performance, the interim results released to the Colombo Stock Exchange showed.

The earnings per share fell to 32 cents from Rs.2.26 from a year ago.

“We have taken up the issue with the government and we are awaiting their direction on a fuel pricing formula to resolve our issues,” said LIOC Managing Director Subodh Dakwale in an earnings call.

LIOC share however closed Rs.1.30 or 3.87 percent up Rs.34.90 at yesterday’s trading.

The company also sells lubricants and engages in bunkering operations at the Trincomalee port.

According to Dakwale, the implications would have been much severe had the world crude oil prices not fallen.

The company sharply narrowed its net profits for the year ended March 31, 2015 to Rs.1.88 billion, down from Rs.4.8 billion the preceding year, as the 4Q15 suffered a massive net loss of Rs.1.06 billion for the same reasons.

With the recent United States-Iran nuclear pact, the industry expects the current global crude prices to remain for the next 12-18 months as the Iranian crude oil will begin to come into the market after the sanction lifted. The company’s top line declined 19 percent year-on-year (YoY) to Rs.17.4 billion. The cost of sales declined by 16 percent YoY to Rs.16.5 billion and the gross profit halved to Rs.852.6 million.

The other operating income had a sharp fall from Rs.238.3 million to Rs.10.2 million from a year ago.

General overheads rose by 16 percent YoY to Rs.769.2 million. The finance cost declined by 36 percent YoY to Rs.22 million. During the three months from March 31, 2015, the company’s short-term borrowings rose by Rs.170 million to Rs.4.17 billion.

This includes US $ 8.004 million (Rs.1.07 billion) borrowing from SBI Colombo and Singapore.

This borrowing is secured against the mortgage of the company’s trading stock held at Kolonnawa, Muthurajawela and Trincomalee terminals.

Meanwhile, the company’s finance income increased 13 percent YoY to Rs.180.1 million.

As of June 30, 2015, Indian Oil Corporation Limited held a 75.12 percent stake in the company, being the single largest shareholder.

The state-controlled private sector pension fund, the Employees’ Provident Fund, had 0.58 percent being ninth largest shareholder of the company.