RIL Q1 net up 4.4% at Rs 6,222 cr as GRM hits 6-year high

Consolidated sales declined 23% to Rs 83,064 cr

Riding on six-year high refining margins and strong petrochemicals earnings, Reliance Industries Ltd (RIL) posted a 4.4 per cent increase in consolidated net profit for the June quarter of 2015-16 at Rs 6,222 crore. For the year-ago period, net profit stood at Rs 5,957 crore. The refining and petrochemicals segment contributed 91 per cent to gross sales and 95 per cent to the operating profit, boosting RIL’s overall profitability.

A Bloomberg poll of analysts had expected the firm to post a profit of Rs 6,211 crore, growth of 4.3 per cent.

The standalone net profit stood at Rs 6,318 crore in the June quarter, up from Rs 5,649 crore in the year-ago period. This is the company’s highest standalone quarterly profit in seven and a half years. In the December quarter of 2007, it had posted a net profit of Rs 8,079 crore.

Consolidated sales declined 23 per cent to Rs 83,064 crore from Rs 107,905 crore in the June quarter of 2014-15.

“Our financial performance reflects the benefits of integrated hydrocarbon chain activities in a benign oil price environment. The sharp increase in demand for transportation fuels helped us realise strong refining margins,” said Chairman and Managing Director Mukesh Ambani (pictured).

“Our petrochemicals business recorded a strong quarterly performance, supported by high operating rates and margin strength in the ethylene chain. In our retail business, we have reached significant milestones over the past couple of years and continue in the high-growth trajectory for this business,” he added.

The company said it was in the final lap of launching Jio services.

On a year-on-year (y-o-y) basis, operating profit before other income and depreciation increased 13.2 per cent to Rs 10,177 crore from Rs 8,989 crore.

Ahead of the announcement of RIL’s quarterly earnings, the company stock closed at Rs 1,025.05 on the BSE, down 1.97 per cent. At $10.4 a barrel, gross refining margin (GRM) beat analyst expectations. In the year-ago period, this stood at $8.7 a barrel. RIL said this was its highest GRM in the past six years. Analysts had expected RIL’s GRM, the earnings from turning every barrel of crude oil into fuel, to be between $9.3 and $9.5 a barrel. “Strong gasoline cracks, led by robust demand growth, lower energy cost and favourable crude differentials, helped boost refining margins,” RIL said.

During the quarter, the benchmark Singapore complex margin averaged $8 a barrel, compared with $5.8 a barrel in the June quarter of 2014-15. Traditionally, RIL’s refineries have enjoyed a $2-4-a-barrel premium over the Singapore GRM. Revenue from the refining and marketing segment decreased 29.9 per cent to Rs 68,729 crore, while earnings before interest and tax (Ebit) increased 37.7 per cent to a record level of Rs 5,252 crore.

From the petrochemical segment, quarterly revenue decreased 17.9 per cent to Rs 20,858 crore y-o-y, with product prices reflecting lower crude and feedstock prices on an annual basis.

However, the segment Ebit increased 25.5 per cent to Rs 2,338 crore. Strong polymer deltas and a sharp rebound in fibre intermediate deltas were key drivers for the improved earnings. The Ebit margins were higher at 11.2 per cent, with strong product deltas, despite lower absolute product prices. Consolidated revenue from the exploration and production business (2.1 per cent of gross revenue) declined 35.3 per cent to Rs 2,057 crore from Rs 3,178 crore in the year-ago quarter. For domestic operations, the revenue was Rs 1,200 crore, down 22.9 per cent. “Lower oil/condensate prices and a decline in gas production led to fall in revenue,” RIL said. The segment Ebit fell 83 per cent to Rs 83 crore.

Alok Agarwal, chief financial officer, said realisations from the sale of EFS midstream would be ploughed back into the upstream business. RIL sold its 49.9 per cent interest in EFS midstream for $1 billion. It had spent $46 million in acquiring the stake and invested another $208 million through the years. RIL, which was investing $12 billion to boost its petrochemicals capacity and build facilities to import ethane from the US, would spend another $5 billion to complete the refining and petrochemical cracker and downstream projects, joint chief financial officer V Srikanth said after the announcement of results.