RIL Q2 net down 5.7% at Rs 5,376 cr y-o-y

However, total income increases 16% to Rs 92,447 cr

Reliance Industries, India’s most valued company, reported a 5.7% decline in its second quarter net profit, but met street estimates on improved refining margins and higher treasury gains.

Net profit was Rs 5,376 crore for the quarter ending September30, 2012 against Rs 5,703 crore in the corresponding period a year ago. Though the gross refining margin was lower at $9.5 per barrel for the quarter against $10.1 a year ago, it is impressive compared to the previous quarter’s $7.6 per barrel.

RIL Chairman and Managing Director Mukesh Ambani said business and financial performance for the first half of FY 2012-13 had been satisfactory despite weakness in global economies and the resultant margin environment. "On a sequential quarter basis, net profit for the quarter was up 20% at $1 billion”, he added.

“There is a global trend of rise in gross refining margins on the back of buoyant crude oil prices and demand supply mismatch for refining refining capacities,” said Alok Ranjan, head portfolio management service at domestic brokerage Way2Wealth.

Brent crude, a benchmark oil price, has increased 7.1 percent this year. The November contract rose 0.4 percent to $115.03 a barrel on the London-based ICE Futures Europe exchange during the day.

Reliance reported gross revenue of Rs 93,265 crore in the quarter, a 15.4% jump from the year ago period. This includes Rs 83,878 crore from refining and Rs 22,058 crore from petrochemicals business. Ustream oil and gas exploration reported Rs 2,254 crore revenue, down from Rs 3,563 crore a year ago. The gross revenue figures also include inter- segment transfers.

Reliance’s two adjacent refineries at Jamnagar in Gujarat have the capacity to process 1.24 million barrels of crude a day. The plants are capable of turning cheap, low-quality crude oil in to high-value products.

Billionaire Chairman Mukesh Ambani is betting on the world’s biggest refining complex to counter a slump in production from its largest natural-gas deposit that led profit to decline for four previous quarters in a row. The company plans to spend 1 trillion rupees in the next five years to improve refinery operations, build chemical plants and start telecommunication services.

A continuous decline in natural-gas production from Reliance’s biggest deposit in India has made analysts the most bearish on the company’s stock in three years. The company reduced its estimate of reserves at all its gas fields by 6.7 percent to 104 billion cubic meters, or 3.7 trillion cubic feet as per its annual report.

Production is expected to decline to 20 million cubic meters a day in the year starting April 1, 2014. Reliance sold stakes in KG-D6 and 20 other blocks to BP Plc, Europe’s second-biggest oil producer by market value, as Ambani sought the London-based company’s technology to drill and produce gas from the deep water area. BP, which completed the $7.2 billion deal a year ago, and Reliance are preparing a new plan to produce gas from the biggest deposits in the block and develop adjoining areas.

The company's stock gained 0.53% to Rs 823.2 a share on Bombay Stock Exchange. Sensex, the benchmark index of the exchange, gained 0.21% to 18713.55 on the day. The company announced its result post the closure of market hours.