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Mukesh Ambani
Reliance Industries’ earnings for the second quarter will mirror the fall in crude oil prices and appreciation in the rupee.India’s largest private sector company might see its July-September quarter’s profit flat — between Rs 5,600 crore and Rs 5,670 crore — quarter-on- quarter and up two to three per cent year-on-year. During the second quarter of 2013-14, RIL had Rs 5,490 crore as net profit.
Gross refining margins (GRMs) — the realisation from turning every barrel of crude into finished products — would see a marginal drop. RIL’s GRMs are expected to decline in line with the benchmarks, driven by lower middle-distillate cracks. “We estimate the company’s GRMs to average at $7.7 per barrel, from $8.7 per barrel in the first quarter,” said ICICI Securities (ISec). It said it expected refining Ebit (earnings before interest and tax) to decline 25 per cent on a quarterly basis.
GRMs for the Singapore Complex dropped by $1 a barrel on a quarterly basis to $4.8 a barrel. The crack spreads for RIL’s key products fell — diesel by $1.8 a barrel and naphtha mildly by $0.5 a barrel.
IIFL said the refining margins had declined on a sequential basis, on the back of a fall in gasoil and jet kero spreads. RIL, having a high proportion of these fuels in its product slate, will bear the brunt.
During the quarter, Brent crude oil was down seven per cent. On a yearly basis, it declined 7.3 per cent. The rupee depreciated 1.3 per cent quarter-on-quarter and rose 2.3 per cent over a year. On exploration and production (E&P), analysts said RIL could see a moderate decline in crude oil production from the MA·1 field and gas production from the KG-D6 field.
However, strong performance in petrochemicals will help the company offset the lower GRMs and weak performance on E&P. ISec added it expected other income to be higher by six per cent on a quarterly basis, at Rs 2,100 crore.
“Petrochemicals is likely to be a stellar quarter,” said Morgan Stanley, adding it saw overall Ebit from petrochemicals rising 32 per cent quarter on quarter to Rs 25,000 crore, though flat on a yearly basis. Higher polymer and polyester spreads will contribute.
Oil marketing companies are expected to post a decent set of numbers, on the back of full provisioning of subsidy sharing from the government. Lower interest costs will help the three companies — Indian Oil, Bharat Petroleum and Hindustan Petroleum — post profits during the quarter.
