Riding on seven-year high refining margins, Reliance Industries Ltd (RIL) on Friday stunned the Street, reporting a 12.5 per cent rise in consolidated net profit at Rs 6,720 crore for the quarter ended September. For the year-ago period, the net profit stood at Rs 5,972 crore.
The net profit for the September quarter includes exceptional items of Rs 252 crore on account of the sale of investment in EFS Midstream worth Rs 2,911 crore and provision for impairment in shale gas assets held by Reliance Holding US worth Rs 2,659 crore.
A Bloomberg poll of analysts had expected RIL to post a 0.8 per cent drop in consolidated net profit at Rs 5,926 crore and net sales of Rs 66,343 crore.
Consolidated sales, however, declined 33.8 per cent year-on-year to Rs 75,117 crore from Rs 1,13,396 crore in the September 2014 quarter. The decline in revenues was led by a 50.6 per cent year-on-year drop in Brent crude oil prices and 35.5 per cent lower exports from India operations.
Following the announcement of the company’s results, RIL’s global depository receipt rose as much as 3.4 per cent.
“We achieved record Ebitda levels and profits for the quarter, underscoring our ability to optimally utilise our assets across the value chain to leverage favourable market conditions. The refining business performance was notable, as it benefited from a combination of high utilisation levels, advantageous crude market opportunities and strong global fuel demand,” said Mukesh Ambani, chairman and managing director of RIL.
“The petrochemicals segment performance reflects strong volume growth, product mix improvement and lower energy costs. Reliance Retail achieved a milestone of Rs 5,000-crore quarterly turnover for the first time, reflecting continuing growth momentum in physical retailing,” Ambani said.
The company’s gross refining margin (GRMs) for the September quarter stood at $10.6 a barrel, against $8.3 a barrel in the year-ago period.
Analysts had expected the GRMs to stand at $8.5-$9 a barrel. GRM measures the earnings from turning every barrel of crude oil into fuel.
RIL, which typically reports a GRM of $2-3 a barrel above the benchmark Singapore complex GRM, posted a premium of $4.3 per barrel during the quarter, the highest since early 2009. During the quarter, the benchmark Singapore complex margin averaged $6.3 a barrel, compared with $4.8 a barrel in the quarter ended September 2014. Brent crude prices averaged $50 a barrel in the September 2015 quarter, against $102 a barrel in the second quarter of FY15 and $62 a barrel in the June quarter this year.
For the refining segment, earnings before interest and tax (Ebit) increased 42.1 per cent year-on-year to a record Rs 5,461 crore. Ahead of the quarterly earnings, the RIL stock closed 0.91 per cent higher at Rs 912.2 on the BSE. At Rs 1,596 crore, other income was lower than Rs 2,009 crore in the September 2014 quarter, primarily due to lower accruals on investments. Operating profit before other income and depreciation increased nine per cent year-on-year --- from Rs 9,818 crore to Rs 10,704 crore.
“A strong operating performance by the refining and petrochemicals business, coupled with favourable exchange rate movement, was partially offset by lower contribution from the oil and gas business,” read an RIL statement.
Revenues from the petrochemicals segment decreased 20.3 per cent year-on-year to Rs 21,239 crore, with product prices reflecting the lower crude and feedstock prices. The petrochemicals segment Ebit increased 7.2 per cent year-on-year to Rs 2,531 crore.
“Strong polymer deltas and healthy polyester chain deltas, along with higher volumes, supported growth in earnings. Petrochemicals Ebit margins were higher at 11.9 per cent, with strong product deltas, despite lower absolute product prices,” RIL said.
Revenue from the domestic exploration and production segment was down 15.5 per cent at Rs 1,166 crore. Lower oil/condensate prices and a decline in gas production from the company’s KG-D6 block led to the fall in revenue.
RIL said for the shale gas business, the overall macro environment remained challenging during the September quarter. While production was flat, the company rationalised capital investments in its shale gas business by reducing activity levels. During the quarter, capital expenditure was down 33 per cent year-on-year at $209 million.
During the quarter, consolidated revenue and Ebitda of Network18 Media and Investments Ltd stood at Rs 801 crore and Rs 35 crore, respectively. Revenue from the retail segment increased 22 per cent year-on-year to Rs 5,091 crore, while the Ebit rose 18.2 per cent to Rs 117 crore..