RIL beats estimates, profit rises 28% on high refining margins

Net profit rose to Rs. 9,079 crore in the quarter ended June from Rs. 7,077 crore crore a year earlier, said the country’s biggest company by market value, which also has businesses ranging from retail and yarn to telecom.

Mukesh Ambani, chairman of RIL.
Mukesh Ambani, chairman of RIL.(Reuters)

Energy giant Reliance Industries Ltd (RIL) on Thursday reported a consolidated quarterly net profit of 28% for the quarter ended 30 June, lifted by a higher-than-expected refining and petrochemicals margins and one-time gain of Rs 1,087 crore by divesting stake in Gulf Africa Petroleum Corporation, its South African subsidiary.

Net profit rose to Rs. 9,079 crore in the quarter ended June from Rs. 7,077 crore crore a year earlier, said the country’s biggest company by market value, which also has businesses ranging from retail and yarn to telecom.

Total revenue rose to Rs 92,661 crore, an increase of 25.5% from Rs 73,829 crore a year ago.

According to a Bloomberg poll of six brokers, RIL had been expected to post a net profit of Rs7,764.5 crore for the three months ended 30 June on net sales of Rs76,326 crore.

“Our industry leading portfolio of assets in the refining and petrochemicals business contributed to considerable improvement in our earnings for the quarter,” said Mukesh Ambani, CMD, RIL.

RIL’S gross refining margin or what the company earns from turning every barrel of crude oil into fuel came in higher-than-expected at $11.9 per barrel, a $5.5 a barrel premium to Singapore’s benchmark GRM which averaged flat at $6.4 per barrel during the quarter.

Analysts had expected RIL to post a GRM of between $10.5 and $11.2 per barrel. Over the past few quarters RIL has been reporting a premium of $4-5 per barrel to the Singapore GRM.

RIL is the operator of the world’s biggest oil refining complex, at Jamnagar in Gujarat, with a refining capacity of 1.24 million barrels of oil per day.

“RIL’s numbers came in above our expectations. Both refining and petrochemicals segments surprised positively on the revenue and Ebitda fronts. GRMs are very strong despite weaker product cracks and contracting light heavy differential,” said Sudeep Anand, Head, Institutional Research, IDBI Capital.

During the June quarter, crude oil prices fell to an average of $50.8 per barrel from $54.6 in the March quarter.

“Strong refining and petrochemicals margin environment contributed to higher operating profits for the quarter,” RIL said in a press statement.

Operating profit before other income and depreciation increased by 11.9% on year basis to Rs 12,554 crore from Rs 11,223 crore in the previous year.

For the refining and marketing segment, Ebit (earnings before interest and tax) increased by 13.4% to Rs 7,476 crore. Petrochemicals segment saw an Ebit increase by 43.7% to Rs 4,031 crore, supported by favorable product deltas and volume growth. Ebit margin for the quarter was at 15.8%.

“The operating profit was led by robust performance from petrochemicals business and sustained strength in refining business. This was partially offset by losses in oil and gas business due to lower volumes and weak domestic price environment,” RIL said.

RIL’s domestic exploration and production segment saw revenue down by 25.7% on year, at Rs 582 crore due to lower gas price realization and declining volumes. Segment Ebit came in negative at Rs 231 crore.

Consolidated revenues were also helped by revenues from Reliance Retail which saw a growth of 73.6% on year to Rs 11,571 crore. Profit before depreciation, interest and tax came in at Rs 398 crore against Rs 240 crore in the corresponding period of previous year, a growth of 65.8%.

Ahead of the earnings announcement, Reliance Jio Infocomm Ltd, the telecom arm of RIL, announced a rights issue (sale of shares to existing shareholders) to raise Rs 20,000 crore via optionally convertible preferential shares. RIL has invested Rs1.79 trillion in Jio so far and forecast the investment to increase to Rs2.5 trillion by fiscal 2020.

RIL had on 27 June sought shareholders’ approval to raise as much as Rs25,000 crore through a private placement of non-convertible debt instruments. RIL will hold its annual general meeting on Friday.

Before the earnings announcement, RIL shares closed at Rs.1,528.70, down 0.31%, on the BSE. The benchmark Sensex closed flat at 31,904.40 points.
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