Mukesh Ambani's Reliance Industries (RIL) surpassed market expectations with a 24% year-on-year jump in quarterly profit, as it benefited from strong refining margins and improved performance in its petrochemicals business.
Net profit increased to R5,502 crore in the December quarter of the current fiscal from R4,440 crore a year earlier, and rose 1.7% from the September quarter. Revenue surged 10.1% to R96,307 crore. The market had expected a profit of R5,070 crore on revenue of R91,651 crore, according to analysts polled by Bloomberg. The RIL share, which has appreciated more than 22% since the beginning of July, closed up 1% at R898.95 on Friday on the BSE. The RIL GDR was up 5.11% or $1.68, trading at $34.44 RIL made a profit of $9.60 on every barrel of crude it processed into fuels — or gross refining margins — in the quarter, compared with $6.80 a barrel in the year-ago period, and $9.50 in the previous quarter.
The company has benefited from its strategy of shifting to cheaper, heavy crude to boost margins.
RIL, which runs the world's biggest refining complex at Jamnagar, Gujarat, processed 17.5 million tonnes of crude in the quarter, compared with 17.2 million tonnes a year ago. Earnings before interest and taxes (EBIT) margins for the refining and marketing business nearly doubled to 4.2% from 2.2% a year earlier.
However, RIL's exploration & production segment continued to disappoint, as segment EBIT halved from a year earlier and revenue plunged 32% to Rs 1,921 crore for the December quarter. The company did not provide quarterly production figures for the upstream business.
The company has been facing slipping gas output at its flagship KG-D6 field off the Andhra Pradesh coast. RIL has attributed the slide in production to reservoir complexity, natural decline and the effect of a shutdown in a field on account of maintenance for six days in the first nine months of the fiscal.
Margins at the company's petrochemicals business also improved on account of higher prices from the September quarter. EBIT margin for the latest reported period came in at 8.8%, compared with 7.9% in the second quarter.
Improved performance encouraged billionaire owner Ambani to outline expansion plans for the petrochemicals business, which had earlier been facing pricing pressures.
"We are investing over Rs 100,000 crore by expanding our petrochemical capacities and adding value to our refining business," Ambani said in a media statement.
"These investments will secure a significant change in RIL’s earning capacity on commissioning of these projects," he added.
The company last month secured financing of $2.1 billion from the US Exim Bank to fund expansion projects at Jamnagar. It also signed $ 2-billion loan with nine banks covered by Euler Hermes Deutschland last May to fund its petrochemical expansion projects.
RIL has also been looking to expand its consumer-focused segments such as telecom and retail in recent years in order to meet the target doubling its operating profit in the next four to five years.
Revenue for organised retail surged 44% to Rs 7,749 crore in the April-December period. RIL operates more than 1,400 stores in 129 cities across India.