Mumbai: Energy giant Reliance Industries Ltd (RIL) on Friday posted a higher-than-expected group profit in the three months ended June, helped by stronger margins in its core refining and petrochemicals business.
Consolidated net profit rose 18% in the quarter to Rs.7,113 crore from Rs.6,024 crore a year ago, said RIL, which has businesses ranging from oil to yarn and retail, and is preparing to launch a pan-India telecom network. The profit surpassed analyst expectations of Rs.6,515 crore, Reuters reported.
Revenue at the group level fell 13.13% to Rs.71,451 crore from Rs.82,509 crore a year earlier.
RIL was helped by a stronger-than-expected gross refining margin, or GRM, the difference between the per barrel price of crude oil and the value of petroleum products distilled from it. The company’s GRM strengthened to $11.5 from $10.4 a year ago. Analysts had expected a GRM of $9.5-10 per barrel.
RIL’s GRM outperformed the Singapore complex margin by $6.5 per barrel, the highest level achieved in eight years. The company had been reporting a $3-4 per barrel premium to Singapore GRMs. Singapore complex margin averaged $5 per barrel.
“Our refining business delivered another record performance and achieved industry-leading GRM,” Mukesh Ambani, chairman and managing director of RIL, said in a statement.
Stand-alone net profit in the June quarter rose 18.5% to Rs.7,548 crore from Rs.6,369 crore in the same period last year. Stand-alone revenue fell 16.7% to Rs.59,493 crore from Rs.71,420 crore. A Bloomberg poll of 10 analysts estimated the company to post a stand-alone net profit of Rs.6,444.7 crore and revenue of Rs.58,141.2 crore.
Revenue from the refining and marketing segment fell by 17.7% to Rs.56,568 crore and earnings before interest and tax (Ebit) rose 25.9% to Rs.6,593 crore.
RIL operates the world’s biggest oil-refinery complex, with a refining capacity of 1.24 million barrels of oil per day, at Jamnagar in Gujarat.
“Improved middle distillate cracks, advantaged crude sourcing, continuing robust demand growth supported refining margin,” said RIL. Middle distillates include kerosene, jet fuel and diesel.
“Though regional refining margins trended downwards, our high-conversion refining system was able to take advantage of higher margins on middle distillates and wider discounts on sour crude oils. Our refining business delivered another record performance and achieved industry leading GRM,” said Ambani in the statement.
Revenue from the petrochemicals segment was largely flat while Ebit was up 20.5% to Rs.2,806 crore, supported by demand.
“Our petrochemicals business has a wide product portfolio, superior feedstock linkages and serves high-growth end-markets in India. As a result, we achieved yet another quarter of margin expansion in petrochemicals business,” Ambani said.
The organized retail business revenue went up by 45.8% to Rs.6,666 crore. The increase was led by growth in demand for digital, fashion and lifestyle, and petroleum products.
“This number also includes our petro-retailing figures. Our fuel retail outlets, which are company-owned and company-operated are also included in the retail business now,” said Srikanth Venkatachari, joint chief financial officer at RIL.
As of 30 June, Reliance Retail operated 3,383 stores across 679 cities with an area of over 13 million square feet. The company operates 361 fuel retailing outlets through its subsidiary Reliance Petro Marketing Ltd. Revenue for the exploration and production business declined by 34.8% to Rs.1,340 crore. The decline in revenue was led by lower upstream production in domestic blocks coupled with sharply lower oil and gas prices in both the domestic and US shale segments.
RIL said it was evaluating options for the launch of Reliance Jio Infocomm Ltd’s pan-India network.
“We are moving towards complete readiness and evaluating our launch options,” said Anshuman Thakur, head of strategy and planning at Reliance Jio Infocomm.
“We have 850 megahertz spectrum pan-India. Department of Telecommunications has approved the trading of spectrum from R-Com (Reliance Communications Ltd),” Thakur said.
“For the last four circles (Rajasthan, Karnataka, Tamil Nadu and Kerala), we received approval only on 6 July. Normally it takes around six-eight weeks to integrate and optimize spectrum. The whole spectrum timeline is addressed from our point of view,” added Thakur.
Reliance Jio said it has over 1.5 million test users on its network. The average monthly consumption per user is in excess of 26GB and is increasing rapidly. Average voice usage per month is over 355 minutes.
“The test programme will be progressively upgraded into commercial operations in coming months,” said RIL, without disclosing the date of commercial launch.
Ahead of the earnings announcement, RIL shares closed at Rs.1,012.55, up 0.61% on BSE, while the benchmark Sensex fell 0.38% to close at 27,836.50 on Friday.