Reliance Industries Q1 profit up 28% on higher margins, Gulf Africa sale
Mumbai: Energy giant Reliance Industries Ltd (RIL) on Thursday reported a consolidated quarterly net profit increase of 28%, beating analysts’ estimates, helped by higher-than-expected refining and petrochemicals margins and a one-time gain.
Net profit rose to Rs9,079 crore in the quarter ended June from Rs7,077 crore a year earlier, said the country’s biggest company by market value which also has businesses ranging from retail and yarn to telecom. Revenue rose to Rs92,661 crore, an increase of 25.5% from Rs73,829 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.
Net profit was boosted by a one-time gain of Rs1,087 crore from the sale of the firm’s 76% stake in Gulf Africa Petroleum Corp., a South African subsidiary.
RIL’s gross refining margin (GRM), or what the company earns from turning every barrel of crude oil into fuel, came in higher than expected at $11.9 per barrel. That was a premium of $5.5 per barrel to Singapore’s benchmark margin, which averaged $6.4 per barrel in the quarter.
Analysts had expected RIL to post a GRM 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 benchmark.
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,” said Sudeep Anand, head of institutional research at IDBI Capital. “Both refining and petrochemicals segments surprised positively on the revenue and Ebitda fronts. GRMs are very strong despite weaker product cracks.” Ebitda stands for earnings before interest, tax, depreciation and amortization.
In the June quarter, crude oil prices fell to an average $50.8 per barrel from $54.6 in the March quarter.
“Strong refining and petrochemicals margin environment contributed to higher operating profits,” RIL said in a statement.
Operating profit before other income and depreciation increased by 11.9% from a year ago to Rs12,554 crore.
For the refining and marketing segment, Ebit (earnings before interest and tax) increased by 13.4% to Rs7,476 crore. The petrochemicals segment saw Ebit increase by a sharper 43.7% to Rs4,031 crore, supported by volume growth. The Ebit margin for the quarter was 15.8%.
RIL’s oil and gas production business continued to drag due to lower volumes and weaker prices. Revenue in this segment declined 25.7% from a year ago to Rs582 crore. It made a loss of Rs231 crore at the Ebit level.
Consolidated revenue was also boosted by Reliance Retail. The unit’s revenue grew 73.6% from a year ago to Rs11,571 crore. It reported an operating profit growth of 65.8% to Rs398 crore against Rs240 crore a year ago.
Profitability in the energy segment will allow RIL to continue investing in its telecom venture, Reliance Jio Infocomm Ltd. Earlier on Thursday, Jio announced a rights issue to raise Rs20,000 crore via optionally convertible preferential shares.
RIL has a 99.44%stake in Jio. It has invested Rs1.79 trillion in Jio so far and has forecast the investment to increase to Rs2.5 trillion by fiscal 2020. Jio had 117.34 million users in May, a market share of about 10%, according to data compiled by Bloomberg.
On 27 June, RIL had sought shareholders’ approval to raise as much as Rs25,000 crore through a private placement of non-convertible debt instruments. The company will hold its annual general meeting on Friday.
Before the earnings announcement, RIL shares closed at Rs1,528.70, down 0.31%, on the BSE. The benchmark Sensex closed flat at 31,904.40 points.