Mumbai: Reliance Industries Ltd., India’s top private refiner, on 28 July posted a 28% rise in quarterly net profit, beating forecasts and driven by robust margins from its refinery operations.
“While our existing businesses continue to deliver a robust operating performance, our new initiatives provide us a platform to deliver superior shareholder returns in the future,” Chairman Mukesh Ambani said in a statement.
Reliance’s 660,000 barrel per day refinery in western India and sales of gas produced from its deep-sea fields off the east coast are expected to drive the company’s future earnings growth.
Reliance, India’s most valuable firm with a market capitalisation of $64 billion, said net profit rose to Rs3264 crore ($806 million) in its fiscal first quarter to end-June, up from Rs2547 crore a year ago.
A Reuters poll of 15 analysts had forecast net profit of Rs30.12 billion.
Profit margins on refining, which delivered 66% of the company’s revenues during the quarter, were at $15.4 per barrel, higher than $12.4 per barrel a year ago and $9.50 a barrel for benchmark Asian Dubai crack margin.
Analysts expected refining margins of more than $13 a barrel.
The company’s refinery earns better margins than elsewhere in the region because it can use cheaper, low-grade crude to produce premium products.
A company spokesman said during the quarter Reliance bought low-grade crude at a discount of $15-$20 a barrel to the Dubai-Brent benchmark, which averaged at $62.80 a barrel. It buys crude mainly from the Middle East, South America and Africa.
“The company continues to surprise the market quarter after quarter and very clearly higher refining margins coupled with substantial discount from lower grade crudes have helped,” said Arun Kejriwal, strategist at research firm KRIS.
He said Reliance’s quarterly earnings would cheer the stock exchange which fell 3.4% on Friday.
Reliance, the world’s top maker of polyester yarn and fibre, said strong demand had boosted its petrochemicals business and it expected better margins for products such as polyester.
Shares in Reliance fell 3.8% to Rs1,866.45 on 27 July after climbing to a record Rs1,948 on 26 July.
In the June quarter, the company’s shares rose 24.3%, outperforming the benchmark BSE index’s 12% gain over the same period and a 19% rise in the sector index.
Reliance Industries’ subsidiary Reliance Petroleum Ltd., is setting up a $6 billion refinery next to its own plant in Jamnagar. This will create a complex able to process 1.2 million bpd when it becomes operational by mid-2008.
Asia’s fast-growing appetite for oil is making its refineries an attractive destination for US oil giants with world no. 2 oil major Chevron Corp. holding a 5% stake in Reliance Petroleum’s refinery.