Mumbai: The oil-to-yarn and retail conglomerate Reliance Industries Ltd (RIL) posted a 30% rise in net profit for the last quarter of fiscal 2010, on the back of its new refinery and gas production, to Rs4,710 crore, but fell short of Street expectations as its costs more than doubled and so-called other income nearly halved.
The comparable quarter’s net profit of Rs3,627 crore does not include an exceptional income of Rs328 crore. Factoring this in, the rise in net for the January-March quarter is 19%.
The most valuable Indian company by market capitalization clocked revenue of Rs57,570 crore for the January-March quarter, up 121% from Rs26,082 crore during the corresponding period last year.
For the full year, RIL’s net profit was Rs16,236 crore on revenue of Rs1.92 trillion.
RIL has turned in a steady increase in profit for the second quarter in a row after several quarters in which profit fell from the year-ago period.
Shares of RIL, which has the highest weightage in the Bombay Stock Exchange’s benchmark Sensex, closed 1.10% higher at Rs1,087.35 on Friday, outstripping the 0.68% rise in the bellwether index that ended the day at 17,694.20 points. The results were announced after the market closed. The stock has risen 23.4% in the past year, trailing the 58.9% increase in the Sensex.
“The results are slightly below our expectations. We were factoring in refining margins of $8.5 (Rs378.25) (a barrel) and expecting slightly higher profitability from its business segments,” said Deepak Pareek, analyst with Mumbai-based brokerage Angel Broking Ltd.
“The depreciation is certainly higher, but the tax provision is lower than expected,” he said, adding that much of this would get clarified in the company’s analyst interactions.
Sector analysts were expecting a strong Q4 at the Mukesh Ambani-owned firm. A Mint poll of seven brokerages had thrown up average estimates of Rs5,078.17 crore in net profit, Rs59,780 crore in revenue and $8.13 a barrel gross refining margins (GRMs), or earnings from turning crude into a variety of fuels in the quarter.
RIL’s GRMs for the quarter too were below expectations at $7.5 per barrel, but has maintained a lead of $2.6 per barrel over the Asian benchmark— Singapore GRMs.
Global refining margins rose to $3.08 a barrel in the three-month period from $1.49 a barrel in the quarter ended 31 December, according to BP Plc data. BP, Europe’s biggest oil company, said refining margins will remain depressed.
PetroChina Co. Ltd, the world’s biggest company by market value, reported lower profit that missed estimates in the year ended 31 December after oil prices declined.
RIL chairman Ambani called FY10 “a transformational year at Reliance”, with “successful completion of the upstream and refinery projects”. The energy firm will “continue to seek growth opportunities within India and globally to accelerate further value creation”, he said in a statement.
RIL sealed a 40:60 joint venture with Philadelphia-based Atlas Energy Inc. two weeks ago, forking out $1.7 billion for the minority stake in its portfolio of shale gas reserves—an indication that it wants to learn the ropes of this disruptive, new technology of mining hydrocarbons.
Its bids for bankrupt Dutch petrochemicals maker LyondellBasell Industries AF and Canadian debt-strapped Value Creation Inc.—also involved with shale gas production— fell through in the last three months before it clinched the deal with unlisted firm Atlas.
Costs have soared under every head in the January-April quarter. Overall costs, including raw material consumption, depreciation and staff expenses, have jumped more than twofold from Rs21,821 crore to Rs51,826 crore.
RIL attributed the cost jump in raw material to “higher crude oil processed in the SEZ (special economic zone) refinery” and higher depreciation to a “higher depletion charge in oil and gas, and increased depreciation in the refining business segment”.
Other income—or earnings from sources other than usual business operations—fell from Rs1,020 crore to Rs615 crore.
RIL will have to find out ways of deploying some $25 billion of excess cash in FY11-14 as well as harness new avenues for future growth, according to estimates by sector analysts at the Indian arm of Goldman Sachs.
Since December, RIL has sold nearly 74 million of its own shares, called treasury stock, and raised about Rs12,979 crore. It had cash and cash equivalents of Rs21,874 crore and outstanding debt of Rs62,495 crore as on 31 March.
RIL’s new 580,000 barrel a day refinery and its prolific gas block D6 in the Krishna-Godavari basin became fully operational in the beginning of fiscal 2010.
Revenue from exploration and production rose 487% in the quarter to Rs4,318 crore, refining business increased by 165% to Rs51,250 crore and petrochemical manufacturing by 59% to Rs15,448 crore.
Ebit, or earnings before interest and taxes, margins fell steeply to 39.4%, 3.9% and 14.4% for these businesses, respectively.
Rakteem Katakey of Bloomberg contributed to this story.