RIL’s June quarter net profit up 32%, plans $2 billion capex

RIL’s June quarter net profit up 32%, plans $2 billion capex

Mumbai: On the back of higher exploration and production of oil and gas and greater refining and marketing operations, Reliance Industries Ltd (RIL), India’s most valuable company, posted a net profit of Rs4,851 crore for the quarter ended 30 June, up 32.3% from the same period a year ago.

This has been the highest growth in net profit in past eight quarters. The operating profit and turnover figures recorded by the company were also the highest ever. While the oil-to-yarn and retail conglomerate’s turnover improved to Rs61,007 crore, 88.1% higher than the corresponding period last fiscal, its operating profit rose 41.9% and crossed the Rs10,000 crore mark in the same period.

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Turnover from the exploration and production business saw a growth of at least 150% in the first quarter of fiscal 2011 and that from the refining and marketing business also more than doubled.

These two segments also registered healthy growth in operating profit. For the refining and marketing business it was 56.7% higher than the corresponding period last year, and for the oil and gas business, it was a 90.6% increase.

RIL shares rose 0.14% to close at Rs1,053.5 apiece on Tuesday on the Bombay Stock Exchange even as the exchange’s benchmark Sensex gained 0.32% to close at 18,077.61 points. The company announced its quarterly earnings after market hours.

“We had yet another record quarter due to high operating rates and improving margins across all our businesses," RIL chairman Mukesh Ambani said in a company statement.

The company has a capital expenditure plan of $1.5-2 billion (Rs7,020-9,360 crore) in the current fiscal, the largest share of which would be spent on strengthening the exploration and production business, said Alok Agarwal, chief financial officer (CFO).

RIL said its strong financial growth was supported by a rise in volumes as well as prices, as its exports more than doubled to Rs32,849 crore, from Rs16,145 crore.

However, higher crude oil prices and narrowing spreads between the cost of crude and price of petroleum products had a marginal impact on the gross refining margins (GRM) of RIL’s refining business, on a sequential basis.

RIL recorded a GRM of $7.3 per barrel of oil in the June quarter, 20 cents (Rs9.36) lower than the March 2010 quarter. In the same period, the benchmark Singapore Complex GRM lost $1.2 per barrel and stood at $3.7.

“Since we are more flexible in our strategy of sourcing crude we have been able to stem the decline in GRM," CFO Agarwal said. Barring unforeseen circumstances, the next three fiscals of the current fiscal should witness GRMs similar or even better than the quarter under review.

RIL’s petrochemical business, however, suffered from declining operating margins.

During the June quarter, the operating profit margin from this segment declined 3.2 percentage points year-on-year and stood at 14.8%. The growth in revenue was 18.8% to Rs13,903 crore, though on a sequential basis revenue declined.

One of the reasons for the relatively weaker performance of this segment was a planned shutdown of manufacturing sites at Hazira and Nagothane, due to which the production of propylene fell 13%, and that of ethylene 16%.

Bloomberg and Reuters contributed to this story.