 "RIL profit rises on refining margins")
Reliance Industries’ (RIL) GRMs stood at $11.5 a barrel in Q1 and were much ahead of Street expectations of $9-10 a barrel. This metric stood at $10.4 a barrel in the year-ago quarter, and at $10.8 a barrel in March 2016 quarter. Good traction in its refining as well as its petrochemicals business aided RIL’s overall performance.
The company’s consolidated net profit (after taxes, minority interest and share in profit/(loss) of associates and joint ventures) grew 18.1 per cent to Rs 7,113 crore, even as net sales or income from operations fell 15.2 per cent to Rs 64,990 crore, compared to the year-ago period. RIL had reported net sales of Rs 76,615 crore and net profit of Rs 6,024 crore in the June 2015 quarter.
Mukesh D Ambani, chairman and managing director, Reliance Industries, in a statement said: “At Reliance, we continued to harness the power of our integrated energy and materials business portfolio. We maintained our earnings growth trajectory during this quarter, as the world grappled with new dimensions of economic uncertainty. 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.”
RIL’s GRMs outperformed the benchmark Singapore complex GRMs by $6.5 a barrel in Q1 — much higher than the historic premium of around $3-4 a barrel that the company has maintained in the past. A key reason for the out-performance is the 24 per cent rise in crude oil prices between 31 March and 30 June, 2016. This helped RIL in the form of inventory gains, though the exact quantum is not known. Higher than expected inventory gains, better crude sourcing and improved margins in select segments boosted RIL’s GRMs in Q1.
The fall in revenues on year-on-year basis was in-sync with the weak crude oil prices. RIL’s net profit was partly helped by a 50 per cent surge in other income to Rs 2,378 crore. Other income consists of interest income and profit on sale of investments.
On a standalone basis, RIL’s net sales came in at Rs 53,496 crore and net profit at Rs 7,548 crore. Bloomberg consensus had pegged RIL’s standalone revenues at Rs 57,426 crore and net profit at Rs 6,549 crore.
The company reported numbers as per the new accounting standards (IND ASs) and hence were not strictly comparable. Based on a reconciliation provided by the company, the restated net profit figures of March’16 and June’15 quarters were lower by Rs 468 crore and Rs 198 crore, respectively due to the new accounting standards. Adjusting for this, net profit growth would have been lower, albeit still healthy, at 14.3 per cent on a year-on-year basis.
Analysts at Antique Stock Broking said, “Reliance’s Q1 profit after tax was much ahead of our and street estimates, primarily driven by a stronger than expected GRM (estimate of $9.5-10 a barrel). Petchem margins were broadly in line with estimates.” They added, this was the highest ever profit for refinery and petrochemicals on the back of integration of operations at Jamnagar (Gujarat-based plant).
RIL’s refining and marketing business reported 17.7 per cent fall in revenues to Rs 56,568 crore on lower crude prices. Healthy GRMs boosted this segment’s operating profit which grew 25.9 per cent to Rs 6,593 crore. Average utilisation rate of its refineries stood at 109 per cent in Q1.
Lower crude oil prices also led to flattish growth in RIL’s petrochemicals revenues to Rs 20,718 crore. This was offset to some extent by higher volumes on the back of expanded capacities. This segment’s operating margin though expanded 200 basis points over the year ago quarter to 13.5 per cent.
RIL’s exploration and production business continued to be under pressure amidst falling production as well as domestic gas prices as well as the US shale gas segment. Shale gas too continued to be weak in the quarter with revenues falling 34.9 per cent and segment losses widening meaningfully to Rs 354 crore.
Amongst other businesses, the company’s telecom venture Reliance Jio has 1.5 million test users on its network. “We are moving towards complete readiness for the launch of Jio and it could happen in the next six to eight weeks,” Anshuman Thakur, Head of Strategy and Planning, Reliance Jio Infocomm, said at a press briefing.
Retail businesses too continued to do well in the quarter. Though this business’ earnings were boosted by transfer of RIL-owned and operated business into retail.