 "RIL Q3 net flat, beats Street's estimates of a decline")
The company’s net profit stayed flat both sequentially and annually at Rs 5,511 crore during the October-December quarter of FY14. Like in some previous quarters, other income helped the company surpass profit estimates. RIL’s net profit for the October-December quarter stood at Rs 5,502 crore.
Analysts had estimated RIL’s year-on-year revenue to remain flat and net profit to fall 3.3 per cent to Rs 5,300 crore. But the company has managed to stem the slide in sales and profit during the quarter.
RIL’s other income stood at Rs 6,900 crore, up 32 per cent against Rs 5,755 crore in the corresponding previous quarter. “This was mainly on account of higher liquid investments,” RIL said in a press statement. Revenue during the quarter was up 10.5 per cent at Rs 1.06 crore. “Reliance’s robust refining configuration enabled it to deliver stable refining profits in Q3 FY14, against the backdrop of declining regional benchmark margins,” said Mukesh Ambani, chairman and managing director, Reliance Industries Limited.
Even as RIL invests to further strengthen its energy businesses, he said, “This quarter demonstrates the outstanding quality of our refining and petrochemical business resources and their ability to deliver creditable performance in a period marked by cyclicality and uncertainties.” RIL has commissioned its new polyester facility in Silvassa, the first among a series of projects. “Our retail business continues on its rapid growth trajectory with 38 per cent revenue growth during the quarter,” Ambani added.
RIL’s sales stood at Rs 1,03,521 crore, up 10.2 per cent against Rs 93,886 crore, during the third quarter of FY13. On the operational front, revenues from the refining and marketing segment, which accounts for 77 per cent of RIL’s business mix, increased 10.1 per cent to Rs 95,432 crore from Rs 86,641 crore in third quarter of FY13.
RIL’s gross refining margins during the quarter came in along expected lines at $7.6 a barrel, down 21 per cent, against $9.6 a barrel during October-December 2012-13.
Analysts said gross refining margins (GRMs) were better than the Singapore average even as earnings before interest and taxes (EBIT) from the refining business were down 13.1 per cent. GRMs are earnings from processing a barrel of crude oil.
Analysts said the quarter was characterised by marginally lower oil prices and weaker GRMs, on a quarter-on-quarter basis. Crude oil prices were flat, with the Brent averaging at $109 a barrel, led by easing of geo-political concerns in Iran.
The big surprise came from the oil and gas segment. Segment revenue for RIL’s oil and gas segment went up 18.4 per cent, quarter-on-quarter, at Rs 1,733 crore against Rs 1,464 crore during the July-September quarter. Year-on-year, however, the segment revenue declined by 9.8 per cent. Oil and gas holds two per cent in RIL’s overall business mix.
“Oil and gas is a positive surprise in addition to other income. RIL’s partner BP has been making positive statements about a possible increase in gas production from its KG-D6 block. We expect the shares to open higher next week,” said T Jagannadham, chief strategist at SMC Global.
Operating profit before other income and depreciation decreased 1.8 per cent on a year-on-year basis from Rs 22,962 crore to Rs 22,546 crore due to lower production in the oil & gas business, partly offset by higher contribution from the petrochemical business.
Analysts were positive on RIL’s oil & gas or exploration and production business with the government allowing RIL to charge higher prices for gas from April 2014. The company last month offered financial guarantees to settle any claims against the shortfall in gas output from its flagship Krishna-Godavari basin’s D6 block, off India’s east coast.
Petrochemical segment, which has an approximate share of 20.4 per cent in RIL’s business mix, saw its segment revenue up 14.6 per cent at Rs 25,280 crore during the quarter. EBIT margin for the segment stood at 8.4 per cent against 8.8 per cent during the corresponding previous quarter.
However, sequentially petchem margins have fallen from 10.1 per cent to 8.4 per cent, which is a concern for analysts.During the day’s trade, RIL’s scrip was down by 0.60 to end at Rs 884.55 on the BSE. The results came in after trading session. While the 30-share Sensex ended lower by 202 points at 21,064 and the 50-share Nifty fell 57 points at 6,262. The BSE Oil and Gas index ended marginally positive at 0.25 per cent.