 "RIL delivers stellar Q3")
The Mukesh Ambani-led Reliance Industries (RIL) on Tuesday posted a 38.7 per cent increase in its consolidated net profit at Rs 7,290 crore for the third quarter of this financial year. Net profit for the same quarter last year stood at Rs 5,256 crore.
On a sequential basis (quarter-on-quarter), the net profit saw an increase of 8.5 per cent. On a standalone basis, which reflects the company’s own operations minus the subsidiaries, the profit was up 41.9 per cent year-on-year (y-o-y) at Rs 7,218 crore.
Both figures beat market expectations by a good margin.
A Bloomberg poll of analysts estimated the company’s consolidated net profit at Rs 7,100 crore, growing 35 per cent year-on-year and net sales at Rs 60,686 crore, a drop of 35 per cent y-o-y. For standalone numbers, analysts expected RIL to report a net profit of Rs 7,011 crore on sales of Rs 57,279 crore.
Before announcement of the earnings that came after market hours, RIL’s scrip ended at Rs 1,043.60, up 2.51 per cent, on the BSE. Reliance’s GDRs, however, were up 2.2 per cent at $30.80 at around 8 pm IST on Tuesday, reflecting better than expected numbers.
“Our portfolio of world-class refining and petrochemical assets are paying off handsomely,” said Ambani, chairman and managing director, RIL. “Refining business delivered yet another record performance on the back of seven-year high refining margins and highest ever crude throughput,” he added.
Refining and marketing accounts for over 65 per cent of RIL’s overall profits and revenue.
RIL’s petrochemicals business also delivered among its best quarterly performances, driven by robust polymer margins. “The benefits of low crude oil and energy prices for our downstream businesses clearly outweigh the impact of these factors on our upstream segment, reflecting in the record earnings for the quarter,” Ambani said.
Consolidated net sales stood at Rs 68,261 crore, a drop of 27 per cent over Rs 93,528 crore in the corresponding period of the previous year. The decline in revenue was led by the 42.7 per cent year-on-year decline in benchmark Brent crude oil price, RIL said.
“Though this has been a difficult and volatile year, we have seen record-breaking results,” said Alok Agarwal, CFO, RIL. Gross refining margin, (GRM) which measures the earnings from turning every barrel of crude oil into fuel, climbed to a seven -year high for RIL at $11.5 per barrel against $7.3 per barrel in the third quarter of 2014-15. During the third quarter of 2015-16, the benchmark Singapore complex margin averaged $8 per barrel.
Brent crude prices averaged $44 a barrel in the third quarter, down 43 per cent year-on-year. Segment revenue from the refining and marketing segment decreased by 30 per cent year-on-year to Rs 57,385 crore, while EBIT (earnings before interest and taxes) increased by 99 per cent and 19 per cent quarter-on-quarter to a record level of Rs 6,491 crore.
Though analysts expected the petrochemicals segment to report weaker earnings, RIL said the segment EBIT increased by 28 per cent year-on-year with strong polymer deltas and higher volumes. Petrochemicals EBIT margins were higher at 13.6 per cent while revenue decreased by 15.7 per cent, reflecting lower crude and feedstock prices.
“The numbers are impressive. We expected the petrochemicals segment to be impacted negatively but the company has done better than our expectation,” said an analyst with a domestic brokerage.
“RIL reported better than expected earnings while GRMs at $11.5/barrel came in line with expectations. Stronger GRMs in January '16 should keep up the excitement as will clarity on commercial launch date and news flow on Jio,” said Ravi Shenoy, VP-Midcaps Research Motilal Oswal Securities.
Petchem has the second biggest share in the company's overall revenue and net profit at 22 per cent and 27 per cent, respectively. In line with expectations, consolidated revenues for the oil and gas segment decreased 38 per cent year-on-year to Rs 1,765 crore during the quarter. The decline was led by lower upstream production in domestic blocks coupled with sharply lower oil and gas prices in both the domestic and US shale segments.
“The unfavourable upstream price environment impacted segment EBIT, which was 89.2 per cent lower on a yearly basis, at Rs 90 crore,” RIL said. The retail segment posted its highest ever quarterly turnover of Rs 6,042 crore against Rs 4,686 crore during the same period last year, registering a growth of 29 per cent.
Consolidated revenue and EBITDA of Network18 Media & Investments Limited was Rs 906 crore and Rs 95 crore, respectively, during the quarter. Network18’s news channels include CNBC-TV18, CNBC Awaaz and CNN-IBN and entertainment channels include Colors, Vh1, MTV and Nick.
RIL saw its other income inch up marginally by 3.7 per cent to Rs 2,426 crore against Rs 2,340 crore in corresponding period of the previous year due to gains on sale of investments. Depreciation (including depletion and amortisation) was higher by 6 per cent at Rs 3,133 crore as compared to Rs 2,954 crore in the corresponding period of the previous year primarily on account of capitalisation of projects at Dahej. RIL’s outstanding debt as on December 31, 2015, was Rs 178,077 crore compared to Rs 160,860 crore on March 31, 2015. Cash and cash equivalents were at Rs 91,736 crore in the form of bank deposits, mutual funds, CDs and government bonds and other marketable securities.
Capital expenditure for the nine month ended December 31, 2015, was Rs 81,463 crore, including exchange rate difference capitalisation. Capital expenditure was principally on account of ongoing expansion projects in the petrochemicals and refining business at Jamnagar, Dahej and Hazira, Jio Infocomm and US shale gas projects, RIL said.
“The year 2016 is anticipated to be a big year for RIL as our projects come to a completion. We will also be taking our digital services to the market,” said Agarwal.
