The Mukesh Ambani-led Reliance Industries Ltd (RIL) on Friday reported a 21 per cent year-on-year decline in net profit for the June quarter at Rs 4,473 crore on the back of falling gas output from its field in the Krishna Godavari basin.
This is the third quarter in a row the company is posting a lower net profit. RIL had reported a net profit of Rs 5,661 crore in the April-June quarter last year.
However, a better gross refining margin (GRM) and a sharp rise in other income helped RIL post a better profit than the March quarter’s Rs 4,236 crore.
| REFINED PROFIT | |||
| Q1 2011-12 | Q1 2012-13 | % Change | |
| Turnover | 83,689 | 94,926 | 13.4 |
| Net profit | 5,661 | 44,73 | 21.0 |
| Gross refining margin | 10.3 | 7.6 | 26.0 |
| Source: RIL | |||
The company posted other income at Rs 1,094 crore in April-June against Rs 1,078 crore a year earlier.
“RIL has improved its earnings profile as profits from operations were higher on a sequential basis on the back of volume growth in the refining business,” said Ambani, chairman and managing director of RIL.
Revenues from refining for the quarter stood at Rs 85,383 crore, against 73,689 during the June quarter last year.
While the company has sequentially posted a straight Rs 400-crore drop in the earnings before interest and tax of the petrochemicals segment, the loss has been compensated by GRM.
The petrochemical business showed an increase of 19 per cent in sales at Rs 21,839 crore against Rs 18,366 crore in June 2011-12. Margins for the petrochemicals, however, fell on an annual basis from 12 per cent to eight per cent.
Analysts said sequentially, RIL’s GRM, the difference between crude oil price and total value of petroleum products produced, was a surprise at an almost flat $7.6 a barrel. The street, fearing that the global economic downturn may hit RIL’s GRM, had estimated the company to report a drop in the margin.
RIL’s GRM also outperformed the benchmark Singapore GRM, by nearly $1. The margin stood at $10.3 per barrel in the corresponding period last year. Operating one of the world's most complex refineries at Jamnagar in Gujarat provides RIL the edge to use heavier crude.
“In this quarter, Reliance has made more money from refining and less money from production,” said Jagannadham Thunuguntla, strategist and head of Research, SMC Global Securities Ltd.
“The proportion of other income has reduced to 35 per cent of the overall profit before tax, a reduction from the 42 per cent share in the previous quarter. This indicates the quality of profits has increased from the operation profit point of view," he added.
During the quarter, RIL's total income increased to Rs 91,875 crore from Rs 81,018 crore a year ago. Revenue was helped by a crude throughput of 17.3 million tonnes.
"We have commenced our next phase of capital investments in the refining and petrochemical segments to enhance earnings and value of our core energy businesses,” added Ambani.
RIL is investing Rs 22,000 crore to make the refinery complex bottomless through the petcoke gasification project. RIL has announced it has selected Phillips66’s E-Gas technology for its planned gasification of plants at Jamnagar.
For the KG-D6 field, RIL is planning to submit a revised field development plan (RFDP) for D1-D3 aimed at maximising gas recovery from the existing fields. It also plans to further pursue approval of RFDP of D 26 (MA), submitted in the earlier quarter. Further, to expedite the development projects of other discoveries, RIL is preparing development plans based on an integrated concept, which is planned for submission in the third quarter of the current financial year.
Gas output at the D6 block is projected to decline to 20 million standard cubic metres a day (mscmd) in 2014-15 from 28 mscmd in the current fiscal year. That's less than half the 60 mscmd it was producing in 2010 and well below planned peak capacity of 80 mscmd.
RIL's retail business saw the turnover grow 42 per cent to Rs 2,269 crore, compared to the corresponding previous quarter. The company witnessed robust same store sales growth of 7-24 per cent across formats over last year. Same store sales growth means sales growth coming from existing stores.
The company has cash and cash equivalents of Rs 70,732 crore. These are primarily invested in fixed deposits, certificate of deposits with banks, mutual funds and government securities or bonds.
RIL’s scrip closed at Rs 722.65 on Friday on BSE, down 0.70 per cent, while the benchmark Sensex shed 0.70 per cent to end trade at 17,158.44 points.
