RIL likely to report profit growth led by petrochem margins
Reliance Industries Ltd (RIL) is likely to report a higher fourth-quarter profit on Monday, as it likely benefited from higher margins in its petrochemical and refining businesses.
The company is expected to post a standalone net profit of ₹8,015.70 crore on revenue of ₹67,467.10 crore for the three months ended March 31, a Bloomberg poll of 16 analysts said.
RIL, which runs the world’s largest refining and petrochemicals complex at Jamnagar in Gujarat, posted a standalone net profit of ₹7,320 crore on revenue of ₹49,957 crore a year ago.
“We expect strong earnings driven by refining and petchem (higher volumes, improved margins). Despite increased losses in domestic exploration and production, we expect RIL to report a ninth straight quarter of quarteron-quarter standalone profit after tax growth,” Nomura Research said in a report dated April 7.
RIL’s standalone profit for the quarter ended January 31 was ₹8,022 crore.
Analysts expect RIL to post a gross refining margin, or GRM, of between $10.5 and $11 per barrel against $10.8 per barrel a year ago. GRM is the difference between the per-barrel price of crude and the value of products distilled from it.
In the March quarter, Brent crude oil prices averaged $54 per barrel, up 8% on a quarterly basis. The average rupee-dollar rate improved on a quarterly basis to 67 and closed at 64.9 at the end of March against 67.9 in the third quarter. This may lead to forex gains for refiners on their crude payables and foreign debt.
Singapore’s benchmark GRM was slightly down on a quarterly basis at $6.5 per barrel.
“We expect GRM at $11 per barrel (up 2% quarter-on-quarter), a $4.6 per barrel premium over Singapore benchmark,” Edelweiss Securities Ltd in a report dated 7 April.
Over the last few quarters RIL’s refineries have enjoyed a premium of $4-5 per barrel to Singapore GRMs.
RIL’s petrochemicals business is estimated to report better earnings due to an improvement in margins and higher volumes.
“We expect petchem ebit (earnings before interest and tax) to rise 11% quarter on quarter (q-o-q) on stronger margins and uptick in volumes. Polymer margins are near-record levels, aromatics margins have rebounded q-o-q and integrated polyester margins are also at multi-quarter highs in the fourth quarter,” Bank of America Merrill Lynch said in a report dated April 10. Ebit is an indication of a company’s operating profitability.
Losses in the exploration and production front may widen for RIL, with production from its KG D6 block expected to have declined 23% year-on-year to 7.3 million metric standard cubic metres per day.
On Friday, RIL’s scrip ended at ₹1,399.75, up 2.22% on the BSE, while the benchmark Sensex closed at 29,365.30 points, down 0.19%.