Record Refining Margins Pump RIL Profit Up 12.5% Revenues rise 24% on higher prices and volumes in refining and petchem
Reliance Industries’ quarterly net profit rose 12.5% year on year as its booming refining and petrochemicals businesses reported higher sales at decade-high margins, which outweighed heavy interest and depreciation charges in its earnings that consolidated the results of telecom venture Jio for the first time.
Net profit for the September quarter rose to .₹ 8,109 crore while reve- nues increased 24% to .₹ 1.01 lakh crore compared with the corresponding period a year ago. Net profit was 11% lower than that in the June quarter which included a one-time gain of .₹ 1,087 crore from the sale of its stake in Gulf Africa Petroleum Corp.
RIL’s Jamnagar refinery earned $12 for each barrel of crude oil it processed, the highest in nine years, and $3.7 more than its Singapore peers. With global demand lik- ely to grow faster than new fuel supply, margins are likely to remain strong, the company said.
In the retail, refining and petrochemicals businesses, higher prices and volumes contributed to the strong growth in revenues, the company said. Revenues of its retail segment rose 81% to .₹ 14,646 crore while its earnings before interest and tax (EBIT) more than doubled to .₹ 334 crore. The segment reported an EBIT margin of 2.3%.
The margin for its refining and marketing business was much higher at 9.5%. This segment clocked a turnover of ₹ 69,766 crore and an operating profit of ₹ 6,621 crore.
Reliance hopes to further increase its return on capital as it starts gaining from the heavy capital expenditure — mainly in its digital, petrochemicals and refining ventures — which is getting completed.
“The benefits of optimising our business through new projects are beginning to emerge. The structural strength in energy and materials business environment augurs well for our new capacities which are coming on-line this year,” chairman Mukesh Ambani said.
The petrochemicals business, which has reported very strong numbers in recent quarters, became even more profitable during the quarter. The segment’s EBIT jumped 45.2% to a record ₹ 4,960 crore while revenue was 25% higher at ₹ 26,999 crore compared with a year ago. The operating margin climbed to a decade-high of 17.7% from 15.2%.
Reliance Jio reported a profit before interest and taxes of ₹ 261 crore, while EBITDA, which also excludes depreciation and amortisation, was much higher at ₹ 1,443 crore. Ahead of the earnings on Friday, shares of the company hit a 52-week high of ₹ 891 on the BSE before closing at ₹ 876.70, gaining 0.5%.
Depreciation rose to ₹ 4,287 crore from ₹ 2,774 crore in the same quarter last year. “The increase was mainly on account of commencement of commercial operations of Jio’s Wireless Telecommunication Network,” the company said.
RIL’s finance cost rose to ₹ 2,272 crore from ₹ 883 crore over the same period “primarily on account of finance cost related to digital services business”, it said.
Its debt as on September 30 rose to ₹ 2.14 lakh crore from ₹ 1.96 lakh crore on March 31, 2017. Cash and cash equivalents were ₹ 77,014 crore against ₹ 77,226 crore at the end of March. The company’s US shale business, where it recently sold its stake in a venture, continued to be sluggish as lower prices and volume affected performance. The domestic oil and gas exploration, and production business reported an 8.4% increase in revenue because of coal bed methane production although its output from KG Basin fields continued to decline. However, the company is at an advanced stage of negotiations and evaluating bids for the project to develop new fields in the block.
On a standalone basis, the company reported standalone net profit of ₹ 8,265 crore and revenues of ₹ 75,165 crore.