Despite falling gas output, the better-than-expected quarterly profit was driven by solid margins in its core oil refining business.
Mumbai : Reliance Industries, India’s most-valuable company, posted a 24 % jump in the third quarter net profit on Friday, the first increase after four quarters of declining returns, on the back of record earnings from oil refining business.
We are investing over Rs 100,000 crore by expanding our petrochemical capacities and adding value to our refining business. These investments will secure a significant change in RIL’s earning capacity on commissioning of these projects” —Mukesh D Ambani – Chairman and Managing Director of RIL
Profits grew despite falling gas output from the company’s fields in KG-D6 and a cut in its estimated reserves by about two-thirds.
Net profit in the October-December at Rs 5,502 crore was 23.9 % higher over Rs 4,440 crore in the same period a year ago, RIL said in a statement.
The better-than-estimated quarterly profit came on the back of rise in earnings from turning crude oil into petrol, diesel and other petroleum products.
RIL, which operates the world’s biggest refining complex at Jamnagar in Gujarat, earned $ 9.6 on turning every barrel of crude oil into fuel in the quarter, compared to $ 6.8 per barrel gross refining margin in the same period a year ago. Sales were up over 10 % to Rs 96,307 crore.
The refining margin in the December quarter was only a shade better than $ 9.5 per barrel achieved in Q2 of current fiscal.
RIL reported more than doubling of earnings before interest and taxation (EBIT) from the oil refining business at Rs 3,615 crore in the October-December quarter.
Sales soared to Rs 93,886 crore from Rs 85,135 crore in the third quarter of 2011-12. Refining is the biggest of RIL businesses, accounting for two-thirds of net sales and 40% of the firm’s operating profit.
RIL, which had previously sought to widen beyond its core energy business through forays into consumer-focused sectors such as telecom, retail and financial services, seems to be shifting focus back to where it started its energy business — oil refining.
The shift in focus is after output from its flagship natural gas field in the Krishna Godavari basin continues to wane and government approvals for developing newer and smaller fields are slow to come.
“RIL’s performance has improved in this quarter with margin expansion in petrochemicals and record earnings in the refining business,” company Chairman and Managing Director Mukesh D Ambani said.
Before the announcement of the earnings, RIL shares rose to a 15-month high to close at Rs 898.95 on BSE today. This is the highest close for RIL shares since October 28, 2011. RIL shares have increased 7.2% this year, adding to last year’s 21 % surge, the most since 2009.
Gas business hurts
Continuing fall in natural gas output at its flagship KG-D6 gas fields in the Bay of Bengal led to earnings from the oil and gas business drop by a massive 54.4% to Rs 590 crore. Segment revenue dropped by 32.2 % to Rs 1,921 crore.
RIL said it was addressing the fall in KG-D6 output to about 21 million standard cubic meters per day, a third of the peak achieved in 2010, by upgrading production facilities and starting drilling in satellite fields around the main gas fields in the block.
Debt soared to Rs 72,266 crore at the end of Q3, up from Rs 68,259 crore at the beginning of the fiscal. It had a cash pile of Rs 80,962 crore, making the company debt free on a net basis.
The company reported a 10.2 % drop in earnings from its core petrochemical business at Rs 1,937 crore on lower production of ethylene and propylene.
Turnover from retail grew 44 % to Rs 7,749 crore as the company continued to expand stores across the country. It has over 1,400 stores in 129 cities. RIL’s subsidiary, Infotel Broadband Services (Infotel), which has won broadband spectrum in 22 circles or zones, is setting up a network using to usher the 4G revolution into India.