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Helped by higher refining margins, Reliance Industries Ltd (RIL) beat Street estimates, posting its highest quarterly profit in seven years at Rs 6,381 crore in the quarter ended March this year, up 8.5 per cent against the year-ago period.
A Bloomberg poll of 16 analysts had forecast a record net profit for the company, at Rs 5,931.5 crore. Net sales were expected at Rs 64,455 crore.
Though RIL had reported a net profit of Rs 8,079 crore for the third quarter of 2007-08, that included profit on sale of investments of Rs 4,094 crore (excluding tax expenses).
For the March 2015 quarter, consolidated turnover was down 33.3 per cent at Rs 70,863 crore, against Rs 1,06,208 crore during the year-ago period, primarily due to a 50 per cent annual fall in benchmark oil prices. Exports from India were 44 per cent lower at Rs 37,480 crore, owing to lower oil prices.
For 2014-15, the company’s consolidated net profit rose 4.8 per cent to Rs 23,566 crore from Rs 22,493 crore in 2013-14. Consolidated turnover was down 13 per cent at Rs 3,88,494 crore.
RIL earned $10.1 for turning every barrel of crude oil into fuel, the most in the past two and a half years. The company maintained its trend of strong premium over the benchmark Singapore gross refining margin (GRM), as seen in previous quarters. The benchmark Singapore complex margin for the quarter stood at $8.5 a barrel, compared with $6.3 a barrel, due to stronger gasoline, naphtha and fuel oil cracks. RIL had reported $9.3 a barrel during the corresponding quarter of 2013-14. Analysts had expected RIL’s GRM at $9.5-10 a barrel.
For FY15, the consolidated GRM stood at $8.6 a barrel, against $8.1 a barrel in FY14.
The refining segment posted quarterly earnings before interest and tax (Ebit) of Rs 4,902 crore (up 50 per cent sequentially and 23.7 per cent over the March 2014 quarter). This was despite lower average crude oil prices, which led to revenue from the refining and marketing segment declining 31 per cent sequentially and 41.6 per cent year-on-year to Rs 56,442 crore in the March 2015 quarter.
On an annual basis, revenue declined 16.3 per cent to Rs 3,39,890 crore, while Ebit for the refining segment increased 18.2 per cent to a record Rs 15,827 crore. Ebit shows a company’s profitability at the operating level.
Mukesh Ambani, chairman and managing director of RIL, said: “2014-15 has been a very successful and important year for Reliance. At a time when the collapse of crude oil prices unsettled hydrocarbons markets, our refining business delivered record earnings…This year, we also made giant strides in our quest to sustain Reliance’s growth momentum, with the highest-ever capital investment into our hydrocarbon business and our next-generation digital services initiative. Our organised retail business maintained its high-growth trajectory with a wider pan-India footprint.”
Ahead of the results, the RIL stock ended flat at Rs 926.85 on the BSE. In the past month, it gained about 10 per cent, outperforming the benchmark BSE Sensex.
Some analysts believe the stock could see further gains on Monday. “The refining margins have come in better than expected. Also, on a standalone basis, interest cost has nearly halved to Rs 404 crore from Rs 881 crore in the previous quarter, aiding the profit,” said an analyst with a domestic brokerage firm.
The sharp decline in crude and feedstock prices hit revenue from the petrochemicals segment which, for the year, was down 6.9 per cent at Rs 96,804 crore. For the segment, the Ebit was lower at Rs 8,291 crore but margins were higher at 8.6 per cent, as product deltas held up well, despite lower absolute product prices. For the March 2015 quarter, the Ebit margin stood at 9.2 per cent, against nine per cent in the previous quarter and 8.1 per cent in year-ago period.
The higher margins helped cushion the fall in absolute Ebit (down 6.8 per cent), which stood at Rs 2,003 crore, against Rs 2,150 crore in the year-ago quarter, even as revenue for the segment fell 18 per cent year-on-year to Rs 21,754 crore.
For 2013-14, revenue for domestic exploration and production operations was 9.2 per cent lower at Rs 5,507 crore due to lower oil/condensate prices and a decline in gas production.
For this segment, the Ebit declined 23.1 per cent to Rs 1,250 crore on account of lower realisations, with no commensurate reduction in costs.
The company’s US shale gas business recorded lower volumes.
This, coupled with sharply lower realisations, resulted in overall revenue and earnings before interest, tax, depreciation and amortisation for the quarter falling 33 per cent and 48 per cent, respectively.
RIL’s other income stood at Rs 2,172 crore, against Rs 2,097 crore in the year-ago period, on account of higher profit on sale of investments. Depreciation was lower by 4.2 per cent at Rs 2,787 crore, compared with Rs 2,910 crore in the March quarter of FY14. Interest cost was Rs 677 crore, against Rs 978 crore a year earlier.
As of March 31, 2015, the company’s debt outstanding was Rs 1,60,860 crore, compared with Rs 1,38,761 crore as of March 31, 2014. The company held cash and cash equivalents of Rs 84,472 crore at the end of March this year.
Analysts were surprised at the company’s performance on the net profit and GRM fronts. Mayuresh Joshi, vice-president (institutions), Angel Broking, says if the company maintains the performance in the refining and petrochemical segments in the first half of FY16, one could expect some re-rating of the stock.
The commissioning of the PTA plant should favour the petrochemical segment. And, as Singapore GRM is expected at $8-8.5, if RIL can maintain a GRM of $9.2-10, it will be positive for the stock.
The company has recommended a dividend of Rs 10 per equity share.
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