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RelianceIndustriesBSE 1.05 % reported a 24% rise in quarterly net profit as the world'slargest refinery at Jamnagar ran flat out and earned hefty margins, helping theconglomerate exceed street expectations and bounce back after four lacklustrequarters.
Thecompany, which has bought back 46 million shares for 3,361 crore, is expectedto gain from the favourable change in the oil ministry's approach while globalfactors such as accelerating growth in China are likely to increase fueldemand, propping up refining margins.
RILsaid there was "positive traction" in the oil exploration sector, andthe Rangarajan committee - which addressed contractual issues and recommended aformula to raise gas prices - had created an investment-enabling environment.Further, it expects development of new fields and investment of 1 lakh crorefor expanding petrochemicals capacity to reap rich rewards.
ShaleBusiness in US Growing Rapidly
"Theseinvestments will secure a significant change in RIL's earning capacity oncommissioning of the projects," Chairman & managing director MukeshAmbani said. Record performance of the refinery and margin expansion inpetrochemicals helped improve earnings, he added.
Net profitfor the December quarter rose to 5,502 crore from 4,440 crore in the samequarter of the previous year. Profit rose as earning from refining operationsmore than doubled to 3,615 crore as the Jamnagar plant earned $9.6 from eachbarrel of crude it refined, up from $6.8 in the same quarter a year ago.
Thecompany's shares closed 1% higher at 898.95 before earnings were announced, thehighest since October 2011. Its global depository receipts in London surged6.3% to $34.83, the highest price since February 13, and traded at $34.50 as of2:11 pm local time, according to a Bloomberg report.
Therefining segment's gains dwarfed the drop in the oil & gas segment that hassuffered because of the decline in natural gas output from the KG-D6 block. Thesegment's earnings before interest & tax (EBIT) fell 32% to Rs 590 crore.Reliance also said its shale business in the US had grown rapidly and was ontrack to contribute substantially to the overall earnings of the explorationand production business.
Thecompany's 'other income', which had risen in earlier quarters, was almost flatat 1,740 crore compared with 1,717 crore a year ago. The growth in RIL's cashpile also slowed. It rose to 80,962 crore ($14.7 billion) from 79,159 crore atthe end of the September quarter.
With adebt of 72,266 crore at the end of December, on a net basis, Reliance isdebt-free, it said.
In thepetrochemicals segment, revenue rose 11.5% to Rs 22,053 crore. The margindropped to 8.8% a year ago but was better than the September quarter's 7.9%.Turnover for the retail business jumped 44% to Rs 7,749 crore ($1.4 billion)compared with the corresponding period last year. At the end of December,Reliance Retail operated more than 1,400 stores in 129 cities. The company saidits key challenges remained timely approvals and implementation of gas pricingrecommendations in line with contractual provisions.
Analystssaid the company was likely to sustain the upturn in refining business."RIL's GRM was much higher than our estimate most probably due tohigher-than-expected impact of light-heavy spread. Going forward, we believethat $9 per barrel is a sustainable GRM," said Sandeep Randery, head ofresearch, Brics Securities. "RIL results have beaten our expectations, thepetrochemical and refining margins have improved. The expansion plans inpetrochemical will further add profitability in coming quarters," saidMayur Matani, an analyst at ICICI Securities.
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