Reliance Industries Ltd’s fiscal second quarter net profit rose 12.5% to Rs 8,109 crore, just about meeting the expectations despite a Rs 271 crore loss on its telecom venture Jio, on the back of healthy refining and petrochemicals margins. The Mukesh Ambani-controlled company’s July-September revenue rose almost 24% on-year to Rs 1.01 lakh crore. The rise in earnings exceeded expectations, and was helped by strong showing in the company’s petrochemicals business, which saw robust margins. Revenue was also boosted by addition of Rs 6,147 crore of earnings from Jio, whose financial performance was included in RIL’s earnings for the first time.
Reliance Industries refining business recorded a healthy increase in both prices and volumes. The refining margin at $12 per barrel rose to a nine-year high from $10.1 per barrel in the same quarter a year ago, but were largely flat from the previous quarter. Refining margins also fell slightly short of analyst expectations. Reliance Industries’ results were weighed down to some extent on account of the pressure on the oil and gas exploration business at the company’s flagship KG-D6 gas fields off India’s east coast.
“The results also reflect strong underlying fundamentals of our refining and petrochemicals businesses. Sustained demand growth coupled with supply disruptions further tightened demand-supply balances globally during the quarter,” Reliance Industries chairman Mukesh Ambani said in a statement. “The structural strength in energy and materials business environment augurs well for our new capacities which are coming on-line this year,” he added.
For the first time, RIL’s results release included a detailed report on the performance of its disruptive venture Jio Infocomm, which has taken the Indian telecom industry by storm. The telecom business reported a net loss of Rs 271 crore, but was profitable on the EBIT level at Rs 260 crore. “The strong financial results of Jio demonstrates the robust business model of Jio and the significant efficiencies that the Company has built through its investment in the latest 4G technology and right business strategy,” Mukesh Ambani said in the statement.
Gross Refining Margin
Reliance Industries GRM grew to a nine-year high of $12 per barrel, but fell short of a CNBC TV18 estimate of $12.5 per barrel. RIL’s GRM, a measure of realisation from making products out of crude oil, was still higher by $3.7 per barrel than the benchmark Singapore Gross Refining Margin for the September quarter. The refining and marketing business revenue rose 15.3% on-year to Rs 69,766 crore in the fiscal second quarter, with the segment EBIT rising 10.8% on-year to Rs 6,621 crore.
Further, RIL’s second quarter revenue from its petrochemicals business, the second-largest contributor, rose about 25%% on-year to Rs 27,999 crore, with the EBIT (earning before interest and tax) for the segment rising 45.2% to Rs 4,960 crore. Earlier June, Reliance Industries successfully commissioned the third and last crystallisation train (Train 3) of its Para-xylene unit at its Jamnagar complex, doubling the company’s PX processing capacity. Reliance Industries is executing major projects in its energy and materials chain at Jamnagar covering Para-Xylene, Cracker complex along with downstream plants and Gasification.
Oil & gas exploration
The oil & gas exploration business revenue continued to remain low, but saw an on-year increase this time to rise 13.3% on-year to Rs 1,503 crore. Revenue for the Oil & Gas segment increased due to commencement of CBM production, Reliance Industries said. Revenues also include Rs 198 crore received towards settlement of various long pending commercial issues relating to sale of crude oil of Panna-Mukta Field. Segment EBIT loss narrowed to Rs 272 crore as against Rs 491 crore in the corresponding period of the previous year. The segment performance continue to remain impacted by declining volume and weak prices on the account of low upstream production and lower domestic gas price realisation at its KG-D6 block.
Organised retail segment continued to grow at a scorching pace, with the fiscal second quarter revenue rising 81.3% on-year to Rs 14,646 crore. “During the quarter, Reliance Retail added 45 stores across various store concepts and strengthened its distribution network for consumer electronics,” it said.