Re fall helps RIL offset drop in GRM, petchem shines

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Summary* KG-D6 production remains weak; US shale Ebitda up sharply

Reliance Industries (RIL) on Monday reported a net profit of R5,490 crore for the quarter ended September 30, an increase of 2.5% sequentially, as a weaker rupee and stronger petrochem margins helped offset a fall in refining margins and sliding oil and gas production. The Street was expecting a bottom line of R5,450 crore.

Earnings before interest depreciation and tax (Ebitda), or operating profit, increased to R7,849 crore, a modest rise of close to 11% sequentially, driven by better margins in the petrochemicals business. The lower output in the oil and gas division and weaker gross refining margins (GRM) of $7.4 per barrel, down from $8.4 per barrel in Q1FY14 and 9.5% in Q1FY13, however, offset some of those gains. The GRMs in Q2FY14, although at a premium of about $2 to the Singapore benchmark, were lower q-o-q and y-oy because of smaller diesel and gasolene cracks during the quarter.

Alok Agarwal, CFO, RIL, told newspersons while the depreciation of the currency had impacted the refining business—since the company imports crude oil — on a net basis it had helped.

A rise in exports, which contributed 66% of revenues, helped boost the top line with revenues rising 15% to R103,758 crore year-on-year and 18.3% sequentially.

A weak rupee helped boost RIL's gains – exports recorded a 19.3% in the first half of the current fiscal to Rs134,455 crore. Agarwal said the refinery throughput was the highest ever in Q2FY 14 at 17.7 million metric tonnes adding that sales to public sector companies were lower by 25-30% as a consequence of which RIL had exported more. He said it would take 18-24 months more for the shale gas business to turn cash positive. The company's North American shale gas business, however, continues to perform solidly, with Reliance’s share of gross production standing at 36.5 Bcfe in 2Q FY14, a growth of 31% y-o-y.

The strong performance of the petrochem segment, which was boosted by the govenment's decision to increase import duty on polymers to 7.5% from 5% in May, helped lift the bottom line.

Other income for RIL was also weaker at Rs2,060 crore, compared with Rs 2,535 crore in the first quarter, and Rs 2,112 crore in the same quarter last year.

“Our diversified and integrated petrochemicals business captured margins across segments – delivering near-record profit levels even as the domestic economy slowed,” Mukesh Ambani, chairman and managing director of

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