Reliance Industries, India's most-valuable company, today reported 24 per cent jump in the third quarter net profit, the first increase after four quarters of declining returns, on the back of record earnings from oil refining business.
Net profit in October-December at Rs 5,502 crore was 23.9 per cent 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 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 Ė 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, which operates the world's biggest refining complex at Jamnagar in Gujarat, earned USD 9.6 on turning every barrel of crude oil into fuel in the quarter, compared to USD 6.8 per barrel gross refining margin in the same period a year ago.
Sales were up over 10 per cent to Rs 96,307 crore.
Debt soared to Rs 72,266 crore at the end of Q3, up from Rs 68,259 crore at the beginning of the fiscal. At quarter end, it had a cash pile of Rs 80,962 crore, making the company debt free on a net basis.
"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 per cent this year, adding to last year's 21 per cent surge, the most since 2009.
Ambani said RIL is investing Rs 100,000 crore in petrochemical sector.
"We are investing over Rs 100,000 crore by expanding our petrochemical capacities and adding value to our refining business," he said. "These investments will secure a significant change in RIL's earning capacity on commissioning of these projects".
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.
The twin refineries at Jamnagar can turn heavier grades of oil, which are typically cheaper, into high-value fuels.
The refining margin in the December quarter as only a shade better than USD 9.5 per barrel achieved in Q2 of current fiscal which the segment contributed Rs 3,523 crore to the EBITA.
The twin refineries with a total capacity of 62 million tons, processed 17.5 million tons of crude as compared to 17.6 million tons in Q2 of current year and 17.2 million tons in Q3 of last fiscal.
Segment revenues were up 13 per cent to Rs 86,641 crore.
"RIL's refining configuration, its inherent design advantages and complexity, its flexible business model and unique crude sourcing capability have all contributed towards it delivering best-in-class performance," the statement said.
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 per cent to Rs 590 crore. Segment revenue dropped by 32.2 per cent to Rs 1,921 crore.
RIL said it has 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.
The company reported a 10.2 per cent drop in earnings from its core petrochemical business at Rs 1,937 crore on lower production of ethylene and propylene.
Of its new business, turnover from retail grew 44 per cent 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.
Stocks More on Reliance Industries
Company INFO More on Reliance Industries
Reliance Q3 profit jumps on better-than-expected refining margins
(Reuters) Indian conglomerate Reliance Industries Ltd posted its first profit increase after four quarters of declining returns, buoyed by improving margins in its core oil refining business.
Net profit climbed a greater-than-expected 24 percent in its fiscal third-quarter through December to 55.02 billion rupees ($1 billion), on net sales up more than 10 percent from a year earlier to 938.9 billion, Reliance said on Friday.
The company reported an average gross refining margin of $9.6 a barrel for the quarter, compared with $6.8 a year earlier and $9.5 in the previous three months.
Analysts had expected Reliance, controlled by India's richest man Mukesh Ambani, to post a net profit of 51.2 billion rupees, according to Thomson Reuters data.
"Refining is doing sufficiently well but ... clarity is still required on where the next round of revenue growth will come from," said Rikesh Parikh, vice president for equities at Mumbai brokerage Motilal Oswal Securities Ltd.
Reliance, India's biggest company by market value, has been under pressure from investors on account of its slowing energy business and a drive into consumer-focused sectors such as telecoms, retail and financial services, in which it is yet to turn a profit.
The results were released after the close of trade in India. Shares in the Mumbai-based conglomerate, valued at $52.6 billion, closed up 1.2 percent ahead of the results.
The stock rose by a fifth in 2012, but lagged a 26 percent increase in the main stock index.
The profit rise came despite falling production at the company's key natural gas field off India's east coast and a cut in its estimated reserves by about two-thirds.
The government is expected to increase natural gas prices by 2014, a move that would help Reliance and its partner, BP Plc , justify higher expenditure on the block.
Reliance said it held $14.7 billion in cash at the end of December and had debts of $13.1 billion.
($1= 54.29 rupees)