Refining margins boost RIL Q4 net; sales disappoint

Reliance Industries, India’s largest private sector refiner, reported a higher-than-expected net profit of Rs 5,589 crore for January-March, on the back of a robust refining margin.

The company’s net sales came in at Rs 84,189 crore, lower than estimates and also the year ago figure.

The corresponding net profit a year ago stood at Rs 4,236 crore and net sales Rs 85,182 crore.

A CNBC-TV8 poll had estimated a 30.8 percent on year rise in net profit at to Rs 5,540 crore and 7.6 percent rise in revenue to Rs 91,673 crore.

In Jan-March, the company’s EBITDA margin stood at 9.3 percent compared with 8.9 percent a quarter ago. Its EBITDA stood at Rs 7,825 crore, down 6.5 percent on quarter.

Net profit from its key refining sector during the quarter stood at Rs 3,520 crore, 10 percent drop on quarter. Experts termed this disappointing as the decline has come in despite a higher than estimated gross refining margin of $10.1 per barrel.

A quarter ago the GRM stood at $9.6 per barrel and an year ago $7.6 per barrel.

Petrochemicals revenue during Jan-March stood at Rs 22,158 crore compared with Rs 22,053 crore a quarter ago.

Other income during the quarter was Rs 2,243 crore, an increase of about Rs 500 crore from a quarter ago.

According to expert SP Tulsian, the disappointment is on the refinery sector as the decline in net profit from the vertical has come in despite a higher GRM. This might be because of the lower volumes as the company had shut its refinery for a month for maintenance.

What management says

“The growth in earnings was largely driven by strong and improved refining margins during the year,” Chairman Mukesh Amabni was quoted as saying in a press release.

The company expects long-term value for shareholders from the diversification into the shale gas exploration.

“We are delighted to see our retail business achieving a milestone of annual revenue crossing Rs 10,000 crore and will further strengthen our position in this sector,” he said.

On KG-D6, where the gas production has been falling continuously the press release said, “Under the KG-D6 block enhancement plan, BP and RIL are planning to invest in a series of projects to develop around 4 trillion cubic feet of discovered natural gas resources from the block.”

At current international liquefied natural gas (LNG) prices, it would cost more than $50 billion to import this volume of gas into India, it said.

This plan, when implemented, would entail a potential total investment in excess of $5 billion over the next three to five years.