Reliance Industries posts strong Q2, beats estimates, reports Rs 8109 cr profit

Reliance Industries on Friday reported a strong set of numbers during the July-September quarter, beating estimates on all fronts. Boosted by strong refining and petrochemicals margins, the company’s consolidated net profit excluding exceptional items increased a sharp 12.5% year-on-year to `8,109 crore. The company announced its earnings after market hours.

Gross refining margins (GRMs) for the country’s largest integrated oil and gas major were at a record nine-year-high of $12 per barrel against $10.10 a barrel in Q2FY17, but below estimates of $12.50 a barrel . The Ebit (earnings before interest and tax) margins for the refining and marketing business stood at 9.5% during July-September 2017, down 40 basis points from Q2FY17. However, RIL’s GRMs outperformed Singapore complex margins by $3.70 per barrel.

Commenting on lesser-than-expected GRMs, V Srikanth, joint chief financial officer, told newspersons that the differentials of light heavy crude have gone against the company and Arab light heavy differentials have narrowed as well. “This offsets the strong jump in transport fuel margins on the GRM,” he said.

Petrochemicals segment Ebit was at a record level of Rs 4,960 crore, supported by strong volume growth, higher margins and improved product mix with ethane cracking stabilising at Dahej and Hazira. Ebit margins were the highest in the last 10 years during the quarter and expanded to 17.7%.

The company recorded revenues of Rs 101,169 crore, an increase of nearly 24% y-o-y. The rise is primarily on account of increase in prices and volumes in refining, petrochemical and retail businesses. Further, the consolidated revenues reflect the commencement of commercial operations of Reliance Jio Infocomm’s (Jio) wireless telecommunication network during the quarter.

Retail business with a revenue increase of 81.3% y-o-y to Rs 14,646 crore crore was led by growth in digital, fashion and lifestyle, and petroleum products.

Operating profit before other income and depreciation increased 39.4% to Rs 15,565 crore y-o-y. Strong operating performance was driven by refining, petrochemicals, retail businesses and positive contribution from digital services starting from this quarter.

RIL’s outstanding debt as on September 30, 2017, stood at Rs 2.14 lakh crore crore versus Rs 2 lakh crore at the end of June 2017 and Rs 1.97 lakh crore as on March 31, 2017. Finance cost increased sharply to Rs 2,272 crore against Rs 883 crore Q2FY17, primarily on account of finance cost related to digital services business. Cash and cash equivalents were at Rs 77,014 crore, an increase of 7% quarter-on-quarter. These were in bank deposits, mutual funds, CDs and government bonds and other marketable securities.

As for capital expenditure, Srikanth said RIL’s capex intensity continues to fall. Indeed, while in Q1FY18 the company had a capital expenditure of around Rs 25,000 crore, the capex for the quarter ended September 30, 2017, stood at Rs 15,653 crore, including exchange rate difference capitalisation. Capital expenditure was principally on account of ongoing projects in the petrochemicals and refining business at Jamnagar and the digital services business.