RIL net up 12.3% to Rs 8,046 cr. Here are all the details

Reliance Industries (RIL) reported record annual profits for the last financial year (2016-17), riding high on refining and petrochemicals businesses. For the March quarter, its consolidated net profit rose 12.3 per cent to Rs 8,046 crore, against Rs 7,167 crore for the same period a year ago.

With a significant part of its capital expenditure on the hydrocarbons business complete, the company expects it to contribute to its income in the current financial year (2017-18). The full impact would be visible in the next financial year (2018-19). The coming quarters, however, will see accounting for both revenue and expenses from its telecom venture.

The company’s turnover in the March quarter rose 45.2 per cent year-on-year to Rs 92,889 crore, largely meeting Street expectations for net profit. In a Bloomberg poll, analysts estimated a consolidated net profit of Rs 8,046.5 crore and a revenue of Rs 86,908 crore.

“Strong refining and petrochemicals margin environment contributed to higher operating profits for the year,” the company said.

“Lower interest costs and lower tax rates have pushed net profit slightly higher than expectations. Refining has performed but petrochemicals performance is slightly disappointing. We will have to look into details,” said Sudeep Anand, analyst at IDBI Capital Markets.

The company’s tax expenses as well as interest costs declined, owing to change in accounting standards and currency fluctuations.

For the full year, the company reported a consolidated net profit before exceptional items of Rs 29,901 crore, a rise of 18.8 per cent from Rs 25,171 crore last year. Net profit was up just 0.5 per cent year-on-year.

The company’s gross refining margins (GRMs) for the quarter were at $11.5 per barrel, against $10.8 per barrel reported in the December quarter. Analysts were expecting GRMs of $10-10.5 in the March quarter.

“Refining is in a good spot. Quarterly volatility is a given, but the double-digit story has been intact,” V Srikanth, joint chief financial officer (CFO) at Reliance Industries said.

Refining and marketing revenue in the March quarter increased 49.9 per cent year-on-year to Rs 72,045; segment earnings before interest and tax (EBIT) was at Rs 6,294 crore, down 1.3 per cent year-on-year on account of lower gasoline and naphtha cracks and planned fluidised catalytic cracking unit turnaround.

“GRMs are a positive surprise. Another positive is that interest costs have come in lower this quarter,” said Nitin Tiwari, analyst at Antique Stock Broking. A favourable rupee also played a role in lowering interest costs.

For its petrochemical business, the company said, in the March quarter revenue increased by 26.4 per cent year-on-year to Rs 26,478 crore, primarily because of an increase in prices across all products. This was partially offset by lower volumes.

Petrochemicals segment EBIT increased 25.8 per cent to Rs 3,441 crore, supported by favorable product deltas.

On the planned investments in the hydrocarbon sector, the company said, “Capital expenditure is now over, with no significant investments in the current financial year. It is for the cash flows to come in… 65 per cent of the value is expected in the current fiscal year and full impact in the next financial year.”

“With $20 billion of downstream capex largely over and nearing commissioning, we expect consolidated Ebitda to grow strongly at 15 per cent CAGR over FY16 to FY19,” said Abhijeet Bora, research analyst, Oil and Gas, Sharekhan, a domestic brokerage which was recently acquired by BNP Paribas.

For the last financial year, the company invested Rs 1.15 lakh crore, including investments in the telecom venture.

For the current financial year, the company looks to spend Rs 15,000 crore to Rs 18,000 crore excluding investments in Jio. For the telecom business, the company said it looks to invest another Rs 18,000 crore in the June quarter; thereafter, investments may fall sharply. The company’s current debt was at Rs 1.96 lakh crore.

In a separate filing, RelianceJio Infocomm reported a net loss of Rs 22.5 crore for the six months ended March. The company provided free voice and data services since its launch on September 5 last year. “This figure (Rs 22.5 crore) means nothing in the context of the size we are talking about,” Srikanth said.

RIL is yet to start accounting for the telecom business in its profit and loss account.

“We will take a call on the recognition of revenue by the end of the current quarter. If it is not in this quarter it will be in the next,” Srikanth said.

The management did not give an expected timeline to break even for its telecom business. As of March, the company had added 109 million subscribers, of which 72 million were Jio Prime members.

Performance for the company’s oil and gas business remained subdued, with a 19.9 per cent decline in the March quarter.

“A continuing weak price environment in the domestic market and declining production trend impacted segment revenues. Segment EBIT loss was at Rs 486 crore, as against Rs 153 crore loss in the corresponding period of the previous year. For planned investments in its shale gas business, the company said the capital expenditure would continue to remain subdued. Considering an investment of a few hundred million dollars would also be on the higher side,” Srikanth said.

The company’s organised retail revenues saw a huge jump of 83 per cent to Rs 10,332 crore.

“The increase in turnover was led by growth across all consumption baskets. The business PBDIT (profit before depreciation, income and tax) grew by 65.6 per cent to Rs 366 crore in March quarter as against Rs 221 crore in the same quarter the previous year,” the company said in its statement.

For FY17, its PBDIT was up 40.4 per cent at Rs 1,203 crore.

In March, Reliance also commenced commercial production from its coal bed methane (CBM) block Sohagpur (West). The company looks to gradually ramp up its production to 2.5 million metric standard cubic metre per day by March 2018. The company has so far made a total investment of close to $500 million in its CBM project.