Reliance Industries’ Q3 profit rises by 3.6% to Rs 7,506 crore
Controlled by Mukesh Ambani, the Reliance Industries Ltd runs the world’s largest refinery complex in Jamnagar.business Updated: Jan 17, 2017 00:01 IST
Reliance Industries, which on Monday reported a Rs 7,506-crore net profit in third quarter driven by treasury and inventory gains, expects a massive up to $3.5 billion boost to pre-tax profit next financial year with the completion of its expansion projects.
“We expect sharp rise in operating profit from next financial year as we complete the $15-billion expansion programme at our refining and petchem businesses at Jamnagar, Dahej and others.
“The new capacities could increase earnings before interest, tax, depreciation and amortisation (Ebitda) by $3.2-3.5 billion on a full-year basis,” joint chief financial officer Srikanth Venkatachari told reporters while announcing the third quarter earnings.
This is massive as for the nine months to December, the company that processes 1.2 million barrels a day at Jamnagar, reported an Ebitda of Rs 31,976 crore or $4.7 billion. Operating profit before other income and depreciation during the quarter rose 2.7% on a year-on-year basis to Rs 11,552 crore from Rs 11,248 crore in the previous year.
The oil-to-telecom conglomerate was on a $15 billion capex programme since March 2012 to set up a petroleum coke integrated gasification combined cycle (IGCC) plant and a refinery off-gas cracker (ROGC), costing $4-5 billion each. This would increase its petrochemical capacity by 66%. Last month, RIL had commissioned the first phase of new paraxylene project at Jamnagar.
The capital expenditure for the third quarter stood at Rs 37,791 crore, while the same for the nine months of this fiscal stood at Rs 81,691 crore, a good chunk of went into its telecom venture Jio.
The company said, “capex was principally on account of ongoing projects in the petrochemicals and refining business at Jamnagar, Dahej, Hazira, US shale gas projects and digital services business.”
“While the ROGC is ‘almost’ complete, the IGCC will be mechanically completed by June 2017. After a few months of stabilisation, the benefits of the projects will be reflected in the company’s operating profit,” Srikanth said, adding “I believe even in the next financial year, we will see a substantial jump in Ebitda”.
Refining and petrochemicals contribute almost 90% of Reliance’s overall revenue and profit.
The Mukesh Ambani-controlled RIL, which runs the world’s largest refinery complex in Jamnagar, earlier in the day a better-than-expected 10% rise in December quarter net profit at Rs 8,022 crore, helped by strong refining margin, on a standalone basis, which include the refining and petrochem business and oil and gas exploration.
Consolidated net profit of Rs 7,506 crore, or Rs 25.4 a share, in October-December, was 3.6% higher than Rs 7,245 crore, or Rs 24.5 per share, in the same period a year back, the company said in a statement.
Turnover was up 16.1% at Rs 84,189 crore.
The record profit in the quarter came in even as its gross refining margins, which is the profit earned on refining each barrel of crude and is a key profitability metric for a refiner, stood at a low $10.8 per barrel for the December quarter from $11.5 a barrel a year ago.
During the quarter standalone revenue rose 9% Rs 66,606 crore, while exports increased 4% to Rs 38,038 crore.
On the completion of the projects and the earnings highlights, chairman Ambani said, “The refining business has delivered eight consecutive quarters of double-digit GRMs, benefiting from the global demand for transportation fuels and improved product cracks.
“We successfully commissioned the first phase of paraxylene plant in December, further deepening the linkage between our refining and petrochemicals operations. We are executing well on our projects under construction and remain confident on delivering on our growth plans,” Ambani said.
On the oil retail business, Srikanth said, during the quarter company added some more petrol pumps taking the total operational outlets to 1,151 as of end December. But he was quick to add that the company may not touch the 1,400 target set earlier for March “as we are yet to figure out the locations for new outlets with the massive increasing in operational national highways.”
“So you can assume that we will be missing the 1,400 outlet target for the year ending March. We may do around 1,250 this fiscal year,” Srikanth added.
He said while employee costs were down by 3.1% Rs 1,894 crore from Rs 1,954 crore a year ago due to VRS-related expenses, “other expenses rose 27.5% to Rs 10,257 crore from Rs 8,047 crore, primarily due to increase in power and fuel expenses with new capacity commissioning, and increase in maintenance expenses on account of planned shutdown at Dahej and Jamnagar.”
Operating profit before other income and depreciation increased 2.7% on a y-o-y basis to Rs 11,552 crore from Rs 11,248 crore in the previous year.
“Operating net was boosted by strong petrochem show, sustained strength in refining and favorable exchange rate. This was partially offset by losses in oil & gas business due to lower volumes and weak domestic price environment.”
Due to rise in the dollar, its interest cost rose to Rs 1,209 crore from Rs 945 crore a year ago, said Srikanth.
Outstanding debt of RIL, which borrows heavily in dollars, rose to Rs 1,94,381 crore in December from Rs 1,80,388 crore in March 2016, while cash balance slipped to Rs 76,339 crore compared to Rs 89,966 crore from March 2016. Out of this net debt stood at Rs 1.18 trillion, he said, adding these are in bank deposits, MFs, CDs and gilt and other marketable securities.