Reliance Industries, India’s second-largest company by market capitalisation and owner of the world’s largest refining complex, saw strong refining margins push up its quarterly net profit to a record $1 billion, even as sales fell due to soft crude prices.
However, analysts do not expect such record margins to sustain, while shareholders are concerned over the large investments being made in telecom, a major diversification from RIL’s energy-heavy portfolio.
The Mukesh Ambani-led company said its January-March quarter profit rose 8.5% to Rs 6,381 crore, compared to Rs 5,881 crore a year ago, while sales fell sharply by 33.3% to Rs 70,863 crore, from Rs 106,208 crore in 2014.
For the full year ending March 31, net profit was up 4.8% to Rs 23,566 crore, compared to Rs 22,493 crore a year ago, while sales fell 13% to Rs 388,494 crore, from Rs 446,339 crore.
The RIL board approved dividend of Rs 10 a share, which would lead to a payout of Rs 3,559 crore.
“2014-15 has been a very successful and important year. At a time when the collapse of crude oil prices unsettled hydrocarbon markets, our refining business delivered record earnings,” RIL chairman Mukesh Ambani said. “The earnings power of hydrocarbon businesses validates our philosophy of investing in world-scale, cost competitive assets.”
The gross refining margin (GRM) stood at $10.1 a barrel for the fourth quarter, much higher than analysts’ expectations of $9.8 and the strongest in eight quarters. GRM denotes the difference between the crude price and the value of the petroleum products that a refinery produces.
“While the GRM is in line with expectations, the figure for the next quarter is expected to be lower,” said Dhaval Joshi, research analyst at Emkay Global. “This kind of quarter is unlikely to sustain. Next quarter, the GRM will likely be lower as winter demand is almost over.”