India’s biggest private company by sales, Reliance Industries Ltd, on Monday posted a 1.7% year-on-year rise in its second quarter net profit, beating market expectations on the back of improved refining margins despite softening crude oil prices.
Mukesh Ambani-led RIL, which operates the world’s biggest refinery complex in a single location, said its consolidated net profit stood at Rs 5,972 crore, against Rs 5,873 crore last year. This was much better than brokerages’ estimates of `5,634 crore.
Sales, however, fell 4.3% to Rs 113,396 crore due to low crude prices and volumes.
“The refining and petrochemical businesses once again delivered robust results outperforming regional industry benchmarks,” chairman Mukesh Ambani said in a statement.
RIL’s gross refining margin — the main indicator of the profitability of a refinery — stood at $8.3 a barrel against $7.7 a year ago.
The refining operations and the oil and gas divisions have been closely watched ever since the company failed to stop the falling domestic oil and gas output in the Krishna-Godavari basin.
During July-September, RIL’s Jamnagar refineries processed 17.3 million metric tonnes of crude at an average utilisation rate of 112%.
In comparison, average utilisation rates for refineries globally during the same period stood at 89.1% in North America, 78.9% in Europe and 84% in Asia.
“The earnings are better than market expectations and refining margins have been the main surprise,” said independent market expert Ambarish Baliga. “This will have a positive impact on the stock tomorrow.”
Shares of Reliance fell 0.3% ahead of the earnings announcement. Outlining RIL’s expansion plans, Ambani said: “Renewed optimism in the domestic economy augurs well for business and consumer confidence, particularly against the backdrop of continuing concerns on global economic growth. We expect to create significant value for our stakeholders over the next 12-18 months as we complete our large investment programme across energy and consumer businesses.”
In June, Ambani told shareholders that RIL was planning to invest Rs 70,000 crore in various businesses. Reliance Jio Infocomm, a subsidiary of RIL, has already signed a $750-million loan agreement backed by Korea Exim Bank in September.
Reliance said the net addition to fixed assets for the half year ended September 30 stood at Rs 44,895 crore. “Capital expenditure was principally on account of ongoing expansions projects in the petrochemicals and refining business at Jamnagar, Dahej and Hazira, broadband access and US Shale gas projects,” the statement added.