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Reliance Industries Q1 results seen up courtesy petrochemical business

Petrochemical business is likely to offset impact of lower refining margins and a stronger rupee in Reliance Industries Ltd’s (RIL) June quarter results.

business Updated: Jul 20, 2017 12:36 IST
Kalpana Pathak
Kalpana Pathak
Mumbai, Livemint
Reliance Industries,petrochemical,June quarter
RIL, which operates the world’s largest refining and petrochemicals complex at Jamnagar (Gujarat), will report its earnings on Thursday.(REUTERS)

Better performance in the petrochemical (petchem) business may lift Reliance Industries Ltd’s results in the June quarter despite lower refining margins and a stronger rupee, analysts said.

RIL, which operates the world’s largest refining and petrochemicals complex at Jamnagar (Gujarat), will report its earnings on Thursday.

According to a Bloomberg poll of six brokers, RIL is expected to post consolidated net sales of Rs76,326 crore and net profit of Rs7,764.5 crore for the three months ended 30 June. A year ago, the figures were Rs71,451 crore and Rs7,113 crore respectively.

A Bloomberg poll of six brokers estimates its stand-alone net sales at Rs63,084.70 crore and a poll of five brokers expects the stand-alone net profit to come in at Rs8,119.60 crore. “RIL may report a tenth consecutive quarter of stand-alone earnings increase. However, with the sharp strengthening of the rupee, we think sequential stand-alone earnings would largely be flat,” Nomura Research said in a report dated 11 July.

RIL’s stand-alone profit for the quarter ended 31 March was Rs8,151 crore.

Analysts expect RIL to post a gross refining margin (GRM) between $10.5 and $11.2 per barrel against $11.5 per barrel a year ago. GRM is what a refiner earns by turning a barrel of crude oil into refined products. In the June quarter, the benchmark Singapore GRMs averaged flat at $6.4 per barrel.

“We expect most domestic refiners to report sequentially weaker refining margins. In addition, inventory losses resulting from sharp decline in crude/product prices would dent refining margins in Q1FY18,” said Antique Stock broking Ltd in a report dated 7 July.

Motilal Oswal Securities expects RIL to post an inventory loss of $1 a barrel.

During the June quarter, crude oil prices fell to an average of $50.8 per barrel from $54.6 in the March quarter. The rupee appreciated against the dollar, averaging Rs64.5 a dollar against Rs67 a dollar in Q4FY17.

Over the last few quarters, RIL’s refineries have enjoyed a premium of $4-5 per barrel to Singapore GRMs. “We expect GRMs at $11.2 per barrel, a $4.8 per barrel premium over Singapore benchmark,” said Edelweiss Securities Ltd in a note dated 5 July.

However, higher volumes, better margins and a new para-xylene plant (PX4) are expected to help RIL’s petchem business.

“With benefits for new capacities coming on stream, we think petchem earnings should increase sequentially,” said Phillip Capital in a note dated 6 July.

Losses in the exploration and production front may widen for RIL, with production from its KG D6 block expected to have declined to 7 million metric standard cubic metres per day.

On Wednesday, RIL’s scrip ended at Rs1,533.50, up 0.89% on the BSE, while the benchmark Sensex closed at 31,955.35 points, up 0.77%.

The company is expected to make fresh announcements on its telecom venture Jio at its annual general meeting scheduled on Friday. Analysts said they expect RIL to give a low-down on monetization of its telecom business, in addition to launching new plans and mobile devices.

First Published: Jul 20, 2017 12:36 IST