Reliance Quarterly Profit Climbs to Highest in Seven Years

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Reliance Industries Ltd., operator of the world’s biggest oil-refinery complex, reported its biggest quarterly profit in seven years as earnings from refining crude increased.

Fourth-quarter net income rose 10.8 percent to 62.4 billion rupees ($1 billion), or 19.3 rupees a share, in the three months ended March 31 from 56.3 billion rupees, or 17.4 rupees, a year earlier, the Mumbai-based company said Friday in a stock exchange filing. That beat the 59.6 billion-rupee median of 16 analyst estimates compiled by Bloomberg. Sales fell 41 percent to 560.4 billion rupees because of the slump in crude prices and gas output.

Higher profits will reinforce Reliance’s plans to spend 1.8 trillion rupees to boost petrochemical-producing capacity, open retail stores and start telecommunications services in the world’s fastest growing major market for smartphones. The company is banking on its refineries to increase profit and make up for lower natural gas output.

“The coming days look quite positive for Reliance as the core refining business is showing strength,” said Jagannadham Thunuguntla, the head of fundamental research at Karvy Stock Broking Ltd. “This gives an opportunity to patient buyers.”

Reliance shares have declined 3.4 percent in the past year, compared with a 26 percent gain in the key S&P BSE Sensex. The loss of value has dislodged Chairman Mukesh Ambani as India’s richest person, according to the Bloomberg Billionaires Index. The stock declined 0.2 percent to 926.85 rupees in Mumbai trading. The earnings were announced after the market closed Friday.

Adjacent Refineries

The producer operates two refineries with a combined capacity of 1.24 million barrels a day located next to each other at Jamnagar in the western state of Gujarat. The units have the ability to process cheaper, lower grades of crude into high-value products for use in Europe and the U.S.

Reliance earned $10.10 for every barrel of crude it turned into fuels in the quarter, compared with $9.30 a year earlier and $7.30 in the three months ended December, the company said. The cost of raw materials declined by more than 50 percent to 376.4 billion rupees, reflecting the slump in crude-oil prices since June.

Profit from making diesel in Singapore, an Asian benchmark, averaged $15.52 a barrel in the quarter ended Dec. 31, compared with $17.86 a year earlier and $15.57 a barrel in the preceding three months, according to data from PVM Oil Associates Ltd. in London.

Reliance spent about 1 trillion rupees during the fiscal year ended March 31 to expand businesses including petrochemicals, refining, telecommunications and U.S. shale gas projects, according to the statement. It didn’t specify the investment planned for the current fiscal year.

Waning Output

The company produces natural gas from the KG-D6 block off India’s east coast with partners BP Plc, Europe’s second-biggest oil company, and Canada’s Niko Resources Ltd. Output from the field has been falling since the middle of 2010 as Reliance says the field is more difficult to produce from than initially thought.

Natural gas output from KG-D6 fell 5 percent to 36.5 billion cubic feet in the quarter from the previous three months, Reliance said. Oil production from the block fell 3 percent to 500,000 barrels and condensate output decreased 0.4 percent to 100,000 barrels.

Reliance, which also operates stores that sell fruits and clothes, will start a $12 billion telecommunications network this year to meet voice and data demand in the world’s second-most populous nation, Ambani told shareholders in June.

(An earlier version of this story was corrected to amend the company’s sales for the quarter.)

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