Reliance Profit Climbs to Highest in 8 Years on Margin Boost

  • Refiner’s quarterly profit climbs to 73.2 billion rupees
  • Crude price decline helps oil processors generate profits

Reliance Industries Ltd.’s fourth-quarter profit climbed 17 percent to the highest in more than eight years as oil’s collapse improved margins from turning crude into fuels and petrochemicals.

Net income at the operator of the world’s biggest refining complex increased to 73.2 billion rupees ($1.1 billion) in the three months ended March 31 from 62.4 billion rupees a year earlier, the Mumbai-based company said Friday in a stock exchange statement. That’s the highest since the quarter ended Dec. 31, 2007, and beat the 70.1 billion-rupee mean of 15 analyst estimates compiled by Bloomberg. Sales fell 11 percent to 499.57 billion rupees.

Higher profits from Reliance’s core businesses will help complete refining and petrochemical projects worth $15 billion. The company controlled by billionaire Mukesh Ambani is also investing a similar amount to start a telecommunications service. Reliance’s refining margins -- the profit from turning crude oil into fuels -- was $10.8 a barrel, compared with $10.1 a year earlier and $11.5 in the three months ended December, the company said.

The two adjacent refineries in the western state of Gujarat have a combined capacity of 1.24 million barrels a day and have the ability to turn cheaper, lower grades of crude into high-value products. Brent oil, the global benchmark, averaged about $35 a barrel in the quarter, 36 percent lower than a year earlier.

Expansion Projects

Group profit rose to 73.98 billion rupees in the period from 63.81 billion rupees a year earlier.

Reliance is expanding its petrochemicals capacity and investing in projects to reduce energy and feedstock costs to boost profits. The new projects may boost margins by $1.50 to $2 a barrel amid lower oil prices, according to Dhaval Joshi, a Mumbai-based analyst at Emkay Global Financial Services Ltd.

“The new downstream projects hold the key to Reliance’s future earnings,” Joshi said.

Reliance plans to spend as much as $3.5 billion on petrochemicals and refinery projects in the year that started April 1, Joint Chief Financial Officer Srikanth Venkatachari told reporters in Mumbai on Friday at a post-earnings press conference.

A majority of the fuels and chemicals that Reliance produces are exported and paid for in dollars. A weaker local currency against the dollar increases export earnings in rupees. The rupee averaged 67.468 per dollar in the quarter ended March 31, compared with 62.275 in the same period a year earlier.

4G Network

The company, which also operates stores that sell fruits and clothes, is yet to spend as much as $4.5 billion to complete its fourth-generation, high-speed data telecommunications network this year.

The project, which will meet voice and data demand in the world’s second-most populous nation, is in the last phase of testing and has more than half a million users at present, Anshuman Thakur, an official at the telecom venture Reliance Jio Infocomm Ltd., said at the press conference.

Reliance shares fell 0.2 percent to 1,038.95 rupees at the close in Mumbai before the earnings were announced.

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