Reliance Profit Surges to 8-Year High as Refining Margin Widensby
Indian refiner posts quarterly profit of 72.2 billion rupees
Refining margin expands to seven-year high of $11.50 a barrel
Reliance Industries Ltd.’s third-quarter profit surged to the highest in eight years as margin for turning crude into fuels widened at the operator of the world’s biggest oil-refinery complex.
Net income increased to 72.2 billion rupees ($1.07 billion) in the three months ended Dec. 31 from 50.8 billion rupees a year earlier, the Mumbai-based company said Tuesday in a stock exchange statement. That beat the 70.1 billion-rupee mean of 17 analyst estimates compiled by Bloomberg. Sales fell 29 percent to 565.7 billion rupees.
Asia refiners, including Reliance, have benefited from a collapse in oil prices with Brent crude falling more than 70 percent over the past 18 months. The company controlled by billionaire Mukesh Ambani depends on earnings from two adjacent refineries in western India to boost profit as it prepares for the commercial start of a $15-billion telecommunications service this year.
“We expect the earnings momentum to continue as refining margins will remain strong,” said Dhaval Joshi, an analyst at Emkay Global Financial Services Ltd. “The next trigger will be the commercial launch” of the telecommunications business, he said.
Reliance earned $11.50 for every barrel of crude it turned into fuels in the quarter, the highest in seven years, compared with $7.30 a barrel a year earlier and $10.60 a barrel in the three months ended September, the company said.
The twin refineries at Jamnagar in the western state of Gujarat have a combined capacity of 1.24 million barrels a day and can process cheaper, lower grades of crude into high-value products. Brent oil, the global benchmark, averaged about $44.69 a barrel in the quarter, 42 percent lower than a year earlier.
A majority of the fuels and chemicals that Reliance produces are exported and paid for in dollars. A lower value of the rupee against the dollar increases export earnings when converted to the local currency. The rupee averaged 65.925 per dollar in the quarter ended Dec. 31, 6.3 percent lower than 62.011 in the same period a year earlier.
Reliance shares rose 2.6 percent to 1,043.60 rupees at the close in Mumbai. The earnings were announced after trading ended.