Reliance Beats Profit Estimate as Petrochemical Margin Jumps

  • Refiner reports second-quarter profit of 77.04 billion rupees
  • Gross refining margin at $10.10 per barrel during July-Sept.

Reliance Industries Ltd.’s second-quarter profit rose 18 percent from a year earlier, buoyed by higher earnings from its petrochemicals business.

Net income for the operator of the world’s biggest oil-refining complex rose to 77.04 billion rupees ($1.2 billion) in the three months ended Sept. 30, the Mumbai-based company said Thursday in a stock exchange filing. That beats a 72.4 billion-rupee average of 14 analyst estimates compiled by Bloomberg. Sales fell marginally from a year earlier to 643.4 billion rupees.

Mukesh Ambani-controlled Reliance is relying on profits from its core refining and petrochemicals business to help its new telecommunications venture, which it started in September. Reliance Jio Infocomm Ltd. spent 137 billion rupees to buy airwaves in the latest round of auctions this month.

Operating profit, or earnings before interest and tax, from its petrochemicals segment jumped 38 percent from a year earlier to 34.6 billion rupees, while that from its refining business increased 9.3 percent to 59 billion rupees.

Margins

The company’s petrochemical margins were above 15% in the quarter, a 14-quarter high, Srikanth Venkatachari, Reliance’s joint chief financial officer, said at a press conference. Refining margins fell during the quarter because of weaker gasoline prices.

Reliance earned $10.10 for every barrel of crude it turned into fuels in the quarter, compared with $10.60 a barrel a year earlier and $11.50 a barrel in the three months ended June, the company said. Its earnings per share rose to 23.7 rupees from 20.1 rupees a year earlier.

The company’s two refineries in the western state of Gujarat, with a combined capacity of 1.24 million barrels a day, have the ability to turn cheaper, lower grades of crude into high-value products. Brent oil, the global benchmark, averaged about $47 a barrel in the quarter ended Sept. 30, 8.4 percent lower than a year earlier.

Telecom operations

“While the petrochemicals business has done well because of stable margins and higher volumes, the future driver will be the telecom venture,” said Dhaval Joshi, an analyst at Mumbai-based Emkay Global Financial Services Ltd. “The stock’s big movement hereon depends on how quickly telecom operations turn around.”

Reliance Jio added 16 million customers in its first month of operations after launching the mobile service offering free services in September, the company said. It is now adding about 500,000 subscribers every day, Anshuman Thakur, Reliance Jio’s head of strategy and planning, told reporters. The company said it may consider extending the free services after December.

Reliance shares closed little changed at 1,087.55 rupees in Mumbai, while the benchmark S&P BSE Sensex Index gained 0.5 percent.

— With assistance by Dhwani Pandya

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