RIL profit rises on refining margins

Reliance Industries has done it again. After reporting a seven-year high gross refining margin (GRM) of $11.5 a barrel in the December 2015 quarter, the company topped this metric in the June 2016 quarter (Q1) as well.

Reliance Industries’ (RIL) GRMs stood at $11.5 a barrel in Q1 and were much ahead of Street expectations of $9-10 a barrel. This metric stood at $10.4 a barrel in the year-ago quarter, and at $10.8 a barrel in March 2016 quarter. Good traction in its refining as well as its petrochemicals business aided RIL’s overall performance.

The company’s consolidated net profit (after taxes, minority interest and share in profit/(loss) of associates and joint ventures) grew 18.1 per cent to Rs 7,113 crore, even as net sales or income from operations fell 15.2 per cent to Rs 64,990 crore, compared to the year-ago period. RIL had reported net sales of Rs 76,615 crore and net profit of Rs 6,024 crore in the June 2015 quarter.

Mukesh D Ambani, chairman and managing director, Reliance Industries, in a statement said: “At Reliance, we continued to harness the power of our integrated energy and materials business portfolio. We maintained our earnings growth trajectory during this quarter, as the world grappled with new dimensions of economic uncertainty. Though regional refining margins trended downwards, our high-conversion refining system was able to take advantage of higher margins on middle distillates and wider discounts on sour crude oils. Our refining business delivered another record performance and achieved industry leading GRM.”

RIL’s GRMs outperformed the benchmark Singapore complex GRMs by $6.5 a barrel in Q1 — much higher than the historic premium of around $3-4 a barrel that the company has maintained in the past. A key reason for the out-performance is the 24 per cent rise in crude oil prices between 31 March and 30 June, 2016. This helped RIL in the form of inventory gains, though the exact quantum is not known. Higher than expected inventory gains, better crude sourcing and improved margins in select segments boosted RIL’s GRMs in Q1.

The fall in revenues on year-on-year basis was in-sync with the weak crude oil prices. RIL’s net profit was partly helped by a 50 per cent surge in other income to Rs 2,378 crore. Other income consists of interest income and profit on sale of investments.

Reliance Industries Limited (RIL)