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Reliance Q2 profit rises 18%; GRM at $10.1/bbl, petchem shines

by October 20, 2016 General

Moneycontrol Bureau

Petrochemical major Reliance Industries’ quarterly earnings beat analysts’ estimates on Thursday with standalone profit rising 17.9 percent year-on-year (up 2 percent quarter-on-quarter) to Rs 7,704 crore, driven by petchem as well as refinery businesses.

Income from operations during the quarter declined 0.3 percent YoY to Rs 64,344 crore but increased 8.15 percent on sequential basis.

Refining business sustained high profitability in a tough environment highlighting exceptional refining assets, dynamic response to market trends and robust operations, Mukesh D Ambani, Chairman and Managing Director said.

Petrochemicals segment gained significantly from higher volumes, integration and supportive product margins, he said.

According to analysts polled by CNBC-TV18, profit was estimated at Rs 7,266 crore on revenue of Rs 57,384 crore for the quarter.

Reliance reported gross refining margin at USD 10.10 a barrel during the quarter against USD 11.50 a barrel in preceding period and USD 10.60 a barrel in Q2FY16; outperforming Singapore complex margins by USD 5 barrel. It was ahead of estimates of USD 9.5 a barrel.

Petrochemical business has registered record earnings in Q2. Revenue grew by a 7.3 percent growth YoY at Rs 21,293 crore, primarily due to increase in volumes of fiber intermediates and polyester products. EBIT (earnings before interest and tax) grew by 38 percent to Rs 3,464 crore and margin expanded by 370 basis points to 16.3 percent.

Revenue from refining segment during the quarter increased 1.1 percent to Rs 51,838 crore with EBIT rising 9.3 percent and margin expanding by 90 basis points at 11.4 percent on yearly basis.

Ambani said projects in the hydrocarbon chain are at advanced stages of mechanical completion and precommissioning activities; these projects will further strengthen position as a leading operator in the energy and materials businesses.

Reliance’s standalone EBITDA (earnings before interest, tax, depreciation and amortisation) grew by 10.1 percent to Rs 10,555 crore and margin jumped 150 basis points to 16.4 percent compared with year-ago period.

Other income in Q2 grew by 35.5 percent year-on-year and 12 percent quarter-on-quarter to Rs 2,280 crore in the quarter ended September 2016.

Consolidated profit declined 22.9 percent (up 1.3 percent sequentially) to Rs 7,206 crore compared with year-ago period. Turnover increased 9.6 percent YoY and 14.3 percent QoQ to Rs 81,651 crore in the quarter ended September 2016.

The company’s KG-D6 field produced 0.26 MMBBL of crude oil and 25.1 BCF of natural gas in Q2, a reduction of 34 percent and 32 percent, respectively, on a YoY basis, mainly due to natural decline in the fields. KG-D6 JV has completed one side track at MA field which has been put to production in Q3FY17.

Near term outlook for natural gas is improving with stronger power-burn with coal plant retirements and growing exports to Mexico and LNG exports, Reliance said, adding, medium term outlook for oil is positive, given improving demand and falling production easing inventory concerns.

Reliance Retail continued growth momentum with revenue growing 63 percent YoY to Rs 8,079 crore, led by growth in digital, fashion & lifestyle and petroleum products. It added 59 stores across various store concepts during the quarter and operated 3,442 stores across 679 cities as on September 2016.

Reliance Jio Infocomm, a subsidiary of Reliance Industries, started its operations during the quarter. It has created a world record by crossing 16 million subscribers in its first month of operations – September 2016.

Mukesh Ambani said the company was delighted and humbled by the overwhelming response across India to the Jio Welcome Offer.

During the quarter, Jio further increased its pan-India spectrum footprint with the acquisition of right to use 269.2 MHz spectrum across all 22 service areas in the country in the auction conducted by Department of Telecommunications in October 2016.

The company said outstanding debt at the end of September 2016 was Rs 189,132 crore compared with Rs 180,388 crore as on March 2016. Cash and cash equivalents were at Rs 82,533 crore in Q2FY17 compared with Rs 89,966 crore in Q1FY17.

The scrip of Reliance Industries, which announced earnings after market hours, closed at Rs 1,088.50, up 0.15 percent.

Disclosure: Reliance Industries owns Network 18 that publishes