RIL's net up 4% on refining, petchem margin gains

Image: Punit Paranjpe / Reuters

RIL's retail business continued to do well with a 17.5 percent increase in revenue to Rs 4,698 crore

Aided by strong operating profits at Reliance Industries Ltd’s (RIL) refining and petrochemicals businesses, the oil-to-yarn and retail conglomerate posted a net profit of Rs 6,222 crore, a four percent year-on-year increase, for the quarter ended June 30.

Billionaire Mukesh Ambani-led company’s revenues in the same period declined by 23 percent compared to the previous year to Rs 83,064 crore. The decline in turnover was due to a sharp correction in global crude oil prices, which had an effect on the rates of crude-linked products that RIL makes and sells such as petrol, diesel and petrochemicals.

“Our financial performance reflects the benefits of integrated hydrocarbon chain activities in a benign oil price environment. The sharp increase in demand for transportation fuels helped us realise strong refining margins,” RIL chairman Mukesh Ambani said in a statement. “Our petrochemicals business recorded a strong quarterly performance supported by high operating rates and margin strength in the ethylene chain.”

Since RIL’s operations are fully integrated across the hydrocarbons value chain (which means that it produces everything from oil and gas to refined crude products and downstream petrochemicals by itself), a slump in crude oil prices also brought down RIL’s cost of raw material by 39.1 percent to Rs 50,305 crore in the April-June period, thereby boosting profitability.

At its refining business, RIL reported a gross refining margin (GRM) – or the difference between the value of refined products sold and the cost of crude – of $10.4 per barrel, which was the highest in six years. RIL’s reported GRM in the June quarter was 19.54 percent higher than in the corresponding period last year.

“Strong gasoline (petrol) cracks (margins) led by robust demand growth, lower energy cost and favourable crude differentials helped boost refining margins,” RIL said in its statement issued on Friday evening after market hours.

Higher demand for energy spelt goods news for refiners across the world and the benchmark Singapore GRM stood at $8 per barrel in the same period, 27.5 percent higher than the previous year.

Similar to the refining business, RIL’s petrochemicals segment also reported a drop in turnover due to lower crude prices, but higher profitability due to strong demand for products that boosted profit margins.

The conglomerate’s retail business continued to do well with a 17.5 percent increase in revenue to Rs 4,698 crore and a 37 percent jump in earnings before interest and tax to Rs 111 crore.

Challenges at its domestic oil and gas exploration and production operations (due to declining output at the KG-D6 gas reservoir) and the sharp decline in international benchmark prices of crude (that had an impact on RIL’s shale gas business in the US) led to a 97 percent decline in profits from this business at Rs 32 crore. Turnover from the segment was also down by 35.3 percent to Rs 2,057 crore. 

RIL’s outstanding debt stood at Rs 1,70,184 crore as on June 30, up 6.18 percent over the year earlier. The company’s cash and cash equivalents stood at Rs 87,391 crore.