RIL posts jump in profit after four quarters of falling returns

Billionaire Mukesh Ambani-led Reliance Industries Ltd (RIL) posted its first increase in profit after four quarters of falling returns on Friday as oil refining margins went up sharply.

Net profit jumped 24 per cent to Rs 5,502 crore for the third quarter ended December 31, 2012, from Rs 4,440 crore in the year-ago period, RIL said on Friday. RIL, which operates the world's biggest refinery in Jamnagar, Gujarat, clocked a gross refining margin of $9.6 per barrel for the quarter up from $6.8 in the same period last year, which enabled the Group to reverse the decline profit in the earlier quarters due to the falling output of its eastern offshore Krishna-Godavari Basin field.

The results were released after the stock market closed and the shares of the company moved up 1.2 per cent ahead of the results. Net sales were up more than 10 per cent from a year earlier to Rs 93,890 crore.

"Refining is doing sufficiently well but clarity is still required on where the next round of revenue growth will come from," said Rikesh Parikh, vice-president, equities, Motilal Oswal Securities Ltd.

RIL has been under pressure from investors on account of the falling output of the K-G Basin. The company has also slashed the estimate of the in-place reserves for the field by close to two-thirds. The government is expected to increase natural gas prices by 2014, which would add to the revenues of RIL.

Debt soared to Rs 72,266 crore at the end of Q3 up from Rs 68,259 crore at the beginning of the fiscal. At quarter end, it had a cash pile of Rs Rs 80,962 crore making the company debt free on a net basis.

Chairman and managing director Mukesh Ambani said, "We are investing Rs 100,000 crore in expanding our petrochemical capacities and adding value to our refining business. These investment will secure a significant change in RIL's earning capacity on commissioning of these projects."

RIL reported more than doubling of earnings before interest and taxation (EBIT) from the oil refining business at Rs 3,615 crore in the October-December quarter. The twin refineries at Jamnagar can turn heavier grades of oil which are typically cheaper into high-value fuels. The refineries processed 17.5 million tonnes of crude as compared to 17.6 million tonnes in Q2 of this fiscal and 17.2 million tonnes in Q3 of the last fiscal.

Segment revenues were up 13 per cent to Rs 86,641 crore. Meanwhile, continuing fall in natural gas output at its flagship KG-D6 gas fields in the Bay of Bengal led to earnings from the oil and gas business drop by a massive 54.4 per cent to Rs590 crore. Segment revenue dropped by 32.2 per cent to Rs 1,921 crore.

Courtesy: Mail Today