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As expected, the rout of crude oil took a toll on the performance of Reliance Industries (RIL) in the December quarter; consolidated profit fell 4.5 per cent year-on-year.
Declining crude oil and feedstock prices meant lower product realisations and inventory losses in the refining and petrochemicals segments, the company’s major profit contributors.
It did not help that RIL’s gross refining margin at $7.3 a barrel was lower both on a sequential quarter and year-on-year basis, in contrast with the rise in the Singapore benchmark.
The domestic oil and gas business continued to reel, with the fall in gas output more than offsetting the benefit of higher prices applicable from November.
Retail cheerDespite a fall in oil and gas prices, profit in the US shale business grew more than seven times over the year-ago period, thanks to strong output growth.
This saved the consolidated oil and gas business the blushes and enabled profit growth of 37 per cent year-on-year.
In an otherwise dismal quarter, cheer came from the expanding retail business which is going from strength to strength.
The segment’s profit grew more than three-fold over the year-ago period, and 34 per cent on a sequential basis.
Other income comeback‘Other income’ which had taken a bit of a backseat in the earlier quarters made a strong comeback.
Higher profit on sale of investments combined with the poor show in the major business segments saw the share of other income in the company’s profit before tax rise to more than a third, from around a fourth in the September quarter.
Capex modeWeakness in crude oil, if it continues, could impact RIL’s performance in the coming quarters too.
Meanwhile, the company continues to be in massive capex mode in its refining and petrochemicals business, reflected in lower cash and higher debt on the books.
This should pay off when the commodity cycle turns, something investors in the stock will be looking forward to.
RIL is also investing big in the telecom business, but has not mentioned the much awaited roll-out date.
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