Reliance Industries Ltd (RIL) reported a marginal 4.4 per cent rise in net profit in the June quarter, dragged down by a 26 per cent fall in revenue and an almost 80 per cent increase in interest costs.
First quarter net profit stood at ₹6,222 crore, up 4 per cent from the ₹5,957 crore reported in June 2014. Revenue, however, was down 26 per cent to ₹77,130 crore.
RIL’s gross refining margin (the difference between the cost of crude oil and the price of refined products) stood at $10.4 a barrel, the highest for the company in the last six years. The benchmark Singapore complex averaged $8 a barrel. However, the decline in revenue, the company said, was led by a 43 per cent fall in benchmark Brent crude prices. The RIL management added that the 45 per cent fall in exports (at ₹36,717 crore) was proportionate with supplying for domestic demand.
The other big hit was to the finance costs, which rose 80 per cent year-on-year from ₹505 crore to ₹902 crore. V Srikanth, Joint CFO, RIL, told reporters at a conference here that the rise in interest costs was because of the depreciation of the rupee.
MD and Chairman Mukesh Ambani said in a press release: “The sharp increase in demand for transportation fuels helped us realise strong refining margins. Oil products demand globally is estimated to have grown at approximately 1.6 million barrels a day year to date, resulting in high refinery runs across all regions. Our petrochemicals business recorded a strong quarterly performance supported by high operating rates and margin strength in the ethylene chain.”
In individual business segments, revenue from refining and marketing fell 30 per cent year-on-year while operational efficiency improved — the EBIT margin moved up from 3.9 per cent to 7.6 per cent. RIL’s flagship Jamnagar refinery maintained total crude processed at 16.6 million tonnes at 107 per cent utilisation.
Income from the petrochemicals business fell 18 per cent year-on-year to ₹20,858 crore. Income from the oil and gas exploration business fell 35 per cent to ₹2,057 crore while the oil and gas business in US shale reported a loss (before interest) of ₹49 crore. Organised retail was the lone bright spot, with revenue rising 17.5 per cent to ₹4,698 crore.
Sharing the outlook for the rest of the fiscal, Srikanth said the global crude and natural gas market will be oversupplied, given the additional capacity that Iran will offer following the lifting of economic sanctions. “But it is a good environment for refineries and will be good for demand of end-products,” he added.
Capital expenditure for the quarter was at ₹32,651 crore, principally on account of ongoing expansion projects in petrochemicals and refining at Jamnagar, Dahej and Hazira, besides broadband access for the soon-to-be-launched Jio telecom network, and US shale gas projects.
As of June 30, RIL’s total debt stood at at ₹1,71,000 crore while cash and equivalents amounted to ₹87,391 crore.
Earnings per share for the quarter was ₹21.10. RIL shares lost 1.97 per cent on the BSE on Friday, closing at ₹1,025.05.