Reliance Industries (RIL) has posted a 4.5 per cent fall in its net profit at Rs 5,256 crore for the third quarter, its first profit fall in the last nine quarters, as a steep decline in crude oil prices and refining margins hurt the company’s core refining business.
The company made a net profit of Rs 5,502 crore in the third quarter of last year.
Its revenue fell by 20.4 per cent to Rs 96,330 crore in the December 2014 quarter as against Rs 121,077 crore previously as revenue from the refining and marketing segment slumped by 24.1 per cent.
RIL’s gross refining margin (GRM) for the quarter also declined to $ 7.3 per barrel as against $ 7.6/bbl in the corresponding period of the previous year. RIL shares, which declined 2.4 per cent during the year, gained 0.51 per cent to Rs 869 on the BSE on Friday. The Sensex has gained 2.23 per in January so far.
The heightened volatility across the hydrocarbon business hit the RIL’s financials. Benchmark crude oil prices declined by around 40 per cent through the quarter, with consequent impact on petrochemical feedstock and product prices.
The company said in line with its operating strategy, it aggressively sold down stocks to maintain optimal levels of inventory, which impacted margins for products.
“This coupled with lower holding value of closing-stock impacted performance of refining and petrochemicals businesses,” it said.
RIL chairman and MD Mukesh Ambani said, “Our focus on operational efficiency and the superior configuration of assets helped us deliver an industry-leading performance in the refining and petrochemicals business despite sharp decline in crude and feedstock prices. The performance also highlights the robustness of our risk management and proficiency of people and processes across the integrated chain.”
RIL’s exports from India were also lower by 21.5 per cent at Rs 58,507 crore.
Analysts said the results were in line with estimates. Piyush Jain, Equity Research Analyst, Morningstar India, said, “Refining segment delivered superior operating margins of 4.4 per cent versus our estimate of 4.3 per cent. GRM of $7.3 per barrel indicates higher inventory losses than expectations but it is likely to be a one off and therefore we are not perturbed by it.”
The company indicated that it will continue with its investments in spite of the volatility in oil prices.
“We continued to advance our refining and petrochemicals business capital investments, which will come to fruition over the next 4-6 quarters,” said Ambani.
During the quarter, RIL’s retail arm Reliance Retail registered a year-on-year growth of 19 per cent in turnover to Rs 4,686 crore with improved margins and profitability. The retail arm, posted its highest ever profit before depreciation, interest and tax (PBDIT) in a quarter of Rs 227 crore, an increase of 114 per cent on a Y-o-Y basis.