Reliance Industries Ltd (RIL) on Monday reported the slowest rate of growth in profit in the past four quarters following a decline in its refining margin in the quarter ended September 2013 but analysts cheered the numbers which met their estimates. RIL also became the first Indian company to post revenue of over Rs 1,00,000 crore in a quarter.
The firms net profit rose 1.5 per cent to Rs 5,490 crore in July-September from Rs 5,409 crore a year earlier as the company benefitted from higher sales in refining and petrochemicals and a weak rupee,offsetting the fall in refining margins. Revenue increased by 14.2 per cent to Rs 1,06,523 crore from Rs 93,266 crore.
Company chairman and MD,Mukesh Ambani,said: RILs first half performance reflects the resilience of our business model in a period of volatility and uncertainty. Our diversified and integrated petrochemicals business captured margins across segments delivering near-record profit levels even as the domestic economy slowed. Optimal utilisation of best-in-class refinery assets and inherent flexibility in sourcing,product delivery contributed to healthy operating profits from our refining business.
Ambani said retail business continued to break new ground,growing 41 per cent in the first half of FY14. Reliances ongoing counter-cyclical investments will strengthen our competitive position in each business segment, he said. Ahead of the results RIL shares closed 0.84 per cent higher at the BSE at Rs 870.25.
Head of research at SMC Securities,Jagannadham Thunuguntla,said,Overall,this has proved to be a very healthy quarter for Reliance. According to him the contribution of RILs core business of refining to its overall profitability is significantly higher this time. In the earlier quarters,the Other Income component has played a key role in the determination of the overall profitability. In the first quarter it accounted for 38 per cent of profit before tax which has come down to 30 per cent,he added. RIL has posted an average gross refining margin of $7.7 per barrel for the quarter,down from $9.5 a year earlier.
The margin is a measure of the profitability of operations at a refinery. It is the difference between the price of crude oil and the value of the petroleum products produced by the refinery.
Analysts also said that how the company will pan out in the second half of the year will depend on improving the Gross Refining Margins along with deployment of its cash reserves and a revival of gas production from its KG-D6 basin. The companys cash and equivalents were Rs 90,540 crore at the end of the second quarter,more than enough to cover its total debt of Rs 83,982 crore.
RIL is however embroiled in a long tussle with the government over the pricing of gas from its offshore fields. While the company claims further investment is impossible unless it was assured of higher prices,sections within the government have said it must supply the deficit in gas supply it has run up at the contracted price of $4.2 mmBtu before revisions are allowed.
Its retail business has registered a turnover of Rs 3,456 crore in the quarter,a 31 per cent growth over the same quarter of last year. The retail business achieved PBDIT of Rs 165 crore for H1 FY14.