Mumbai: Reliance Industries Ltd.’s profit in the third quarter increased 10 per cent from a year earlier to its highest level in nine years, buoyed by higher petrochemicals earnings and investment gains.
Net income for the operator of the world’s biggest oil-refining complex rose to Rs80.2 billion ($1.2 billion) in the three months ended on Dec. 31, the most since the December quarter of 2007 and up from Rs73 billion a year ago, the Mumbai-based company said on Monday in a stock exchange filing. That compares with a Rs78.5 billion average of 12 analyst estimates compiled by Bloomberg.
Higher profits from the refining and petrochemicals businesses are crucial for Mukesh Ambani-controlled Reliance as the company is investing billions of dollars in new areas, which are yet to turn a profit. Reliance has invested $25 billion on a fourth-generation mobile service that it started in September and plans to invest $4.4 billion more, even though it is yet to start charging customers for the services. It has also expanded into retailing of groceries, electronics and merchandise. Still, oil and petrochemicals comprise more than 95 per cent of its profit.
"Stable margins in the core business, mainly refining and petrochemicals, coupled with higher other income boosted profits,” said Dhaval Joshi, a Mumbai-based analyst at Emkay Global Financial Services. "We need to watch the company’s telecom business now. Customer response once the company starts charging and the revenue flow thereafter will be key for its stock performance."
Reliance’s refining margin fell to $10.8 a barrel in the quarter from $11.50 a barrel a year earlier, the company said. It earned $10.10 for every barrel of crude it turned into fuels in the three months ended September. Its earnings per share rose to Rs24.7 from Rs22.5 a year earlier.
The company’s income earned from investments increased 33 per cent to Rs30.25 billion primarily due to higher profit from the sale of some fixed-income products, Srikanth Venkatachari, Reliance’s joint chief financial officer, said at a press conference. Operating profit, or earnings before interest and tax, from its refining business fell 4.3 per cent from a year earlier to Rs61.9 billion and rose 26 per cent to Rs33 billion from its petrochemicals segment.
The company processed 17.8 million tonnes of crude oil during the quarter, lower than the 18 million tonnes refined a year earlier, following a five-week shutdown at a catalytic cracking unit.
The company operates two refineries in the western state of Gujarat, with a combined capacity of 1.24 million barrels a day. These units can turn cheaper, lower grades of crude into high-value products.
Reliance shares fell 1.3 per cent to Rs1,076.25 at the close in Mumbai, while the benchmark S&P BSE Sensex Index gained 0.2 per cent. The earnings were announced after trading ended.