A stellar show by the refining and petrochemicals businesses helped Reliance Industries (RIL) offset severe weakness in the oil and gas exploration segment. This helped the company improve its June quarter consolidated operating profit by about 13 per cent year-on-year and net profit by 4.4 per cent. This was despite revenue falling 23 per cent due to the fall in crude oil and consequent decline in product prices.
The company’s gross refining margin of $10.4 a barrel is a six-year high, up from $10.1 a barrel in the March quarter and $8.7 a year before. This helped the refining segment improve profit 37 per cent over the year-ago period. Higher margin was driven by strong gasoline cracks, a result of healthy demand and lower cost of crude oil. The margin improvement was in contrast to the sequential weakness in the benchmark Singapore complex.
The expansion in the petrochemical capacity continued at healthy pace. Though revenue fell due to lower product prices, margins improved sharply driven by strong product differentials. The segment’s operating profit rose 25 per cent year-on-year.
The oil and gas business again disappointed, but to a much sharper degree this time around. Operating profit was down 97 per cent from a year ago and 94 per cent lower than the March quarter. While the domestic business continued to falter, the international business (US shale) posted a loss due to the sharp dip in gas prices. The prognosis seems bleak.
After a weak March quarter, the retail business revived somewhat. Sales in the June quarter declined a bit sequentially but operating profit improved 7 per cent.
RIL, which holds a pan-India unified licence, is set to launch its telecom services in the coming quarters. The business may take a few years to break-even, but could hold good growth potential in the long run.
Lower returns on investments saw other income fall 7 per cent year-on-year. Higher interest cost (up 80 per cent) due to the rupee’s weakness was also a drag on the bottom-line growth.
While debt levels have risen in keeping with the expansion plans across segments, the cash hoard remains at a formidable ₹87,391 crore.