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Reliance Industries Ltd Q1 profit grows 18.1% on 8-year-high refining margin

Reliance Industries Ltd (RIL) on Friday reported a bigger-than-expected 18 per cent jump in June quarter net profit on account of highest refining margin in eight years and robust petrochemical earnings. Consolidated net profit at Rs 7,113 crore, or Rs 24.1 per share, in the April-June period was 18.1 per cent higher than Rs 6,024 crore in the same period of last fiscal, RIL said in a statement.

This was the ninth consecutive quarter for which the company posted highest segment profit for refining and petrochemical business. RIL, which has in recent years invested in sectors like telecom, retail and financial services as it seeks to diversify revenue sources and reduce dependence on the oil and gas sector, however did not give any guidance on commercial launch of its 4G telecom and high-speed broadband services.

Revenue fell 13.4 per cent to Rs 71,451 crore, hurt by a sharp fall in prices of crude oil and petroleum products. RIL, operator of the world's biggest oil-refinery complex that can process low-grade crude and switch between fuels depending on market prices, earned USD 11.5 on turning every barrel of crude into petroleum product.

This was the highest gross refining margin it has earned in eight years, as against USD 10.8 per barrel in preceding January-March quarter and USD 10.4 in the first quarter of 2015-16 fiscal. The company, which is investing USD 12 billion to boost petrochemical capacity and refinery processes as well as build facilities to import ethane from US, earned a 13.5 per margin on petrochem business.

"At Reliance, we continued to harness the power of our integrated energy and materials business portfolio. We maintained our earnings growth trajectory during this quarter, as the world grappled with new dimensions of economic uncertainty," said Mukesh D Ambani, Chairman and Managing Director RIL.

Its debt rose to Rs 186,692 crore at the end of June from Rs 180,388 crore as on March 31, 2016. Cash in hand was up marginally at Rs 90,812 crore from Rs 89,966 crore at end of FY16. Before the earning announcement, RIL shares closed 0.6 per cent higher Rs 1,012.55 on BSE.

Ambani said: "Though regional refining margins trended downwards, our high-conversion refining system was able to take advantage of higher margins on middle distillates and wider discounts on sour crude oils. Our refining business delivered another record performance and achieved industry leading GRM."

While pre-tax profit from refinery business jumped 26 per cent to Rs 6,593 crore, earnings from petrochemical business soared 20.5 per cent to Rs 2,806 crore. RIL's oil and gas business reported a pre-tax loss of Rs 312 crore as compared to Rs 199 crore profit a year ago.

Revenue from organised retail soared 46 per cent to Rs 6,666 crore and EBIT by 21.2 per cent to Rs 240 crore. Other income was higher at Rs 2,378 crore in the quarter under review, as against Rs 1,584 crore a year ago due to higher interest income and profit on sale of investments.

Its interest cost also soared to Rs 1,206 crore as against Rs 915 crore a year ago. The rise was due to "higher average exchange rate during the quarter", RIL said. Lower oil prices meant earnings from refinery business fell 17.7 per cent to Rs 56,568 crore but segment pre-tax profit was up 26 per cent at Rs 6,593 crore.

During the quarter, RIL's Jamnagar refineries processed 16.8 million tonnes, which translates into 109 per cent of the installed capacity. "RIL's GRM outperformed Singapore complex margins by USD 6.5 per barrel, highest level achieved in the last eight years," the company said.

Petrochemical business revenue was down 0.7 per cent at Rs 20,718 crore but segment pre-tax profit was up 20.5 per cent to Rs 2,806 crore, primarily on account of increase in prices. US shale gas revenue fell 35 per cent to Rs 556 crore and it posted a pre-tax loss of Rs 354 crore during the quarter.
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