Mumbai: Mukesh Ambaniled Reliance Industries on Friday reported its third consecutive drop in its quarterly profits. The profits for April-June period fell 21% to Rs 4,473 crore due to poor performance of its core businesses of refining, petrochemicals and oil & gas. RIL's shares closed down 0.7% to Rs 723 on Friday ahead of the results, which are largely in line with market expectations as analysts predicted 18-28% drop in net profits.
The drop in profits were in spite of a 13.4% growth in its top line to Rs 94,926 crore and contribution of Rs 1,904 crore from other income as treasury gains from its huge cash pile accounted for 35% of the profit before tax.
In its core business of refining, which accounts for over 77% of revenues, the gross refining margins (GRMs) for the quarter fell to $7.6 per barrel against GRMs of $10.2 in the year-ago period, pulling down its EBIT by over 32% to Rs 2,151 crore. The EBIT for the petrochemicals business, which accounts for 20% of revenues, fell by over 20% to Rs 1,756, lower from what the RIL made from treasury operations.
RILs oil and gas business, which is facing regulatory hurdles reported 34% drop in EDIT to Rs 972 crore as its oil and gas production from its showcase KG-D6 block fell by 37% and 33% to 0.9 million barrels of crude oil and 104 billion cubic feet of natural gas respectively.
"RIL has improved its earnings profile as profits from operations were higher on a sequential basis on the back of volume growth in the refining business," said RIL chairman Mukesh Ambani, adding that the company has commenced its next phase of capital investments in the refining and petrochemical segments to enhance earnings and value of energy businesses.
Ambani kept his promise of making RIL a debt-free (net of cash) company but briefly as the RIL debts increased almost by $1 billion during the quarter to Rs 1,320 crore against cash of $12.7 billion.
Declining earnings have cost RIL its position as India's biggest company by market value. However, Ambani has set a target of doubling RIL's profits in the next five years with $12 billion investments in the refining and petrochemicals segment. Overall the company will be investing Rs 1,00,000 crore across its businesses of energy, telecommunications, retail.
However, the company is not in favourites list of analysts as it has eight sell ratings by analysts, 18 holds and 26 buys, according to a Bloomberg data, which says that the number of buy recommendations has dropped to 50% of the total, the lowest since December 2010.
"I see a clear disconnect in the refinery profits. How can the EBIT increase by Rs 400 crore when the GRMs stood same at $7.2 per barrel in the last two quarters and crude processing increased by just one million tones," investment advisor S P Tulsian told TOI, adding that the results were disappointing as the EBIT from its bread-and-butter petrochemicals business has fallen in last three quarters. |
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