Reliance Industries Ltd., operator of the world’s biggest oil-refinery complex, reported its highest quarterly profit in seven and a half years as lower crude costs boosted earnings from fuel sales.
First-quarter net income rose 12 percent to 63.2 billion rupees ($987 million), or 19.5 rupees a share, in the three months ended June 30 from 56.5 billion rupees, or 17.5 rupees, a year earlie. That beat the 62.5 billion-rupee median of 16 analyst estimates compiled by Bloomberg. Sales fell 32 percent to 658.2 billion rupees as the value of products sold overseas almost halved to $5.1 billion.
Reliance, among a handful of global refiners with the ability to process low-grade crude into high-value products and switch between fuels depending on market prices, is gaining from crude’s 42 percent slump in the quarter from a year ago. The company, controlled by billionaire Mukesh Ambani, is investing $12 billion to boost its petrochemicals capacity and build facilities to import ethane from the U.S., securing low-cost feedstock for polymer resins such as those used to make clothing and containers.
“The company has top class assets,” D.K. Aggarwal, chairman of Mumbai-based brokerage SMC Investments & Advisors Ltd., said before the earnings. “With crude oil expected to remain on the lower side, Reliance should continue to show good numbers.”
During the quarter, $10.40 was earned for every barrel of crude turned into fuels, compared with $8.70 a year earlier and $10.10 in the three months ended March 31, Reliance said in the statement.
Raw material costs fell 40 percent to 489.8 billion rupees, reflecting lower crude prices in the period.
The start of downstream expansions in the next 18 months will lift Reliance’s earnings before interest, taxes, depreciation and amortization by 75 percent over the next three years, Vikash Kumar Jain, an analyst at CLSA Asia-Pacific Markets, said .
Upstream shale ventures in the U.S. were affected by declining prices, Reliance said in the statement. Henry Hub gas prices averaged $2.72 per million British thermal unit, 44 percent less than a year earlier. While the market outlook is curtailing near-term growth, the business holds long-term promise, Reliance said.
Natural gas output from KG-D6 declined 13 percent to 37 billion cubic feet in the quarter from a year earlier, Reliance said. Oil production from the block declined 16 percent to 440,000 barrels and condensate output dropped 6 percent to 80,000 barrels.
Reliance, which also runs stores selling fruits and clothes, has spent 1 trillion rupees to build a telecommunications network that will start by December this year, Ambani told shareholders in June. First-quarter revenue from the retail business grew 18 percent on year to 47 billion rupees. As on June 30, Reliance Retail operated 2,747 stores across 210 cities in India.http://www.bloomberg.com/news/articles/2015-07-24/reliance-profit-rises-as-oil-price-plunge-boosts-fuel-margins