Cogencis, Thursday, Jan 17
MUMBAI – The strength in petrochemical, retail and telecom services business helped Reliance Industries Ltd beat investors’ expectations on counts of consolidated net profit, sales and operating profit for the quarter ended December.
Although higher realisations and volume in the petrochemical business and strong footfalls during the festive season in retail stores drove the company’s consolidated revenue performance, the operating performance left much to be desired.
The operating performance of the company was hit by the weakness in the mainstay refining operations which was impacted by volatility in global crude oil prices during the quarter.
The country’s most valuable company reported consolidated revenues of 1.6 trln rupees, up 56.4% on year as against analysts’ estimate of 1.34 trln rupees.
Reliance Industries, in an earnings statement, said that competitive cost positions and integration benefits drove the sustained performance even in challenging global business environment for the company’s energy business.
RIL’s export operations also meaningfully contributed to the staggering sales growth during the quarter. Exports grew 35.2% on year to 623.8 bln rupees, contributing 39% to sales as against 45% a year ago.
RIL’s organised retail operations were the highlight of the quarter registering strong growth in sales, operating profit and margins.
Revenues from retail operations grew 89.3% on year to 355.8 bln rupees during the quarter, while earnings before interest and tax surged 210.5% to 15.1 bln rupees.
The company’s retail outlets registered 139 mln footfalls during the December quarter and helped the vertical almost double its operating margin to 4.2% from 2.6% a year ago.
The drive in the retail business was complimented by the company’s petrochemical operations, which saw record operating profit performance during the quarter.
Sales of petrochemical operations grew 37.1% on year to 462.5 bln rupees, which was underpinned by a 42.9% on year growth in operating profit for the segment to 82.2 bln rupees.
The strength in the petrochemical operations was augmented by higher price realisations and volume growth especially in polymer products and fibre intermediates.
“Strong volume growth and robust polyester chain margins offset the impact of weaker polymer margins,” RIL said.
This helped the petrochemical segment post a 70-basis-point on year expansion in operating margin to 17.8%.
While, petrochemicals operations sustained their recent strong performance, the mainstay refining operations had a “softer” quarter owing to a sharp decline in light distillate product cracks on a year-on-year basis.
Sales of the refining and marketing operations rose 47.3% on year to 1.11 trln rupees on higher volume growth and price realisations, but operating profit declined 18% on year to 50.6 bln rupees.
Gross refining margins for the quarter stood at $8.8 per barrel, down 24% on year but above Singapore complex gross refining margin of $4.5 per barrel for Oct-Dec largely because of better risk management and efficient plant utilisation.
The light distillate cracks dropped sharply due to slower gasoline demand growth. The decline in light distillate cracks weighed on Singapore margins despite gains in fuel oil and middle distillate cracks, the company said.
The company’s digital services business, which has sent the highest amount of capital expenditure in recent years, registered robust revenue and operating growth aided by addition of nearly 28 mln net users during the quarter.
Reliance Jio Infocomm Ltd’s sales grew 12.4% on quarter to 103.8 bln rupees, while standalone operating profit climbed 13.4% on quarter to 40.5 bln rupees.
The average revenue per user continued its sequential decline witnessed in recent quarters as the ongoing price war continues to take a toll. ARPU for the quarter fell 1.3% on quarter to 130 rupees, but was above Axis Capital’s estimate of 129 rupees.
Even though the RIL’s consolidated profit before depreciation, interest, and taxes rose 20% on year to 238 bln rupees, the 62% surge in consolidated total expenditure to 1.48 trln rupees due to higher fuel prices and production meant that the company’s overall operating performance remained weak.
RIL’s consolidated operating margin shrank 398 basis points on year to 13.63%, just in-line with the lower end of analysts’ estimate of 13.7-16.5%. The growth in operating profit was also led by strong performance in petrochemicals, retail and digital services businesses.
That, however, had no material impact on bottomline performance which was buffeted by the 10.9% on year growth in other income to 24.6 bln rupees.
RIL’s consolidated net profit rose 8.8% on year to 102.5 bln rupees, above the market’s expectation of 95.4 bln rupees.
During the quarter, the company’s other expenses surged 44.3% on year to 204.6 bln rupees owing to rapid scale-up of consumer businesses, higher network operating expenses, and regulatory charges.
The telecom-to-oil company’s total outstanding debt as on Dec 31 stood at 2.74 trln rupees, with finance costs rising nearly 100% on year to 41.2 bln rupees in Oct-Dec.
Today, shares of Reliance Industries ended at 1,134.45 rupees on the National Stock Exchange, down 0.1%. RIL announced its result after market hours. End
US$1 = 71.04 rupees
Reported by Chiranjivi Chakraborty
Edited by Maheswaran Parameswaran