REUTERS - Higher margins from its core refining business helped energy conglomerate Reliance Industries(RELI.NS) post a third consecutive increase in quarterly profit, even as revenue from gas sales fell and output continued to decline.
Average gross refining margin rose to $8.4 per barrel for the June quarter compared with $7.6 in the same period last year, helping boost profits nearly 19 percent to a higher-than-expected 53.52 billion rupees.
Net sales fell 4.6 percent to 876.5 billion rupees while revenue from its oil and gas business fell 42 percent after weakening nearly 39 percent in the previous quarter.
Reliance, controlled by Mukesh Ambani, India’s richest man, operates the world’s biggest refining complex and derives nearly 80 percent of its revenue from refining. It was expected to post June quarter net profit of 52.7 billion rupees, according to Thomson Reuters I/B/E/S.
Reliance is poised to benefit from a recent government decision to double domestic gas prices from April 1, 2014, a measure the company had set as a precondition for any further investments in gas production.
Falling output at the company’s key Krishna Godavari (KG) D6 field has capped revenues, but analysts said the price hike was likely to give Reliance, and partner BP Plc, an incentive to boost exploration and infrastructure spending.
Reliance said last month it would spend more than $26 billion over three years, much of it to bolster its refining, petrochemicals and exploration businesses, after coming under pressure from investors over its drive into telecoms and retail.
“In oil and gas, we have capex approval for 2013/14, which will allow us to do everything to stabilise production at D6,” Alok Agarwal, joint chief financial officer told reporters.
“For any new development, it will take us at least three years to start production. It’s a long cycle,” he added.
Refining revenue during the June quarter fell marginally to nearly 816 billion rupees, while revenue from petrochemicals was almost flat at 219.5 billion rupees.
Other income, mainly treasury-related gains, accounted for 38 percent of pretax profit for the quarter. The company held cash reserves of $15.7 billion at June-end.
Shares in Reliance, India’s second biggest company by market value, rose 0.7 percent ahead of the results. Its shares have gained 10 percent so far this year, outperforming a 3.7 percent rise in the Sensex.
Additional reporting by Swati Pandey; Editing by Miral Fahmy