A Reliance Industries Ltd. petrochemical plant is pictured at night in Jamnagar, Gujarat. (Photographer: Rajan Chaughule/Bloomberg News)

Q4 Results: Reliance Industries’ Profit Falls On Low Refining Margin

Reliance Industries Ltd.’s profit fell for the first time in four years on lower gross refining and petrochemicals margins.

The standalone profit fell 4.2 percent sequentially to Rs 8,556 crore in the quarter-ended March, the first decline in 17 quarters, according to the Mukesh Ambani-led company’s exchange filing. That, however, is higher than the analyst estimates compiled by BloombergQuint, which had pegged the figure at Rs 8,490 crore. The company’s other income worth Rs 2,883 crore aided the top line to beat estimates.

The profit was lower due to the refining business’ throughput process, according to Deven Choksey, managing director of KRChoksey Investment Managers Pvt. Ltd. “The throughput process is lower compared to the earlier quarter because of the refinery shutdown.”

The company’s revenue was down 16.5 percent over the previous quarter to Rs 83,597 crore in the January-March period. Estimates compiled by BloombergQuint had pegged the figure at Rs 93,357 crore. The company’s revenue had breached the Rs 1-lakh-crore mark in the previous quarter.

Its operating profit fell 5.5 percent quarter-on-quarter to Rs 13,704 crore, while its operating margin expanded 190 basis points to 16.4 percent.

Gross refining margin—the amount a refiner earns by refining one barrel of crude oil— fell to $8.2 per barrel from $8.8 in the previous quarter. This, along with lower volumes due to a plant shutdown, further impacted the company’s refining segment.

Also, the Singapore gross refining margin, the Asian benchmark, remained depressed in the March-ended quarter due to excess inventory and lower demand. Singapore GRMs averaged around $3.2 a barrel in the quarter versus $4.3 in the October-December period.

The revenue from its refining business declined 21.4 percent over the previous quarter to Rs 87,844 crore. The company’s volumes were at 16 million metric tonnes from 18 million metric tonnes, dragged by a refinery shutdown and lower GRM.

Petrochemical Business Takes A Hit

The company’s revenue from the petrochemicals business fell 8 percent quarter-on-quarter to Rs 42,414 crore in the January-March period. Operating profit from the business fell 3 percent sequentially to Rs 7,975 crore—the first decline in nine quarters. Its operating margin expanded 100 basis points to 18.8 percent due to lower gas price.

The company’s debt stood at Rs 2.87 lakh crore as of March 2019. Its total debt-to-Ebitda ratio stood at 3.43.

Shares of Reliance Industries closed 3.14 percent higher at Rs 1,386 apiece ahead of the earnings announcement. That compares with 0.29 percent fall in the NSE Nifty 50 Index. The Reliance Industries’ stock has risen 21.6 percent in the March quarter.