RIL Q3 net flat on weak refining margin, higher input costs

The company said its earnings before depreciation, interest and taxes decreased 1.8 percent to Rs 9,927 crore, profit before tax rose 2.1 percent to Rs 6,992 crore, while cash profit fell 3.3 percent to Rs 7,676 crore.

“Reliance’s robust refining configuration enabled it to deliver stable refining profits in 3Q FY14, against the backdrop of declining regional benchmark margins,” said Reliance chairman and managing director Mukesh Ambani in the media release detailing the earnings.

“Even as we invest to further strengthen our energy businesses, this quarter demonstrates the outstanding quality of our refining and petrochemical business resources and their ability to deliver creditable performance in a period marked by cyclicality and uncertainties,” he said.

The company said it had cash and cash equivalents of Rs 88,705 crore as at the end of the December quarter.

Here’s how each of Reliance’s business segments fared:

Petrochemicals

Quarterly revenues rose 15 percent year-on-year to Rs 25,280 crore, and operating profit rose 10 percent to Rs 2,124 crore. On a sequential basis, the operating profit was down 15.2 percent. 

From the media release: 

“During the quarter, domestic demand for polymer products was lower by 5 percent on Y-o-Y basis. This was primarily due to lower demand in key end-use sectors like infrastructure, fertilizer, automobile, pipes etc. However, for 9M FY14, India polymer demand was higher by 3 percent, driven by 5 percent growth in PP and 4 percent growth in PVC. PE demand remained flat on Y-o-Y basis.

Overall, PP demand was moderately higher as there was growth in some of the end-use packaging applications. However, PP demand was negatively affected by poor demand from cement packaging and automobile sector.”

The company said it has commissioned the state-of-the-art Polyester Filament Yarn (PFY) plant at Silvassa, the first first plant to be commissioned in petrochemical expansions, raising total polyester capacity from 2.4 MMTPA to 2.8 MMTPA.

Refining

Quarterly revenues rose 10 percent to Rs 95,432 crore year-on-year due to higher crude prices, but operating profit was down 13 percent to Rs 3141 crore as gross refining margin slipped to 7.6 percent from 9.6 percent. Quarterly operating profit was down 1 percent sequentially. The company said output was lower due to maintenance shutdown of 5 days.

From the media release: 

“During 3Q FY14, RIL Jamnagar refineries processed 17.0 MMT of crude, an operating rate of 110 percent, sequentially lower due to maintenance turnaround. With turnarounds, post the driving season, the third quarter utilizations in North America, Europe and Asia were 83.5 percent, 74.3 percent and 85.8 percent, respectively.

RIL’s margins were positively impacted by widening crude differentials, strength in middle-distillates and naphtha product cracks, which was offset by weak gasoline cracks. Singapore complex margins on Q-o-Q basis were negatively impacted by lower gasoline and fuel oil cracks and unfavorable benchmark crude movement. Margins declined to USD 4.3/bbl, the lowest quarterly level in last 3 years, but improved towards the end of the quarter.”

Oil & gas

Quarterly revenues declined 10 percent year-on-year to Rs 1733 crore, and operating profit declined 8.5 percent to Rs 540 crore as production in the KG-D6 block continued to decline. The output fell 10 percent sequentially.

From the media release:

“KG-D6 field produced 1.45 million barrels of crude oil, 0.2 million barrels of condensate and 135 BCF of natural gas in 9M FY14 (April-december), a reduction of 38 percent, 44 percent and 51 percent, respectively on a Y-o-Y basis. Fall in production is mainly attributed to geological complexity and natural decline in the fields.

Panna-Mukta fields produced 5.7 million barrels of crude oil and 50.9 BCF of natural gas in 9M FY14 – reduction of 11 percent and 7 percent respectively on Y-o-Y basis. The decrease in production was due to a shut-down of Panna-Mukta field for three days for SBM maintenance and re-certification work, coupled with natural decline. The decline in production was partly compensated by incremental production from Panna “L” area and Infill wells.”

Retail

Quarterly revenues rose 38 percent year-on-year to Rs 3927 crore, and operating p[rofit stood at Rs 106 crore.

From the media release:

“Aided by increased shopping activities during the festive season and several initiatives undertaken to drive value and offerings, the business recorded a LFL (like-for-like) growth of up to 21 percent across various format sectors.

The company enhanced its presence in the current quarter and expanded rapidly across various format sectors by opening more than one store a day. As on 31st December 2013, Reliance Retail operated 1,577 stores across 141 cities.”