Mukesh Ambani-promoted Reliance Industries (RIL) on Friday reported a 14.1 per cent rise in its consolidated profit before tax (PBT or pre-tax profit) at Rs 15,055 crore for the September quarter (Q2) of 2019-20 (FY20), following robust growth in the retail and digital service businesses.
The two consumer businesses now account for 30 per cent of RIL’s earnings before interest and tax (EBIT), as against 20 per cent in the year-ago quarter. The results, declared after market hours, were a mixed bag with some parameters ahead and a few falling short of analysts’ estimates.
Net profit for the quarter under review was at Rs 11,262 crore, up 18.3 per cent from Rs 9,516 crore a year ago. Both PBT and net profit were at their highest ever. Consolidated net sales (excluding the goods and services tax and the excise duty) stood at Rs 1.49 trillion, an increase of 3.6 per cent as compared to Rs 1.43 trillion in the corresponding period of the previous year.
“The increase in revenue is primarily on account of robust growth in the retail and digital businesses, which grew by 27 per cent and 43 per cent, respectively. This was partially offset by a decrease in refining and petrochemicals segment revenue with a 17.7 per cent fall in Brent crude price,” RIL said in a statement.
In a Bloomberg poll, analysts had estimated RIL’s consolidated net profit at Rs 11,080 crore and revenue at Rs 1.53 trillion.
Apart from strong revenue and profit growth in the retail and digital businesses, profit growth was aided by a 189 per cent surge in other income at Rs 3,614 crore, compared to Rs 1,250 crore in the year ago period. The company’s gross refining margins (GRM) for Q2 came in at $9.4 per barrel, its highest in the last four quarters. It was $9.5 per barrel a year ago, and $8.1 per barrel in the June 2019 quarter. Most analysts had estimated the GRM in the range of $9.5 to $10.5 per barrel for Q2.
EBIT for the refining business fell 6.9 per cent year-on-year (YoY) to Rs 4,957 crore. For its petrochemicals business, EBIT fell 6.4 per cent to Rs 7,602 crore.
“IMO is clearly the short-term positive trigger for improvement in refining margin, but because of the overall weak demand environment, it is pulling the margins in the other side. It (IMO) can be constructive impact,” said V Srikanth, joint chief financial officer of RIL.
The International Maritime Organization (IMO) regulations require ships to switch to cleaner fuel starting January 2020. In the consumer businesses, organised retail and digital services (Jio), Q2 EBIT grew by 64 per cent to Rs 2,035 crore, and 63 per cent to Rs 3,322 crore, respectively, compared to the year ago quarter.
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On the changes in the tax structure for companies in India, Srikanth added, “Effective MAT (minimum alternate tax) rate for the current quarter was 21 per cent, which in previous quarter was at 25 per cent, and which is the effect of MAT coming down.”
He added, “For Jio and retail, it continues to be the marginal tax rate because we have not yet elected to choose either option A or option B.”
RIL’s outstanding consolidated debt as on September 30, 2019 rose to Rs 2.91 trillion compared to Rs 2.87 trillion as on March 31, 2019. Net debt, officials said, was flat at Rs 1.57 trillion as of September 2019. The company's capital expenditure for Q2 was at Rs 19,000 crore.
At RIL’s annual general meeting in August, group chairman Mukesh Ambani announced a proposed investment by Saudi Aramco in the company’s oil-to-chemical division. Commenting on the deal, Srikanth added, “We continue to move ahead in our conversations and the number of things to be done, be it due diligence, structure finalisation, regulatory compliance. Work is going on.”
Exports from RIL’s India operations continue to fall in the September quarter, and were lower by 12.1 per cent at Rs 53,161 crore as against Rs 60,460 crore in the year ago period, primarily due to lower price realisation for refining and petrochemical products and emphasis on domestic placement.
The two consumer businesses now account for 30 per cent of RIL’s earnings before interest and tax (EBIT), as against 20 per cent in the year-ago quarter. The results, declared after market hours, were a mixed bag with some parameters ahead and a few falling short of analysts’ estimates.
Net profit for the quarter under review was at Rs 11,262 crore, up 18.3 per cent from Rs 9,516 crore a year ago. Both PBT and net profit were at their highest ever. Consolidated net sales (excluding the goods and services tax and the excise duty) stood at Rs 1.49 trillion, an increase of 3.6 per cent as compared to Rs 1.43 trillion in the corresponding period of the previous year.
“The increase in revenue is primarily on account of robust growth in the retail and digital businesses, which grew by 27 per cent and 43 per cent, respectively. This was partially offset by a decrease in refining and petrochemicals segment revenue with a 17.7 per cent fall in Brent crude price,” RIL said in a statement.
In a Bloomberg poll, analysts had estimated RIL’s consolidated net profit at Rs 11,080 crore and revenue at Rs 1.53 trillion.
Apart from strong revenue and profit growth in the retail and digital businesses, profit growth was aided by a 189 per cent surge in other income at Rs 3,614 crore, compared to Rs 1,250 crore in the year ago period. The company’s gross refining margins (GRM) for Q2 came in at $9.4 per barrel, its highest in the last four quarters. It was $9.5 per barrel a year ago, and $8.1 per barrel in the June 2019 quarter. Most analysts had estimated the GRM in the range of $9.5 to $10.5 per barrel for Q2.
EBIT for the refining business fell 6.9 per cent year-on-year (YoY) to Rs 4,957 crore. For its petrochemicals business, EBIT fell 6.4 per cent to Rs 7,602 crore.
“IMO is clearly the short-term positive trigger for improvement in refining margin, but because of the overall weak demand environment, it is pulling the margins in the other side. It (IMO) can be constructive impact,” said V Srikanth, joint chief financial officer of RIL.
The International Maritime Organization (IMO) regulations require ships to switch to cleaner fuel starting January 2020. In the consumer businesses, organised retail and digital services (Jio), Q2 EBIT grew by 64 per cent to Rs 2,035 crore, and 63 per cent to Rs 3,322 crore, respectively, compared to the year ago quarter.
chart
On the changes in the tax structure for companies in India, Srikanth added, “Effective MAT (minimum alternate tax) rate for the current quarter was 21 per cent, which in previous quarter was at 25 per cent, and which is the effect of MAT coming down.”
He added, “For Jio and retail, it continues to be the marginal tax rate because we have not yet elected to choose either option A or option B.”
RIL’s outstanding consolidated debt as on September 30, 2019 rose to Rs 2.91 trillion compared to Rs 2.87 trillion as on March 31, 2019. Net debt, officials said, was flat at Rs 1.57 trillion as of September 2019. The company's capital expenditure for Q2 was at Rs 19,000 crore.
At RIL’s annual general meeting in August, group chairman Mukesh Ambani announced a proposed investment by Saudi Aramco in the company’s oil-to-chemical division. Commenting on the deal, Srikanth added, “We continue to move ahead in our conversations and the number of things to be done, be it due diligence, structure finalisation, regulatory compliance. Work is going on.”
Exports from RIL’s India operations continue to fall in the September quarter, and were lower by 12.1 per cent at Rs 53,161 crore as against Rs 60,460 crore in the year ago period, primarily due to lower price realisation for refining and petrochemical products and emphasis on domestic placement.
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