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RIL’s profit surges on high refining margins

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    NEW DELHI : Reliance Industries Ltd reported a 46% jump in quarterly profit aided by robust refining margins, but missed analysts’ expectations because of a surge in input costs.

    Profit at India’s most valuable company rose to 17,955 crore for the three months ended 30 June from 12,273 crore, but missed the average profit estimate of 22,920 crore in a Bloomberg survey of analysts.

    Revenue from operations surged 55% to 2.23 trillion from 1.44 trillion. However, total expenses surged 51% to 1.98 trillion, led by a 76% increase in raw material costs, the company said.

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    Fuelling growth

    All segments of the conglomerate contributed to profit growth, even as a volatile business environment added to challenges. Consumer-oriented businesses continued to show traction, with the retail business benefiting from positive operating leverages while Jio (digital services business) benefited from the tariff hikes taken in the earlier quarters, the company said. In addition, refining strength boosted the show for the oil-to-chemicals (O2C) business as rising production and realizations meant oil and gas E&P (exploration and production) saw operating profits more than double over the year-ago period. “Geopolitical conflict has caused significant dislocation in energy markets and disrupted traditional trade flows. This, along with resurgent demand, has resulted in tighter fuel markets and improved product margins. Despite significant challenges posed by the tight crude markets and higher energy and freight costs, the O2C business has delivered its best performance ever,” Mukesh Ambani, chairman and managing director of Reliance Industries, said in a statement.

    The June quarter saw a surge in refining margins, and benchmark Singapore GRM (gross refining margins) improved to $21.4/barrel, a significant jump from $8 a barrel in the previous quarter, analysts at Motilal Oswal Financial Services said. Reliance’s earnings were boosted as exports of refined products from Russia and China declined, demand recovered in the US and Europe, and inventories remained at multi-year lows. RIL earns a significant premium over the benchmark, and thereby refining segment is likely to have contributed strongly to profits despite the petrochemical margins seeing just modest improvement. However, the company said downstream chemical profitability was stable.

    Oil-to-chemicals segment’s revenue rose 11% sequentially and 57% from a year earlier to 161,715 crore. The segment’s operating profit outpaced revenue growth, rising 40% sequentially to 19,888 crore.

    Revenue of the E&P business nearly tripled to 3,625 crore. Segment operating profit rose to 2,737 crore on improved gas price realization and higher production at the KG D6 field.

    Retail segment revenues grew 52% from a year earlier, while Ebitda almost doubled.

    Ambani said Reliance continues to focus on enhancing consumer touch points and building a stronger value proposition for customers. “Our strong supply chain infrastructure and sourcing efficiency are helping us maintain competitive pricing for daily essentials, thereby insulating consumers from inflationary pressures,” he added.

    On Friday, Reliance Retail said it acquired Catwalk, a leading women’s footwear brand, and the India franchise rights for Sunglass Hut, a premium eyewear retailer. The firm also formed a joint venture with Plastic Legno SPA’s by acquiring a stake in the toy manufacturing business in India.

    Suneera Tandon contributed to the story.

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