MUMBAI (Reuters) - Reliance Industries Ltd, India’s biggest company, met forecasts with a 13 percent rise in quarterly profit, but analysts were disappointed after four quarters of 20 percent-plus earnings growth.
The petrochemicals and refinery giant, valued at $77 billion, said strong refining margins helped overshadow sluggish growth at its petrochemicals business, and analysts expect a new refinery and gas output to boost earnings in the coming quarters.
It is expected to begin producing gas from its deep-sea fields off India’s east coast by September.
A 580,000 barrels-per-day refinery, being built by unit Reliance Petroleum in western India was 94 percent complete, the company said this week, and analysts expect the project could also start operations in the September quarter.
Reliance Industries, India’s top petrochemicals maker, already runs the country’s biggest refinery, a 660,000 barrels-per-day unit at the same location, and the new refinery will make the combined facility the biggest in the world.
“We will play major role in India’s energy security as we are focusing to be among the top leaders in the world in the oil and gas sphere,” Chairman Mukesh Ambani said in a statement.
Reliance said net profit rose to 41.1 billion rupees ($976 million) in its fiscal first quarter ended June 30 from 36.3 billion reported a year earlier, helped by refining margins.
Net sales grew to 430.5 billion rupees from 312.9 billion.
Analysts had forecast a net profit of 41.4 billion rupees on net sales of 418.7 billion in a Reuters poll.
Reliance said gross refining margins were $15.7 a barrel, well above the benchmark Asian Dubai crack margin, which averaged about $8 a barrel in the June quarter. The margins, which were $15.4 a year earlier, are bolstered by the refinery’s ability to process cheaper, high-sulphur crude oil.
“The numbers are just not up to the mark. The refining margins were particularly disappointing. We were expecting in excess of $16,” V.K. Sharma, head of research at Anagram Stock Broking said.
“The stock is not going to react positively tomorrow. The market is no more generous.”
Ahead of the news, shares in Reliance rose 1.8 percent to 2,306.55 rupees in a market that fell 1.1 percent.
Sluggish margins in petrochemicals clipped the pace of earnings growth for Reliance. Raw material consumption costs rose 75 percent in the quarter to 335.3 billion rupees due to higher price of crude and naptha, a key input for petrochemicals.
Exports more than doubled to 283.6 billion rupees, with fuel contributing most, the company said.
The company said its capital expenditure in the quarter was 72.15 billion rupees, primarily in the oil and gas business. It plans to add six more rigs by year-end to its fleet of six for development and exploration.
Shares in Reliance dropped 7.6 percent in the June quarter, outperforming a 10 percent fall in the sector index and a 14 percent decline in the broader market index.
