Reliance Industries reports 13% jump in Q2 FY18 profit but telecom arm Jio reports loss

Oil-to-retail and telecom conglomerate Reliance Industries Ltd (RIL) beat street estimates to post a 13 percent year-on-year rise in net profit at Rs 8,109 crore for the quarter ended September 30, mainly due to improved revenues and profitability from its refining and petrochemicals business. The growth in profitability was accompanied by a 24 percent jump in the topline to Rs 101,169 crore, on a consolidated basis.

This is the first time that Reliance has included the financials of Jio, its telecom arm, into the quarterly earnings. With a subscriber base of 136.8 million as on September end, Reliance Jio reported a loss of Rs 271 crore quarter ended September 30th.

Since commencement of services on September 5, 2016, Jio has been aggressive with its pricing tariffs, to cross 100 million subscribers in 170 days, adding 6 lakh subscribers per day at an average. Consolidated value of services was reported at Rs 7,213 crore and consolidated EBIT of Rs 261 crore. “We are focussed on providing multi-layered digital services on top of the basic connectivity service to optimally utilise our infrastructure,” Reliance chairman Mukesh Ambani, said in a Reliance Jio statement.

RIL’s reported earnings for the second quarter of fiscal 2018, especially for its refining business, which was better than what analysts tracking the company expected. The Mukesh Ambani-led company’s GRM improved to a nine-year-high of $12 per barrel from $10.1 in the corresponding quarter, a year-ago period.

“The results reflect strong underlying fundamentals of our refining and petrochemicals businesses. Sustained demand growth coupled with supply disruptions further tightened demand supply balances globally during the quarter. The benefits of optimizing our business through new projects are beginning to emerge,” Ambani added in the media statement.

The Reliance earnings however disappointed when compared to the sequential previous quarter. RIL’s net profit slid 11 percent when compared to the June ended figure of Rs 9,108 crore.

RIL’s GRM outperformed the regional benchmark Singapore GRM by $3.7 per barrel. The conglomerate’s oil and gas exploration and production business improved in the three months to September, compared to the previous quarter. Revenues rose 13.5 percent year-on-year to Rs 1,503 crore and operating losses narrowed to Rs 272 crore compared to Rs 491 crore a year earlier.

The retail business continued to do well with revenues rising nearly 82 percent over the year earlier to Rs 14,646 crore and Ebit doubled to Rs 334 crore.  

The vertically-integrated company’s petrochemicals business complemented the refining vertical’s performance as well, with revenues increasing 25 percent over the year earlier to Rs 27,999 crore. Segment Ebit (earnings before interest and tax) also rose sharply by 45.2 percent to Rs 4,960 crore, "supported by strong volume growth, higher margins and improved product mix with ethane cracking stabilising at Dahej and Hazira," the company statement said.

This vertical’s operating profit margin came in at 17.7 percent in the July to September quarter, which was the highest in the last 10 years.

RIL’s net debt as on September 30 stood at Rs 214,145 crore; and the company had cash and cash equivalents to the tune of Rs 77,014 crore.

RIL’s shares edged up 0.48 percent on the BSE on Friday to Rs 876.7 per share. The bourse’s benchmark index, S&P BSE Sensex, in contrast, jumped 0.78 percent to 32,432.69.

(Reliance Industries is the owner of Network 18, publisher of Forbes India)