Reliance Industries Ltd, operator of the world’s largest oil refining complex, reported first-quarter profits that beat analysts’ estimates and rose the most in a year after refining margins widened.
Net income, excluding that of units, rose 5.5 percent to 56.5 billion rupees (US$936 million), or 17.50 rupees a share, in the three months ending last month from a year earlier, Mumbai-based Reliance said on Saturday. That exceeded the 53.7 billion rupee median profit estimate of 25 analysts compiled by Bloomberg. Sales rose 10 percent to 963.5 billion rupees.
The company controlled by billionaire Mukesh Ambani depends on earnings from its two refineries to boost profits as natural gas production from its biggest deposit remains near the lowest in four years. Higher profit is crucial for Reliance which is spending 1.8 trillion rupees to expand its polyester, petrochemicals, refining and natural gas businesses and starting a new telecommunications service next year.
“The gas business is crucial for Reliance as the outlook for refining margins in Asia is not very strong because demand is falling,” said D.K. Aggarwal, New Delhi-based chairman of SMC Investments & Advisors Ltd, which manages about US$100 million of Indian shares.
“Diversifying its businesses should benefit Reliance when India’s economic growth starts reviving,” he added.
India’s gross GDP growth forecast for the year ending March was raised to 6.3 percent from 6 percent by the Asian Development Bank on Friday on the expectation the new government would overhaul policy and spur investments.
Reliance earned US$8.7 for every barrel of crude it turned into fuels in the quarter, compared with US$8.4 a barrel a year earlier and US$9.3 a barrel in the three months ended March, the company said.
The company operates two refineries with a combined capacity of 1.24 million barrels a day located next to each other at Jamnagar in the western state of Gujarat. They have the ability to process cheaper, lower grades of crude into high-value products for use in Europe and the US.
Reliance is set to deal with a smaller refining margin as demand for fuels in Asia slows. Earnings from making diesel in Singapore, an Asian benchmark, this year are set to be the lowest since 2011, according to Wood Mackenzie Ltd.
Profit from making diesel in Singapore averaged US$16.15 a barrel in the quarter, compared with US$16.52 a year earlier and US$17.86 a barrel in the preceding quarter, according to data from London-based PVM Oil Associates Ltd. On July 9, it fell to the lowest since December 2010, according to the data.
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