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RIL could report flat profit growth in Q2

October 11, 2014 12:37 IST

RILReliance Industries’ earnings for the second quarter will mirror the fall in crude oil prices and appreciation in the rupee.

India’s largest private sector company might see its July-September quarter’s profit flat -- between Rs 5,600 crore (Rs 56 billion) and Rs 5,670 crore (Rs 56.7 billion) -- quarter-on- quarter and up two to three per cent year-on-year.

During the second quarter of 2013-14, RIL had Rs 5,490 crore (Rs 54.9 billion) as net profit.

Gross refining margins -- the realisation from turning every barrel of crude into finished products -- would see a marginal drop. RIL’s GRMs are expected to decline in line with the benchmarks, driven by lower middle-distillate cracks.

“We estimate the company’s GRMs to average at $7.7 per barrel, from $8.7 per barrel in the first quarter,” said ICICI Securities.

It said it expected refining earnings before interest and tax to decline 25 per cent on a quarterly basis.

GRMs for the Singapore Complex dropped by $1 a barrel on a quarterly basis to $4.8 a barrel.

The crack spreads for RIL’s key products fell -- diesel by $1.8 a barrel and naphtha mildly by $0.5 a barrel.

IIFL said the refining margins had declined on

a sequential basis, on the back of a fall in gasoil and jet kero spreads.

RIL, having a high proportion of these fuels in its product slate, will bear the brunt.

During the quarter, Brent crude oil was down seven per cent.

On a yearly basis, it declined 7.3 per cent.

The rupee depreciated 1.3 per cent quarter-on-quarter and rose 2.3 per cent over a year.

On exploration and production, analysts said RIL could see a moderate decline in crude oil production from the MA·1 field and gas production from the KG-D6 field.

However, strong performance in petrochemicals will help the company offset the lower GRMs and weak performance on E&P.

ISec added it expected other income to be higher by six per cent on a quarterly basis, at Rs 2,100 crore (Rs 21 billion).

“Petrochemicals is likely to be a stellar quarter,” said Morgan Stanley, adding it saw overall Ebit from petrochemicals rising 32 per cent quarter on quarter to Rs 25,000 crore (Rs 250 billion), though flat on a yearly basis. Higher polymer and polyester spreads will contribute.

Oil marketing companies are expected to post a decent set of numbers, on the back of full provisioning of subsidy sharing from the government.

Lower interest costs will help the three companies -- Indian Oil, Bharat Petroleum and Hindustan Petroleum -- post profits during the quarter.

Kalpana Pathak in Mumbai
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