India's Reliance sees strong refining margins backed by solid demand
(Reuters) India's oil conglomerate Reliance Industries Ltd. reported quarterly results on Thursday that were in-line with expectations, and said it expects refining margins to remain strong, driven by rising fuel demand.
Reliance, controlled by India's richest man, Mukesh Ambani, said its fiscal 2Q profit was $1.1 B for the quarter to September 30. That roughly matched analysts' estimates of $1.08 B, and was well above its year-ago profit of $750 MM on the same basis.
On a net basis, the country's largest refiner reported a 23% drop in its quarterly profit, as its year-ago profit was boosted by a $670 MM gain from an asset sale.
It said gross refining margin, or profit earned on each barrel of crude processed -- a key profitability gauge for a refiner -- came in at $10.1/bbl for the three months to September 30, accelerating its lead over the regional benchmark Singapore GRM.
A senior company executive defended the refining margins saying they could be sustained.
"These are not one quarter numbers, the margins are improving consistently every quarter," said V. Srikanth, joint chief financial officer of Reliance.
Reliance operates the world's biggest refining complex in western India and analysts expect an upgrade currently underway to improve margins by $2 to $3.
The company's refinery upgrade plan is at "advanced stages of mechanical completion and pre-commissioning," said Ambani in a statement, adding this would further strengthen the company's position.
Fuel demand in India, the world's third-largest consumer, is rising fast as higher income levels and cheaper credit boost vehicle sales. The International Energy Agency estimates India's fuel demand will be 10 MMbpd by 2040.
Reliance gets 95% of its profit from oil refining and petrochemicals, but has been spending aggressively to expand in retail, telecoms and e-commerce.
Reporting by Promit Mukherjee; Writing by Sankalp Phartiyal; Editing by Euan Rocha and Alexandra Hudson
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