MUMBAI - Reliance Industries Ltd. Monday posted a fall in net profit for the fourth straight quarter, hurt by a lower refining margin and a drop in natural-gas production.
India's largest-listed company by market value, however, exceeded analysts' estimates for its net profit because of a near-twofold jump in income from non-core activities.
Mumbai-based Reliance said its profit for the July-September quarter dropped 5.7% to 53.76 billion rupees ($1.01 billion) from 57.03 billion rupees a year earlier. Sales rose 15% to 903.35 billion rupees.
The average of estimates in a Dow Jones Newswires poll of 13 analysts was for a net profit of 49.50 billion rupees.
Reliance's results highlight the pressures the company is facing on its energy business, which contributes about 80% of its sales and nearly three quarters of operating profit. The company has been struggling with falling gas production at a block off India's east coast, while its margin from refining crude oil into products has been hit by weak global fuel demand, government control on diesel prices in India and the tendency of local state-run oil refiners to keep gasoline prices low.
Reliance is investing in telecom, retail, homeland security, financial services, hotels and media to cut its exposure to India's heavily regulated oil and gas sector. Its billionaire Chairman Mukesh Ambani said in June it will invest about 1.0 trillion rupees over the next five years to expand and diversify its businesses that range from oil and gas exploration to selling groceries and vegetables.
The company is finding it difficult to identify the "next big project" to drive earnings growth, and it has been hit by a "dilution of competitive advantage in its core refining and petrochemicals business," brokerage Ambit Capital Pvt. Ltd. wrote in a recent note.
Reliance recently lowered its estimate for recoverable gas from its D6 Block in the Krishna-Godavari basin by 70% to 3.10 trillion cubic feet, citing poor production and a decline in pressure in the fields.
The company holds a 60% stake in the block--India's largest gas find so far. U.K.-based BP PLC owns 30% of the block and Canada's Niko Resources Ltd. the rest.
Reliance's gas output from the basin during the July-September period fell 37% to 92.6 billion cubic feet.
The company's earnings from converting each barrel of crude oil into products in the July-September quarter declined almost 6% from a year earlier to $9.5 per barrel. The margin, however, was up 25% from the April-June period, which also boosted its profit sequentially by 20%.
Its profit got support from higher non-operating income, which grew 92% from a year earlier to 21.12 billion rupees.
Reliance said it had cash and cash equivalents of 79.16 billion as of Sept 30. During the past quarter, the company bought back 39 million shares for 27.96 billion rupees.
Copyright (c) 2012 Dow Jones & Company, Inc.
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