RIL could report flat profit growth in Q2

Reliance 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.