Reliance Industries Limited (NSE:RELIANCE) announced an unexpected 24% increase in profits this morning in their earnings report for its third fiscal quarter of 2012. The firm posted a net profit of 55.02 billion rupees. Analysts had expected the firm to announce profits of just 50.14 billion for the last three months.
The firm said that sales in the fourth quarter amounted to 938.86 billion rupees. That amounts to a 10% bump in revenues compared to the same period last year. Analysts had expected the company’s revenues to amount to 924.8 billion. In the last three months of 2011 the firm revealed earnings of 44.4 billion. The increase in profits year on year was 24%.
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The results are big news for RIL because the firm revealed declining profits for each of the last four reported quarters. This report breaks that trend and, investors will hope, amounts to a turn around in the company’s fortunes.
Reliance is a firm in the energy sector which operates in three basic segments, Oil & Gas, Refining, and Petrochemicals. In the last three months of 2012, the firm’s profits were boosted by increased revenue in the latter two segments, while the oil and gas exploration business collapsed at the company.
The exploration segment of the firm posted a 32% decline in revenues during the last year. The total revenues for the segment was 19.21 billion rupees, on much lower output of natural gas. The firm’s output during the quarter was around 25 million standard cubic feet per day.
The firm’s increased profits was the result of a huge margin expansion in the refining business. The firm’s profit on refining of each Brent barrel was $9.60 for the quarter. That compares with $6.80 per barrel in the same three months of 2011. Sales in the refining business grew 12.9% to 866.4 billion rupees. Refining is by far the most important, and profitable, part of the firm’s business.
The petrochemical business increased its sales by 11.5% compared to the same period in 2011. Petrochemicals are the second most important component of the firm’s business, and according to the chairman of the company, increasing margins in this segment was one of the most positive aspect of the firm’s report.
The most important result for the company is, of course, the huge increase in revenue from its refinery business, and its large boost in per barrel profitability. An industry benchmark , the Singapore complex refinery numbers, were $6.50 per barrel for the quarter. That number pales in comparison to the $9.50 per barrel put up by RIL (NSE:RELIANCE).
RIL is a Mumbai based company, and is the largest component of the Indian stock market. the firm has a market capitalization of 2.94 trillion Rupees. The firm’s stock has been rising for the past year, and currently stands close to its 52-week high of 902 per share.
The firm’s share closed at just over 900 rupees per share yesterday afternoon. After posting such a glowing earnings report this morning, it is likely that the firm’s share price will exceed its recent highs once the market opens.