Reliance expects sharp rise in operating profit

Indian oil-to-telecoms conglomerate Reliance Industries Ltd expects a sharp rise in operating profit from the next financial year as it completes an expansion of its core refining and petrochemicals business, a senior executive said on Monday.
Reliance, controlled by India's richest man Mukesh Ambani, on Monday reported a better-than-expected 10 percent rise in third-quarter net profit to 80.22 billion rupees ($1.18 billion), helped by strong refining margin. Analysts had on average expected a standalone profit of 78.5 billion rupees, according to data compiled by Thomson Reuters.
The company embarked on a $15 billion capital spending programme in March 2012 to set up a petroleum coke integrated gasification combined cycle (IGCC) plant and a refinery off-gas cracker (ROGC), each costing $4 billion to $5 billion. The company had at the time envisaged a 66 percent expansion of its petrochemical capacity.
Reliance's Joint Chief Financial Officer Srikanth Venkatachari said on Monday the new capacity could increase earnings before interest, tax, depreciation and amortisation (EBITDA) by $3.2 billion to $3.5 billion on a full-year basis.
By comparison, for the nine months to December, Reliance reported EBITDA of about 319.76 billion rupees ($4.7 billion).
Srikanth said while the ROGC is "almost" complete, the IGCC will be mechanically completed by June 2017. After a few months of stabilisation, the benefits of the projects will be reflected in the company's operating profit.
"I believe even in the next financial year, we will see a substantial jump in EBITDA," Srikanth told a news conference.
Refining and petrochemicals contribute around 90 percent of Reliance's overall revenue and profit. Standalone revenues, which include its refining and petrochemicals business and oil and gas exploration in India, came in at $9.8 billion for the third quarter ending December 31, up 9 percent from a year ago.
Gross refining margin, or profit earned on each barrel of crude processed - a key profitability gauge for a refiner - was $10.8 per barrel for the December quarter.