Reliance Industries Profit Misses Estimates

Reliance Industries Ltd. delivered growth in profit for the eighth consecutive quarter. However, it missed expectations of analysts. As a result, the performance will cast a shadow on its price when the trading opens on Monday. On Friday, the stock finished the week with a gain of 2.17 percent and 1.99 percent on the NSE and BSE respectively. Its telecom service segment, Reliance Jio, cannot be blamed completely for missing the Street expectations.

Higher Profit

Reliance Industries’ net profit rose close to 3 percent to Rs,8,697 crores from the preceding year’s fourth quarter. Analysts polled by Bloomberg predicted a profit of Rs,8,923 crores, BloombergQuint reported. Its top line jumped 14.7 percent to Rs 84,037 crore from the previous quarter. Its revenue also fell short of expectations of Rs.89,734 crore. The company’s earnings before interest, tax, depreciation, and amortization dropped 2.3 percent to Rs.13,425 crore from the third quarter. Similarly, operating margin also dropped 2.8 percentage points to 16 percent in the fourth quarter.

The petrochemical firm indicated that it was able to earn approximately $11 for a barrel of crude processed in the March quarter. In the preceding three-month period, i.e., December quarter, the company earned $11.6 per barrel. However, the price realization is more or less in line with the estimation of $11.2 a barrel. During the fourth quarter, the average prices of Brent crude were approximately $67.23 a barrel. This was based on Bloomberg data.

The company’s chairman and managing director, Mukesh Ambani, said in a press release that “Substantial synergies, productivity gains and production growth in our energy and materials business has allowed us to perform at very competitive levels despite the uptrend in oil prices through the year.” During the last annual general meeting, the company’s chairman and MD, Mukesh Ambani, acceded to shareholders’ request for 1:1 bonus shares.

As far as other key factors, petrochemicals revenue increased 13 percent to Rs.38,113 crore from the preceding quarter. Similarly, refining business revenue jumped 23 percent to Rs.93,519 crore where exploration and production revenue plunged 54 percent to a Rs.746 crore. However organized retail revenue jumped 29 percent to Rs.4,183 crore in the fourth quarter. At the end of March, the company’s cash and cash equivalents were Rs.78,063 crores, which was modestly higher than the previous year.

Jio Performance

Reliance Jio Infocomm Ltd. delivered almost a flat profit growth in the three-month ended March. This is due to average revenue per user (ARPU) continued its downtrend. This is mainly due to competition unleashed by it in 2016. Its rivals are also facing the pressures on ARPU. The company’s standalone profit was Rs.510 crore compared to Rs.504 crore in the December quarter. However, it is lower than the consensus estimate of Rs.584 crore.

Reliance Jio’s operating revenue advanced 3.6 percent to Rs.7,128 crore on a sequential basis. While operating profit expanded 2.5 percent to Rs.2,694 crore, its margin narrowed to 37.8 points representing a fall of 1.1 percentage points. The company’s ARPU was Rs.137, which is lower than Rs.156 recorded two quarters back. Its rival, Bharti Airtel, also witnessed its ARPU dropping to Rs.116.

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