MUMBAI (Reuters) ? Energy major Reliance Industries posted its highest ever quarterly net profit on Saturday on higher refining margins and other income, but analysts focused on slowing gas output and said refining margins were still below expectations.
Reliance, India's largest listed company, said net profit rose 15.8 percent from a year ago, largely driven by improved performance in refining and petrochemicals businesses. It also posted a 64 percent jump in other income to 11 billion rupees, mainly due to one-time treasury gains.
"The refining margins are lower than expected, and the premium to Singapore margins has come down," said K.K. Mital, chief executive for portfolio management services at New Delhi's Globe Capital. "They are also sitting on a lot of cash, but debt remains high, so that is an area they need to do something."
"I expect the stock to be under pressure on Monday," he said.
Reliance reported gross refining margins of $10.1 a barrel for the quarter, barely a dollar higher than the benchmark Singapore average margin at around $9 a barrel. Analysts said they had expected Reliance to exceed the benchmark by around $2 a barrel.
The company operates the world's biggest refining complex in western India, which can handle less costly high-sulfur crude oil, giving it the best refining margins in the industry.
But its growth outlook has been marred by falling gas output from its huge gas fields off India's east coast. Last month, India's upstream regulator said Reliance was producing 44 mscmd (million standard cubic metres per day) from its main D6 block.
The figure is much lower than the 60 mscmd it was producing a year earlier and far off the planned peak capacity of 80 mscmd.
Controlled by Mukesh Ambani, the world's ninth richest person according to Forbes, the company's market value has plunged by nearly a fifth this year to $57.8 billion due to the falling gas output.
India's federal auditor last month criticised Reliance and the government over development of the gas field in the Krishna Godavari (KG) basin and called for revamping profit-sharing arrangements from oil and gas blocks.
Earlier this year, Reliance sold a 30 percent stake in 23 oil and gas blocks, some in the KG basin, to BP in a $7.2 billion deal.
The British company, with deepwater exploration expertise, has said it is confident of raising gas output from the field from 2014.
Q2 PROFIT JUMPS
Reliance, with interests also in oil exploration and retail, said net profit for the fiscal second quarter ended September rose 15.8 percent from a year earlier.
Reliance posted net profit of 57.03 billion rupees ($1.16 billion) for the September quarter from 49.23 billion rupees a year ago. A Reuters poll of analysts had forecast net profit of 57.1 billion rupees.
Net sales rose 37 percent to 785.69 billion rupees.
Reliance's gross refining margins rose to $10.1 per barrel from $7.9 per barrel a year earlier, but was lower than the $10.3 a barrel in the previous quarter. Analysts has expected margins around $11 a barrel.
The margins, a key measure of profitability, were boosted by higher demand and refinery closures in Asia despite crude oil prices falling 17 percent in the quarter. The refining segment accounts for nearly 80 percent of Reliance's revenues.
Reliance's petrochemicals business also posted a 40 percent rise in revenue on higher domestic demand. However, its oil and gas exploration business posted a 17 percent fall in revenue, mainly on account of lower production at its main KG-D6 block, Reliance said.
The company said it held cash balances of $12.6 billion as at September-end, and had outstanding debt of $14.6 billion.
Shares in Reliance have dropped 18.1 percent in the year to date, more than a 16.7 percent fall in the main stock index, in which the stock has the heaviest weight. Ahead of the results, the stock closed up 2.4 percent on Friday.
(Additional reporting by Kaustubh Kulkarni; Editing by Ranjit Gangadharan and Jane Baird)
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