--Profit rises 19% to 53.52 billion rupees vs forecast of 52.63 billion rupees
--Sales fall 5% to 876.45 billion rupees
--Refining margin up 11% at $8.4 a barrel, gas output falls 53%
(Adds details, analyst comment, share price)
By Saurabh Chaturvedi
NEW DELHI--Reliance Industries Ltd. (500325.BY) Friday posted a better-than-expected 19% increase in its first-quarter net profit, helped by strong performance by the conglomerate's refining and petrochemical business that helped it offset a drop in gas output.
Net profit rose to 53.52 billion rupees ($902 million) in the April-June quarter from 45.03 billion rupees a year earlier, while sales fell 5% to 876.45 billion rupees. The average of forecasts from six analysts was for a net profit of 52.63 billion rupees on sales of 898.61 billion rupees.
Earnings from converting a barrel of crude oil into products during the past quarter rose 11% from a year earlier to $8.4 a barrel, while earnings margin before interest and tax in the refining business expanded to 3.6% from 2.5%. Reliance has a refining capacity of 1.24 million barrels a day.
The results show Reliance's dependence on its refineries businesses to push profits. It is facing challenges in its exploration and production business, hurt by falling production at a natural gas filed off India's east coast. Revenue from the block that holds India's largest gas deposit fell 42% from the year-earlier quarter.
Reliance is investing in sectors such as telecommunications, retail, homeland security, financial services, hotels and media as it seeks to diversify its revenue sources to lower the dependence on India's heavily regulated oil and gas sector. It also has purchased stakes in shale gas assets in the U.S.
At the company's annual shareholders meeting last month, Chairman Mukesh Ambani, India's richest man, outlined a three-year investment plan of 1.5 trillion rupees.
In the past quarter, the company, which exports most of its fuel products, benefited by a steep fall in the local rupee currency's value against the dollar, as this boosted its overseas earnings when converted into rupees. Another contributor to the profit growth was non-operating income, which rose 33% to 25.35 billion rupees.
Ahead of the results, Reliance's shares rose 0.7% to end at 923.15 rupees on the Bombay Stock Exchange where the benchmark Sensex index finished flat.
Reliance said its gas output from the Krishna-Godavari basin off the east coast fell about 53% to 49.2 billion cubic feet during the fiscal first quarter. The company blames reservoir complexities and water ingress in the fields for falling output.
In 2011, it sold a 30% stake in 21 oil and gas blocks to BP PLC for $7.2 billion, as it sought to get technology for deep-sea exploration. The companies had announced plans to invest more than $5 billion in the next three-to-five years to boost gas output.
The company is expected to benefit from India's decision last month to nearly double the price of natural gas from April next year. Reliance had been demanding the government to increase the price, citing increased costs and high international prices.
Bhavesh Chauhan, a senior analyst at Mumbai-based Angel Broking Ltd., said he doesn't see any major increase in production from Reliance's gas field at least in the next two years. "There's no new catalyst to drive the stock," he said.
Angel Broking rates the stock neutral.
Write to Saurabh Chaturvedi at firstname.lastname@example.org
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