Petrochemicals aid Reliance Industries to post a stronger-than-expected growth

20-Oct-15

A strong showing of the refinery business and increase in profit margins of the petrochemicals business led to a stronger-than-expected growth in Reliance Industries (RIL)'s bottom line in Q2 2015. RIL's gross refining margins (GRM) hit a seven year high of $10.6 per barrel in Q2 September 2015. The GRM was US$8.3 per barrel in Q2 September 2014. The profitability of the petrochemicals business improved due to a combination of strong volume growth, product mix improvement and lower energy costs. RIL's bottom line was also boosted by exceptional one-time gain of Rs 252 crore in Q2 September 2015. This was a net impact of gains of Rs 2911 crore (net of taxes) on sale of investment in EFS Midstream LLC and provision for impairment in US shale gas assets amounting to Rs 2659 crore (net of tax). It may be recalled that Reliance Holding USA, Inc, a subsidiary of RIL concluded the sale of its interest in EFS Midstream LLC to an affiliate of Enterprise Products Partners L.P. in July 2015. EFS Midstream provides natural gas gathering, treating, compression and condensate processing services in the Eagle Ford Shale. According to RIL, the near term outlook for the US shale gas business remains challenging due to weak macro environment. The long term outlook for the business remains promising.