Five takeaways from Reliance Industries Q4 results

Better refining margins aid Reliance's March 2014 performance

Reliance Industries’ March 2014 quarter numbers were slightly lower than analysts’ expectations. The company posted a net profit of Rs 5,631 crore as compared to market expectation of Rs 5,660 crore. Its numbers reflect a 2.2 per cent growth over the previous quarter and a 0.7 per cent growth over the same quarter last year. For the year ended March 2014, Reliance posted its highest ever net profit of Rs 21,984 crore.

Here are the five takeaways from RIL’s March quarter numbers.

1. Marginally higher net profit was achieved even as revenues dropped 8.1 per cent during the March 2014 quarter. Higher refining margins of $9.3 per barrel as compared to expectations of $8.6 a barrel and $7.6 barrel in the previous quarter. Higher refining margin helped the company post a 4.4 per cent growth the operating profit level.
   

 

The oil and gas division saw an 18.2 per cent drop in revenue and a 30 per cent drop in profit over the previous quarter. With no clarity on domestic gas price and increase in gas production, the division is expected to underperform this quarter too. Contribution of profit from this division is now only 5.7 per cent as compared to 9.1 per cent in the previous quarter.
 

It was the refining division that saved the day for Reliance. Despite an 8.2 per cent drop in revenues, operating profit jumped by 25.9 per cent due to better refining margins. The division contributed around 60 per cent to the operating profit in March 2014 quarter as compared to 53 per cent in the previous quarter. The petrochemical division posted a marginal drop in revenue and profits.

 

Reliance’s retail business has posted a turnover of Rs 14,496 crore during the quarter and an operating profit of Rs 363 crore. In spite of having invested a sizeable amount of capital over the years and operating 1,691 stores across 146 centres making it the largest retail business in the country, the division is not making any meaningful contribution to the company’s P&L. The only saving grace is that the retail business is now profitable at the operating level.
 

On the much awaited telecom front, there is no sign of launch dates except for the fact that senior managers have been appointed. Reliance is expected to consume some of its cash pile for launching the telecom venture. Reliance sits on Rs 88,190 crore (Rs 88,705 crore in the previous quarter) of cash and cash equivalent at the end of March quarter. Also, its income by utilising this cash has come down to Rs 2,036 crore as compared to Rs 2,305 crore in the previous quarter.

To sum up, but for better refining margin Reliance delivered a mediocre performance.