Reliance Industries` Q1 net profit jumps 13%

Reliance Industries Ltd (RIL), India's largest company by market value, has reported a 13 per cent increase in net profit for the first quarter ended June 2008, as it was able to sell its products at higher prices and also because of doubling of export sales.

The Mukesh Ambani-owned flagship firm has reported a net profit of Rs 4,110 crore or earnings per share (EPS) of Rs 28.3 for the quarter ended June 2008, against Rs 3,630 crore, or EPS of Rs 25, in the year-ago period.

Turnover in the first quarter of fiscal 2009 increased 41 per cent to touch Rs 41,805 crore against Rs 29,721 crore in April-June 2007.

Nearly 95 per cent of the increase in turnover was due to increase in prices, with volume increases accounting for the rest, said a press release from the company.

One of the primary reasons it was able to export more was due to the company's decision to shut down 1,432 petrol pumps it owned in India after it could not compete with state-owned oil marketing companies supported by government subsidy. 
 

THE Q1 PICTURE (in Rs crore)
	Apr-Jun 2007	Apr-Jun 2008	% change
Turnover	29,721	41,805	40.65
Expenditure	24,976	36,609	46.57
PBT	4,450.00	4,902.00	10.15
PAT	3,630	4,110	13.22
EPS (Rs)	25.00	28.30	13.20
SEGMENT RESULTS (in Rs crore)
Revenues
Refining	22,328	32,587	45.94
Petrochemicals	13,213	14,871	12.54
Oil & Gas	518	787	51.93
Others*	72	124	72.22
Profit before interest and tax
Refining	2,557	3,040	18.88
Petrochemicals	1,845	1,579	-14.41
Oil & Gas	290	503	73.44
Others*	11	9	-18.18
*Includes businesses like Reliance Retail

According to analysts, RIL has recorded gross refining margin, the difference between the total value of petroleum products produced by the refinery less the price of input, of $15.7 per barrel against $9.6 per barrel, the benchmark Singapore gross refining margin, in the first quarter ended June 2008.

Refinery accounts for 66 per cent of the company's business. The margins, which were $15.4 a year earlier, are boosted by the refinery's ability to process cheaper, high-sulphur crude oil.

Even so, the performance fell under analysts' expectations. "RIL's margins are below the street's expectations. The refinery margins are under pressure as crude oil prices are high. Coupled with reduced demand for oil products in the overseas markets, the margins are under pressure and this will continue as long as oil prices are high," said Vinay Nair, research analyst, Khandwala Securities, who maintains a "buy" on the RIL stock.

RIL shares went up 1.81 per cent at Rs 2,306.55 on the Bombay Stock Exchange today. However, the results were announced after the markets closed.

Commenting on the results, Reliance Industries Chairman Mukesh Ambani said: "We are confident that the new growth drivers oil and gas, organised retailing and agro-retail will take Reliance to a higher growth trajectory in the medium term."

The company's retail wing, Reliance Retail, has so far opened 735 stores in 70 cities, with over 3.5 million sq ft of floor space. Revenue from this company was not disclosed.

With production from the Krishna-Godavari basin expected to start in the current fiscal, Nair expects growth to be driven by the sale of gas. He adds: "That is where the real money will come from".

Other key revenue drivers of the firm include, the high upstream production from Tapti block, the increased utilisation rate of Jamnagar refinery and high revenue from refining and marketing segment. The capital expenditure for the period was Rs 7,215 crore, primarily in oil and gas business.