 "Will Reliance continue to beat earnings in FY16?")
If Reliance Industries’ June quarter performance is an indication, the rest of the year is expected to be eventful for investors. Other than the launch of its much-awaited 4G services, the company will also be commissioning other projects which will positively impact revenues in the coming quarters. Reliance has utilised the slowdown of the past couple of years to put in place a smart crude one sourcing strategy, is helping it reap dividends. The company has managed to hold on to margins in both petchem and refining, though crude oil prices have corrected sharply. Even as the sharp fall in commodity prices (namely crude) impacted topline, which declined 23 per cent to Rs 83,064 crore, profit growth remained strong in the quarter. Operating profit before other income and depreciation increased by 13.2 per cent year-on-year to Rs 10,177 crore, with higher contribution from refining and petrochemicals.
Other than refining, petrochemicals have also spiked during the first quarter of the financial year. Polymer and naphtha margins are at an all-time high. The polymer delta has risen strongly, which has buoyed petchem margins and offset weakness in the polyester delta. A recovery in the petchem would possibly help RIL sustain its strong profit growth in coming quarters too. Operating margins for the petchem segment improved to 11.2 per cent in the quarter from 7.3 per cent in the previous year.
Oil & gas continue to be a drag, especially with the prices of crude falling sharply over the last eight months. Revenues from its domestic exploration and production business contracted 23 per cent year-on-year to Rs 1,200 crore. The segment’s Ebit declined 83 per cent YoY to Rs 83 crore. Production from KG-D6 continued to decline compared to the corresponding period in the previous year. Investors believe this is a crucial year for RIL, as it will commission some of its biggest projects and launch the much-awaited 4G service. RIL’s net debt has increased to Rs 83,423 crore from Rs 76,388 crore in the previous quarter.
Other than refining, petrochemicals have also spiked during the first quarter of the financial year. Polymer and naphtha margins are at an all-time high. The polymer delta has risen strongly, which has buoyed petchem margins and offset weakness in the polyester delta. A recovery in the petchem would possibly help RIL sustain its strong profit growth in coming quarters too. Operating margins for the petchem segment improved to 11.2 per cent in the quarter from 7.3 per cent in the previous year.
Oil & gas continue to be a drag, especially with the prices of crude falling sharply over the last eight months. Revenues from its domestic exploration and production business contracted 23 per cent year-on-year to Rs 1,200 crore. The segment’s Ebit declined 83 per cent YoY to Rs 83 crore. Production from KG-D6 continued to decline compared to the corresponding period in the previous year. Investors believe this is a crucial year for RIL, as it will commission some of its biggest projects and launch the much-awaited 4G service. RIL’s net debt has increased to Rs 83,423 crore from Rs 76,388 crore in the previous quarter.