Reliance beats expectations

RESULTS REVIEW: SEPTEMBER 2005

P/E based on six month annualised EPS

10.77

Revenues were up 28 per cent but growth in operating profit was lower on account of substantial price discounts allowed to oil marketing companies. Net profits were up 41 per cent, partly buoyed by forex gains.  

Petrochemical sales were higher by 13 per cent while operating profit from the segment grew at a faster clip at 22.8 per cent. EBIT (earnings before interest and tax) margins in the segment were thus higher by 117 basis points.

On a sequential basis, segment profit of the petrochemicals business jumped by 45 per cent. The rise was a combination of high domestic sales where profit margins are better and good volumes growth.

Refining sales were higher by 43 per cent y-o-y but operating profit growth was lower at 22 per cent and margins were down 138 basis points due to the Rs 300 crore ($1.2/bbl) discount extended to oil marketing companies on sale of LPG and Kerosene. On a quarter-on-quarter basis, refining revenues were up 15 per cent increase, but profit fell 14.27 per cent.

Refining sales volumes at 8.36 million tonnes was up 7.2 per cent q-o-q and 8.3 per cent y-o-y. Gross refining margin stood at $11.6 per barrel (before accounting for discount), compared with $11.4 per barrel in the June quarter.

The company earned a forex gain of Rs 130 crore during the quarter.

The company also revalued some of its plants, equipments and machinery by an amount of Rs 22,497 crore and an equivalent amount has been credited to the revaluation reserve account. The additional depreciation due to this amount to Rs 353 crore, which has been withdrawn from the revaluation reserve account. Analysts view this as a measure to protect the size of its balance-sheet size (read book value) ahead of the demerger of RIL