Higher MAT, depreciation also take their toll, says company
Reliance Industries Ltd (RIL), India’s largest private sector company, reported a fourth straight decline in quarterly profits on shrinking refining margins and reduced exports due to a global economic downturn.
The company today posted a 6.4 per cent fall in net profit at Rs 3,852 crore for the second quarter (July-September) of this year compared to Rs 4,116 crore in the year-ago period.
Refining margins more than halved to $6 a barrel from $13.3 a barrel a year earlier. The results met the Street’s expectations because gas production from its Krishna-Godavari (KG) fields helped offset lower refining margins.
| MORE PAIN (RIL’s Q4 performance in Rs crore) | |||
| Q2 ‘09 | Q2 ‘10 | % Chg | |
| Net turnover | 44,688 | 46,848 | 4.8 |
| Net profit | 4,116 | 3,852 | -6.4 |
| Refining margin ($) | 13.3/bbl | 6/bbl | -54.9 |
Kamlesh Kotak, Head, Asian Market Securities, said RIL’s performance was expected to be subdued anyway. “We see the refining margins low till December. The market is keenly watching the gas dispute (between the two Ambani brothers), as nothing else seems to be greatly positive,” he said.
RIL said the decline in profits was also due to higher depreciation and tax provisioning. Depreciation during the quarter went up 91.4 per cent to Rs 2,432 crore against Rs 1,270 crore in the corresponding previous quarter. The
provision for tax has more than doubled to Rs 800 crore against Rs 344 crore
in the corresponding previous quarter, owing to the higher minimum alternate tax (MAT) rate announced in the last Budget.
RIL Chairman Mukesh Ambani said the timely completion of the new SEZ refinery and the deepwater oil and gas KG-D6 block and their safe and stable ramp-up are noteworthy accomplishments for the company. “These projects have contributed meaningfully in RIL achieving a record level of profits, despite the challenging business and economic environment,” he said.
During the quarter under review, revenue from the oil and gas segment, which includes exploration, development and production, more than tripled to Rs 2,937 crore against Rs 935 crore during the corresponding previous quarter.
Total income rose around 6 per cent to Rs 47,476 crore during the quarter from Rs 44,839 crore a year ago. While the company’s revenue from refining business grew nearly 9 per cent to Rs 39,564 crore, income from the petrochemical business stood at Rs 13,340 crore, down by 14.20 per cent.
The company, which began production of natural gas from its KG D6 facility this April, has ramped up the production to over 40 mscmd. During the period, the total production from KG D6 was 222,104 tonnes of crude oil and 4,813 million standard cubic meter per day of natural gas.
However, the company has said it was producing only about 60 percent of its 60 million standard cubic metres a day (mmscmd) capacity.
That meant it had been missing out on $100 million in monthly revenue since May, and it would delay hitting peak gas output of 80 mmscmd by at least a quarter until April-July 2010. Natural gas from KG D6 block was supplied to 15 fertilisers, 19 power, three steel, one LPG and two city gas distribution companies. For the half-year ended September 30 2009, the company achieved a turnover of Rs 81,284 crore reflecting a decrease of 8.7 per cent over the corresponding period of the previous year.
During the period, exports were lower by 26 per cent at Rs 43,035 crore. For its international operations, RIL has farmed-out 30 per cent of its participating interest in Oman-Block 18 and 25 per cent in Oman-Block 41 to Oman Oil Company Exploration and Production.
The basic earning per share for the half year was Rs 45.8 against Rs. 54.0 for the corresponding period of the previous year.
Ahead of the results, RIL fell 1.56 per cent at Rs 2003.85 on the Bombay Stock Exchange today.
