Market surprised by sharper-than-expected drop.
The net profit of Reliance Industries Ltd (RIL), India’s largest private sector company, declined for the third consecutive quarter, as the global recession restricted fuel demand and refining margins narrowed.
The company’s net profit declined 11.5 per cent to Rs 3,636 crore for the three months ended June 30, 2009, against Rs 4,110 crore in the previous corresponding quarter, a sharper drop than what the market expected.
| SLIPPING (RIL Q1 results) | ||||
| (In Rs Crore) | Q1 FY09 | Q4 FY09 | Q1 FY10 | % Change over Q1 FY09 |
| Turnover | 43,050 | 29,073 | 33,309 | -22.60% |
| PBDIT | 6,347 | 6,430 | 6,623 | 4.30% |
| Profit Before Tax | 4,902 | 4,256 | 4,650 | -5.10% |
| Net Profit | 4,110 | 3,546 | 3,636 | -11.50% |
| EPS (Rs) | 28.3 | 25.6 | 23.1 | - |
| [excl. exceptional item] | ||||
Net sales fell 22.9 per cent to Rs 32,055 crore against Rs 41,579 crore in the corresponding previous quarter. The quarterly revenue from refinery sales and marketing dropped 22.7 per cent to Rs 25,180 crore against Rs 32,587 crore in the first quarter of the previous year.
Gross refining margins for the period was $7.5 per barrel against $15.7 per barrel a year ago. Refining accounted for around 65 per cent of Reliance’s revenue during the quarter, while the oil and gas business contributed 5 per cent.
A press release said the company continued to operate its refinery at over 96 per cent, signifying its ability to place the refined products profitably in global markets.
The results were announced after the markets closed.
THE COMPANY’S scrip closed at Rs 2,013.75, down 1.20 per cent on the Bombay Stock Exchange today.
The company said a decrease in prices accounted for a 24.4 per cent reduction in revenue. Though revenues from the petrochemical segment fell 22.3 per cent to Rs 11,540 crore, domestic demand for most of the products remained strong. Polymers sales went up 19 per cent, polyester 3 per cent, though demand for fibre intermediates was flat.
Also, exports were lower by 38.5 per cent at Rs 17,433 crore. Reliance exports most of its refinery products. The company has plans to counter the declining overseas demand by selling fuels in India, so it exited the EOU scheme at its Jamnagar refinery in April.
Mukesh Ambani, chairman and managing director, RIL, said, “Timely completion with safe and stable start-up of the new SEZ refinery and the deep-water, oil and gas KG D6 block are noteworthy accomplishments. These projects will not only play a significant role in shaping the future growth at RIL but, more importantly, will help change the energy landscape of India and the industry globally.”
Revenue from oil and gas, however, more than doubled from Rs 787 crore in the first quarter of the last fiscal. RIL started gas production from its Krishna-Godavari (KG) D6 block in April. In the past three months, production from the KG basin has risen to around 30 million standard cubic metres per day.
“Refining margins were a setback, as demand suffered globally. We were expecting it to be around $8.2 per barrel against the numbers reported. However, petrochem margins were good in spite of global demand dynamics. The next quarter should be better if crude oil stabilises around the present levels,” Vinay Nair, analyst from Khandwala Securities.
