Growth rates at Reliance Industries have faltered in the second quarter of 1998-99 over the first quarter as poor realisations affected performance.
The company, which previously escaped the demand recession, seems to have been hit in the second quarter where sales grew by a mere 1.58 per cent and profits by 3.23 per cent.
The performance also indicates there might be a fall in corporate sector earnings in the second half of the current year.
The recesssionary trend in the petrochemicals can be gauged from the growth rate in production of RIL's major business, polyester, fibre intermediate and plastics. Production growth rates of polyester filament yarn, polyester staple fibres and PET declined marginally to 30.3 per cent in Q2 from 31.7 per cent in the first-quarter.
Production volumes of fibre intermediates rose by 72.4 per cent in Q1 at 3.19 lakh tonnes whereas it nosedived 50.9 per cent to 3.17 lakh tonnes in the second quarter of the current year
Growth rates in plastics fell to 11.4 per cent in second quarter from 27.6 per cent in first quarter, reflecting the full impact of the recession.
RIL, which achieved sales growth of 16.49 per cent and net profit growth of 9.64 per cent for the full first half of 1998-99, showed a marginal 1.58 per cent rise in sales and a lowly 3.23 per cent climb in net profit in Q2.
The Q2 growth in net profit that Reliance could achieve was primarily due to a 52.2 per cent rise in other income.
A lower interest growth rate of 28.8 per cent in the second quarter compared with a rise of 69.7 per cent in Q1 also helped the company tide over the situation.
The marginal recovery in petrochemical prices in the domestic market in Q2 on account of the swadeshi import duty helped the company shore up profit margins.
Gross profit margins (GPM) which declined to 17.45 per cent in the Q1 from 18.95 per cent in the first quarter of 1997-98, rose back to 18.42 per cent in Q2. This resulted in company showing a modest growth of 7.2 per cent in gross profit, higher than Q2 sales growth of 1.58 per cent.
Depreciation charges during the second quarter of the current year also rose at a slower pace of 17.6 per cent compared with the growth rate of 51.2 in first quarter of the current year. This factor too impacted the company's bottomline which shows a marginal 3.2 per cent rise.
