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| Reliance Industries: Revenue surprise |
| Vishal Chhabria & Sunaina Vasudev / Mumbai Jan 23, 2010, 00:57 IST |
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 The 92 per cent year-on-year growth reflected the additional revenues from the SEZ refinery numbers
A depressed market saw something to cheer as Reliance Industries’ (RIL) revenues came in on the higher side of analysts’ estimates. High global inventories and lower demand had hit gasoline and distillate realisations, so the market expected revenue growth for December 2009 quarter to be relatively more muted — volume growth was expected to be strong due to higher capacities. The 92 per cent year-on-year growth reflected the additional revenues from the SEZ refinery numbers, which was commissioned end-December 2008 and displayed in RIL’s numbers post the merger of Reliance Petroleum.
Refining and marketing segment revenues were up 21 per cent sequentially (140 per cent year-on-year) to Rs 48,000 crore, as the RPL’s (SEZ) refinery operated at 115 per cent and the domestic refinery at 100 per cent capacity. RIL’s gross refining margins (GRMs) were virtually flat (sequentially) at $5.9 per barrel for the December 2009 quarter but fell by 40 per cent year-on-year. This is in contrast to a sharp dip seen in benchmark Singapore GRMs, which according to analysts touched its lowest levels in six years, averaging $1.13 per barrel for the December quarter as supply clearly outstripped demand. Lower margins resulted in the segment’s profits falling 27 per cent year-on-year to Rs 1,379 crore for the quarter.
The upstream (exploration and production) business has seen consistent news flow on new discoveries in the Krishna Godavari (KG) D6 block and segment revenue is up 20 per cent sequentially and more than triple over December 2008 numbers, to Rs 3,530 crore.
Petrochem revenues also clocked in good growth and the company saw a volume boost based on strong domestic demand, in conjunction with low industry inventories allowing better realisation in December 2009 quarter. This pushed through a 17 per cent year-on-year increase in revenues to Rs 14,756 crore. The numbers looked good, positioned against the lower base of the previous year’s quarter.
Overall, expenses for the company doubled year-on-year, mainly because of higher crude oil inputs for the new SEZ refinery. However, the company has felt the pinch of the lower GRM environment and higher depletion rate in KG D6 fields compared to PMT. Cumulatively, these factors pulled operating profit margins down considerably (by 4.36 percentage points year-on-year) to 13.8 per cent for the December 2009 quarter, though in absolute terms, operating profits were higher by 46 per cent at Rs 7,844 crore. A dip in other income, higher interest charges and tax outgo meant that post tax profits increased by only 16 per cent year-on-year to Rs 4,008 crore.
The outlook for the company is relatively better, according to sector analysts, as GRMs are expected to trend upwards over the year. This is on the back of expected distillate demand growth in Asia and supply rebalanced by refinery capacity rationalisations and shutdowns globally.
The stock has underperformed the Sensex by 3.7 per cent in the last 3 months and closed flat in the day’s trading at Rs 1,053.15, outperforming the Sensex marginally, which was down 1.14 per cent for the day.
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