RIL Q4 net dips 21% but refining margins higher than expected

Year's turnover up by a third plan being readied with BP to address KG-D6 output fall

Reliance Industries on Friday reported a 21 per cent fall in its net profit to Rs 4,236 crore in the quarter ending March 2012, as compared to Rs 5,376 crore in the same quarter a year earlier, even as it sprung a surprise with higher than expected gross refining margins (GRM).

Many analysts expected its GRM to remain flat or fall lower than $6.8 a barrel in the quarter. However, it reported GRM of $7.6 per barrel.

Total income went up 17 per cent to Rs 85,182 crore as compared to Rs 72,674 crore in the fourth quarter last year. “Better GRM impacted the profitability, which did not fall as much as we expected,” said Deepak Pareek, oil and gas analyst at Prabhudas Lilladher.

High crude oil prices and their effect on refining margin, weaker petrochemical spreads, lower gas production, and lower throughput on account of a three-week shutdown made analysts predict a fall in profits. For the 2011-12 financial year, net profit rose 2.2 per cent to Rs 19,724 crore and turnover increased 35 per cent to Rs 358,501 crore.

The revenue of the company's largest segment, refining, grew 21.5 per cent to Rs 76,211 crore for the quarter. In the petrochemical segment, revenue went up 17.7 per cent but margins in the segment declined 0.7 per cent on a quarter-on-quarter basis, to 10.2 per cent. “On a trailing quarter basis, Ebit (earnings before interest and taxes) margins reduced (in the petchem segment) due to reduction in deltas across the olefins and the polyester chain except for PVC, benzene and butadiene,” the company said.

Natural gas production from its flagship KG-D6 blocks (Krishna-Godavari basin) was 551.31 billion cubic ft during 2011-12, a fall of 23.5 per cent as compared to last year. Crude oil production fell 37.9 per cent. RIL said production was impacted due to unforseen reservoir complexities and water ingress in the producing fields. Our technical teams and of Britain’s BP are working on a plan to address all this, subject to regulatory approvals from the government, said the company.

RIL also said it was finalising arrangements with service and infrastructure providers, application developers and device manufacturers to launch its 4G (fourth-generation) services in India. The company's subsidiary, Infotel Broadband Services, has broadband wireless access spectrum across 22 of the country’s 23 telecom circles.