Reliance Net Up 25% To Rs 1653cr

R eliance Industries once again stunned the markets yesterday by announcing record sales and profit growth in 1997-98, despite plunging product prices and realisations.

In a year when petrochemical prices fell to 10-year lows, Reliance beat analysts expectations by recording a net profit of Rs 1,653 crore, a 25 per cent jump over 1996-97. Gross sales rose 54 per cent to Rs 13,404 crore while the operating profit rose 48 per cent to Rs 2,887 crore.

The company has recommended a dividend of 35 per cent for the financial year, which works out to 70 per cent after RILs 1:1 bonus, announced in June 1997, are taken into account. Earnings per share rose to Rs 17.6.

 

Reliance paid tax of just Rs 65 crore, at a rate of 3.6 per cent, thanks to a number of tax shelters like export income, income from oil and gas and higher depreciation due to revaluation of the Patalganga and Naroda plants. The higher depreciation of Rs 793 crore was charged to the general reserve account.

Announcing the results yesterday in Mumbai, Reliance Industries managing director Anil D Ambani said the company was ready for further growth in 1998-99, backed by high volumes and stable prices. We dont expect prices to fall further. They have seen the worst in the last two quarters of 1997-98 and should rise now considering the high demand, he added.

FUTURE PLANS: Addressing his first public media briefing after a long time, Anil Ambani spoke at length on various issues concerning RIL and its future plans. He announced that the company would soon complete formalities relating to listing on the New York Stock Exchange.

Quarterly results will be published from this year, with the first-quarter results to be announced in July.

Ambani also said the group was open to acquisitions, as long as they fitted in with the overall strategy. However, he said there were no concrete proposals at the moment.

Buoyant Volumes: Backed by a surge in sales volume of 91 per cent, Reliances sales touched Rs 13,404 crore (including excise duty and inter-divisional transfers) from Rs 8,730 crore. Of this, goods worth Rs 3,600 crore were sold internally, by one division to another.

The consensus estimate of various analysts on net profit was around Rs 1,600 crore. Analysts said they had assumed higher interest and tax costs in their figures.

Production volumes rose 182 per cent to 5.2 million tonnes and operating margins were maintained at 32.14 per cent. The company benefited from large volume growth as new capacity additions in the last quarter of 1996-97 bore fruit this year. Several plants of polyester, polymers fibre intermediates plus the cracker were commissioned and they achieved full production this year.

Through this, Reliance was able to offset the price falls in most major product categories, especially in the second half. Prices of PTA, which along with paraxylene and MEG contributes nearly 10 per cent of gross sales, crashed from Rs 28.2 per kg in August 1997 to Rs 22.1 per kg in February 1998.

Consequently, this affected Reliances overall PTA production which stood at only 6.84 lakh tonnes in 1997-98, while the companys installed production is close to a million tonnes. Unlike polyesters and polymers, PTA did not contribute much to profitability this year.

The big volume push was given by polyesters and polymers backed by high demand growth. Demand for polypropylene grew by 38 per cent last year and the company produced 3.57 lakh tonnes of an installed capacity of 3.5 lakh tonnes.

Full production was also achieved in PVC, which saw a 10 per cent demand growth and where prices again fell drastically to Rs 29.7 per kg in February 1998 from Rs 36 per kg in October 1997. Polymers contribute nearly 45 per cent to sales compared to 35 per cent of polyesters.

PROFITABILITY PUSH: The lower prices did not affect margins much. Operating margins remained at 19 per cent while the company achieved savings on other fronts.

Last year, Reliance paid net interest of Rs 170 crore and capitalised a further Rs 395 crore. This year, total interest costs stood at Rs 504 crore with little capitalisation. Reliance pre-paid Rs 1,000 crore worth of high-cost debt last year and raised some cheap debt, thereby reducing the overall interest burden.

Savings were also achieved on the operational front. Raw material costs came down due to two reasons. Lower prices for naphtha and paraxylene but also stoppage of costly ethylene imports after the commissioning of the cracker. Ethylene imports alone used to cost the company over Rs 1,000 crore annually.

The cracker start-up cut ethylene import costs, the commissioning of world-scale plants improved volumes without affecting administration costs and this led to improvement in profitability, said an analyst with an FII.

RELIANCE INDUSTRIES: SURGING AHEAD

Reliance re-emerges as Indias largest corporate entity with gross sales of Rs 13,404 crore.

Its net profit of Rs 1,653 crore is the largest ever recorded by a private sector major in the country.

The 35 per cent dividend payout, on enhanced equity, will involve Rs 327 crore.

Its sales volume grew at 91 per cent, while production volume topped 182 per cent.

Total production volume to top nine million tonnes by the year 2,000. lTotal assets zoomed to Rs 24,388 crore from Rs 19,536 crore. lSeventeen new plants, including a 7.5- lakh- tonne cracker, were commissioned during the last two years.

It will spend over Rs 20,000 crore over the next two to three years at its Jamnagar petrochemicals and refinery complex.

The company achieved the profit levels and maintained its margins despite a 10-year low in petrochemicals prices.

Its capex over the last three years equals 8 per cent of governments total capital expenditure.

Its turnover is equal to 1 per cent of the countrys GDP.

RIL accounts for 1.5 per cent of total government revenues.