Higher refining margins save the day for Reliance Inds

Crude turned out to be a double-edged sword for Reliance Industries during the April-June quarter. Robust refining margins—which are directly co-related to crude oil prices—helped the company meet analyst expectations on the bottomline. At the same time, it also pushed up raw material costs, resulting in operating profit margins getting squeezed. Revenues from the exploration & production business fell sharply, and margin pressures in the petrochemical segment offset much of the gains from higher volume sales and price hikes.

Reliance Industries’ first quarter net profit rose 17% year-on-year, to Rs 5661 crore. This was marginally ahead of a CNBC-TV18 poll projecting the bottomline at Rs 5625 crore. Net turnover for the quarter rose 39% to Rs 81,018 crore, better than the poll estimate of Rs 78,000 crore. But net operating margins declined to 11.9% from 15.3%, because of a 40% jump in raw material costs.

“Our cash flows give us the unparalleled opportunity to allocate capital to higher-margin resource plays in leading markets around the world. We remain committed towards investing in India and have commenced the investment program in the petrochemical business,” chairman and managing director Mukesh Ambani said in the earnings release.

OIL AND GAS (exploration and production):

Segment revenue:Rs 3894 crore, down 16.5% y-o-y
Earning before interest and taxes: Rs 1473 crore, down 23.3% y-o-y
“Lower production from KG-D6 and PMT(Panna-Mukta Tapti) blocks resulted in lower oil & gas revenue and partly offset by higher crude oil price realization. EBIT margins remains flat as compared to trailing quarter but were lower on a year-on-year basis due to lower oil and gas production,” the company said, adding “production from KG-D6was 1.41 million barrels of crude oil and 156.2 BCF of natural gas, reduction of 41% and 18% respectively as compared to 1Q FY11.”

REFINING AND MARKETING

Segment revenue: Rs 73,689 crore, up 46% y-o-y
Segment EBIT: Rs 3199 crore, up 57.2% y-o-y
“RIL’s gross refining margin (GRM) for quarter was at $ 10.3 /bbl as against $ 7.3/bbl in the corresponding period of the previous year. Singapore complex refining margin averaged at $ 8.5/bbl for 1Q FY12 which is double of the level in 1Q FY11. RIL processed 17.0 million tonnes of crude and achieved its highest ever average utilization of 110%. Average utilization rates for refineries globally during the same period were 83.3% in North America, 74.1% in Europe and 85.1% in the Asia,” the company said in the release.

PETROCHEMICALS

Segment revenue: Rs 18366 crore, up 32.1% y-o-y
Segment EBIT: Rs 2215 crore, up 8%
“Increase in volume accounted for 6.5% growth in revenue and higher prices accounted for 25.6% growth in revenue. EBIT margins for the quarter ended 30th June 2011 were at 12.1% as compared to 14.8% in 1Q FY11 due to base effect of higher revenues. On a trailing quarter basis, EBIT margins were lower due to negative impact of margin contraction in Polyester & Polymer chains which was partially offset by higher margins in PVC, PET, Butadiene and LAB,” the company said.

Reliance Industries shares ended the day at Rs 882.15, up 0.98% over their previous close.

Source: www.moneycontrol.com

Thanks,
Gaurav Agarwal
Head Dealer
DENIP Consultants Pvt Ltd