Reliance surprises with 58 per cent Q3 net growth

Reliance Industries, the largest private sector company in the country, has reported third quarter results, which are way ahead of expectations. Most analysts had forecast a difficult quarter for the company because of a plant shutdown and lower refining margins because of lower crude oil prices. Surprisingly, Reliance managed to achieve very good volume growth and refining margins improved considerably over the previous quarter.

For the quarter ended 31 December, 2006, net profit has increased 57.6 per cent to Rs2,799 crore, or Rs20.1 per share, from Rs1,776 crore, or Rs12.7 per share, for the previous year quarter. Net Revenues were higher by 45.71 per cent at Rs26,472 crore as compared to Rs18,168 crore for the previous year quarter.

For the nine month period ended December 2006, the company has reported a net profit of Rs8,055 crore, or Rs57.8 per share, on net revenues of Rs79,468 crore. The company is all set to achieve turnover in excess of Rs1 lakh crore this financial year. RIL would be the first private sector company and the second among all companies to do so.

Refining and fuel marketing business recorded a revenue growth of 37 per cent over the previous year quarter. Crude oil throughput increased to 7.9- million tonnes from 6.7-million tonnes for the previous year quarter, but was lower when compared to 8.2-million tonnes processed during the second quarter of this financial year. Average refinery utilisation rate was 95 per cent for the first nine months.

Petrochemicals division's gross revenues increased by 48 per cent over the previous year quarter. Volume growth for the division was at 34 per cent with polymers and polyester intermediaries achieving volume growth of 45 per cent each. With a capacity of 2-million tonnes per annum, Reliance has become the world's largest producer of polyester fibre and yarn.

Operating profits, excluding other income, jumped by a substantial 58.23 per cent over the previous year quarter. Operating margins as a percentage of net revenues increased 152 basis points to 17.9 per cent from 16.38 per cent for the previous year quarter.

Average refining margins for the quarter were $11.7 billion per barrel, substantially higher than $9.1 per barrel achieved for both the previous year quarter and the second quarter of this year. Surprisingly, RIL managed this margin improvement when all other regional refining margin benchmarks were substantially lower than the earlier periods.

The refining division's EBIT jumped 125 per cent and its EBIT margins improved substantially to 9.2 per cent from 5.6 per cent a year ago. Petrochemical division's EBIT were higher by 32 per cent but EBIT margins declined to 12.9 per cent from 14.5 per cent a year ago.

Apart from higher refining margins, a decline of 14.24 per cent in other operating expenses helped in margin expansion. Input costs were higher by 54.78 per cent while staff costs went up by 13.94 per cent

Interest and finance charges increased 51.03 per cent over the previous year quarter while depreciation charges went up 28.88 per cent. Other income declined considerably to Rs42 crore from Rs180 crore for the previous year quarter.