Despite what Reliance Industries Ltd (RIL) CMD Mukesh Ambani described as a ?challenging quarter?, the country?s largest private sector company by market capitalisation reported a dip in net profit of just 10% to Rs 3,501 crore for the third quarter of 2008-09. In the same quarter last year, its profit was Rs 3,882 crore.
The results are better than market estimates, according to a Reuters poll and RIL?s stock gained 1.21% to close at Rs 1,132.95 on the BSE on Thursday. ?This was one of the most challenging quarters for Reliance with volatility in prices and margins. Producers and consumers are coming to terms with slower global trade and economic outlook,? Ambani said.
RIL joins Infosys as one of India?s top companies that have managed to beat the bleak market expectations this quarter. Its healthy showing was made possible by improved gross refining margins?the difference between the cost of crude and post-refining price. Margins did not fall as much as feared by many analysts, dropping to just $10 a barrel against $15.4 on a year-on-year basis.
RIL?s margins in the quarter were $6.4 a barrel higher than the benchmark Singapore complex gross refining margin. This was attributed by the company to better sourcing of crude, flexibility in the crude basket and other refining-related infrastructure, despite the fall in demand for fuel and lower gains from processing.
Overall sales dipped 9% to Rs 31,563 crore in the quarter as against Rs 34,590 crore in the corresponding period. RIL will, however, benefit from an earnings boost once natural gas production from the Krishna-Godavari basin goes fully on-stream by late February, pumping 30-40 million cubic metres of natural gas a day.
Deepak Parekh, an analyst with Angel Broking, said the performance of the company was driven by its petrochemical segment rather than refining division. ?RIL posted profits also due to higher interest income of Rs 546 crore during the quarter, against Rs 141 crore the previous financial year.?
Revenues for the nine-month period in the petrochemical segment increased 11% to Rs 43,043 crore, against Rs 38,880 crore. But revenues for refining and marketing increased much lower at 26% from Rs 72,057 crore to Rs 90,720 crore.
Ambani said ?Reliance performed commendably in this environment, with high operating rates. We also reached an important milestone in the start up of the RPL refinery.? Its Jamnagar refinery processed 24.2 million tonnes of crude, a utilisation rate of 98%, compared with 23.7 million tonnes of crude oil processed during the corresponding period last year. The average refinery utilisation rate was 83.2% in North America, 83.6% in Europe and 82% in the Asia-Pacific region.
Meanwhile, RIL said that the company?s share in the Panna-Mukta block production of natural gas and crude oil for the nine-month period decreased 20% each, compared with the corresponding period of the previous year. The decrease was due to a shutdown in June 2008 in the PPA process platform.