RIL Q4 NET DROPS 9%

Oil Co Hit By Lower Prices,Volumes Although RPL reported a Rs 84-cr profit,RIL saw its Q4 profit dip to Rs 3,546 cr.But FY10 promises to be better,with higher revenues from the new refinery and KG gas sales

RELIANCE Industries (RIL), India's largest company by market capitalisation, posted its second consecutive decline in quarterly profits due to fall in product prices and lower volumes on account of a temporary shutdown at a unit. While this was in line with market projections, many did not expect RIL subsidiary, RPL, to post a net profit of Rs 84 crore for the January-March quarter. RPL, which is proposed to be merged with RIL, commenced production only in December.
    RIL, which runs the world's largest refining complex in a single location, on Thursday announced its fourth-quarter numbers, with net profit falling 9.3% to Rs 3,546 crore as its sales also dropped 24% to Rs 28,362 crore. ETon Thursday reported that Reliance's fourthquarter net profit would fall by 9% on the basis of estimates by analysts. The company's net profit fell 9.8% in the October-December quarter as well, which was the first decline in profit after three years.
    However, the company is expected to reap the benefits of over $15 billion worth of investments made during the past 3-4 years in the Krishna Godavari (KG) basin and RPL refinery. Both the projects have commenced production, and would generate massive cash flows for RIL, which is sitting on reserves of Rs 25,000 crore ($5 billion).
    RIL posted a gross refining margin (GRM) — the difference between the prices of finished products and crude rates — of $9.9 a barrel against a GRM of $15.4 last year. According to Macquarie Securities regional director and head of research Jal Irani, "Going forward, we believe RIL will post a growth in profit on the back of the commencement of the KG basin gas and the new refinery."
"This was a transformational year for Reliance. We commissioned our large refinery and substantially completed gas development projects. We have set new global benchmarks for project execution. Our operating performance with earnings growth is credible in a year of extraordinary challenges of price volatility and demand reduction," said a statement issued by RIL chairman Mukesh Ambani.
According to RIL circles, the company is content with a 2.5% increase in earnings, since large integrated oil firms around the world hardly managed growth. In fact, the four largest petrochem firms globally witnessed a 50-90% dip in earnings. Once gas flows from the KG basin, RIL's revenue mix of 98% from refinery and petrochemicals business is expected to change, as the upstream business will start contributing a major chunk of RIL's revenues. KG gas sale likely to improve RIL's profit in FY10
ANALYSTS expect that RIL, which earns 70% of its revenue from exports of gasoline and fuel, is expected to record a higher profit growth this financial year once revenues from the sale of natural gas from the KG basin is accounted for. RIL's net profit, excluding exceptional item, fell 1% to Rs 3,874 crore in the March quarter, as it provided for Rs 370 crore toward estimated claims on account of subsidiaries.
    RIL's refinery at Jamnagar exited its EOU status from April 16, which allowed it to sell petroleum products in the domestic market. The company commenced gas production from the KG basin from April 2. Amitabh Chakraborty, president (equity) of Religare Securities, said: "RIL surprised the street with its petrochemicals business reporting 17.7% margins, whereas GRMs were slightly weak. FY10 will be very good for the company, as its GRMs would improve with the RPL merger and new gas flowing in. We estimate a net addition of Rs 11,000-12,000 crore to RIL's PAT in FY10 from these two businesses which translates to an EPS of Rs 140 — nearly a 40% jump from FY09." RIL's stock on BSE gained 2.7%, or Rs 46.25, to close at Rs 1,726.35. The stock has gained 1.49% in the past week and 22.4% in the past one month.