The Hindu Business Line : Reliance net up 10 pc in Q1

Bottomline growth
Plant shutdown at Jamnagar refinery in May that impacted capacity utilisation.
Under recoveries in retail marketing and higher interest costs.
Rising raw material costs and investment in new businesses impacted margins.

Mumbai , July 20

Reliance Industries Ltd (RIL) has reported a 10 per cent increase in net profit for the first quarter ended June 30, 2006, on a 32 per cent increase in turnover.

RIL's net profit amounted to Rs 2,547 crore, up from Rs 2,310 crore in the corresponding year-ago quarter. Its turnover was recorded at Rs 26,166 crore for the quarter, against Rs 19,884 crore.

The rather modest growth in its bottomline was due to a plant shutdown at its Jamnagar refinery in May that impacted capacity utilisation, under-recoveries in retail marketing, higher interest costs, rising raw material costs that impacted margins, and investment in new businesses.

"All our businesses have recorded a robust performance in a very challenging environment," said a statement from Mr Mukesh Ambani, Chairman, RIL. "I am very excited about RIL's future as we continue to commit our cash flows in expanding our existing and new businesses."

Expenditure rose across almost all heads: raw material costs rose 34 per cent, to Rs 13,540 crore; employee costs rose 26 per cent, to Rs 318 crore; while `other expenditure' rose 28 per cent to Rs 1,915 crore.

The company's operating profit before other income, at Rs 4,237 crore (Rs 3,566 crore), rose 19 per cent. But its net operating margin was 17.3 per cent against 20.1 per cent a year ago.

Other income decreased to Rs 44 crore from Rs 194 crore, as surplus funds were utilised for investment in Reliance Petroleum Ltd, decreasing interest income for the company.

Profit before depreciation, interest and tax rose 14 per cent, to Rs 4,281 crore (Rs 3,760 crore).

Interest expenditure increased by 12 per cent, to Rs 266 crore (Rs 237 crore). Outstanding debts as on June 2006 totalled Rs 23,428 crore, against Rs 17,663 crore a year ago.

Depreciation amounted to Rs 907 crore (Rs 791 crore). Provision for taxation rose 45 per cent, amounting to Rs 356 crore (Rs 246 crore).

RIL had made a capital expenditure of Rs 1,900 crore during the quarter, primarily on exploration, production, and implementation of value maximisation projects, said a statement from the company.

Segment-wise performance

From the segmental point of view, the period witnessed a huge pressure on RIL's retail marketing business as a result of the rise in crude oil prices and inadequate increase in selling prices of petrol and diesel. This has led to under-recoveries, said the statement.

As a proportion of turnover RIL's refining and marketing business fell to 66.91 per cent during the quarter, from 69.44 per cent in the corresponding year-ago period. This segment reported only a 13.8 per cent rise in PBIT, whereas the total rise in PBIT for the company was 17.9 per cent.

As a proportion of PBIT, its composition fell by 2 percentage points, to 59.74 per cent from 61.8 per cent.

The petrochemicals segment, on the other hand, showed a PBIT rise of 23.3 per cent. Its contribution to the turnover also increased, from 28.8 per cent, to 31.4 per cent. Petrochemical prices were strong but margins for the majority of petrochemical products were also lower mainly on account of higher feedstock prices, said a statement from RIL.

Production of oil, gas and petrochemicals rose 7 per cent, to 3.52 million tonnes. Exports of manufactured products rose 86 per cent, to Rs 13,270 crore (Rs 7,144 crore).

The company's share rose on the stock exchanges, gaining Rs 13.6 (or 1.38 per cent) over the day on the BSE to close at Rs 995.7.

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