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Our Bureau

Higher raw material costs impact refining margins

Mumbai , Oct. 19

Reliance Industries has reported a 9 per cent increase in net profit for the second quarter of the current fiscal.

The modest rise in profit was mainly due to higher raw material costs impacting the refining business margins.

The net profit amounted to Rs 2,709 crore, up from Rs 2,481 crore in the second quarter of the previous fiscal.

Turnover up 29 pc

Turnover increased by 29 per cent to Rs 29,550 crore (Rs 22,893 crore).

Raw material costs at Rs 22,385 crore increased by 47 per cent. Staff costs rose 9.6 per cent to Rs 284 crore (Rs 259 crore).

Interest and finance charges were higher at Rs 278 crore (Rs 222 crore) while depreciation was 25 per cent higher at Rs 1,018 crore (Rs 804 crore).

Earnings before interest and tax (EBIT) margins for the refining business declined to 6.4 per cent for the quarter, from 8.2 per cent a year ago. At the absolute level, the EBIT margin was lower by 3 per cent at Rs 1,489 crore, said a statement from the company.

This was lower primarily due to the softening of the gross refining margin which fell to $9.1 per barrel, from $10.4 per barrel in the corresponding previous period.

Improved global refining utilisation, lower turnaround, end of peak driving season in the US and fuel switching in China and the US led to a fall in refining margins across all regions, said the company.

Petrochem margin up

The EBIT margin of the petrochemicals business was higher at 16.2 per cent, up from 15.7 per cent. At the absolute level, it was higher by 38 per cent at Rs 1,764 crore.

Polymer products and fibre intermediates witnessed strong margins, but there were lower margins in the polyester business due to high fibre intermediate prices.

Under-recovery in retail fuel prices and inability to raise its retail prices led to loss of market share in that segment, said the company.

RIL's performance was also impacted by a plant shutdown at Hazira in August due to flooding of the Tapi river. There was a production loss of 63,000 tonnes as well additional costs of Rs 34 crore which added to "other expenditure''.

Highest-ever exports

Exports at Rs 19,413 crore rose 142 per cent, and were the highest-ever for any quarter, said the company.

For the half-year ended September 30, 2006, net profit at Rs 5,256 crore was up 10 per cent, while turnover at Rs 55,716 crore was up 30 per cent. Operating profit at Rs 7,694 crore was up 15 per cent. Production of oil, gas and petrochemicals in volume terms rose 14 per cent to 7.48 million tonnes.

RIL shares lost Rs 12.35 over the day on the BSE to close at Rs 1,195.65.

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