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Raghuvir Srinivasan

Revenues remain flat in fourth quarter

A file picture of Reliance's Jamnagar petrochemicals complex.

The pressure on margins in the petrochemicals business, which Reliance has been experiencing since the second quarter of 2006-07, continued in the final quarter as well.

In fact, unlike in the second and third quarters, when the revenue from petrochemical sales showed a good growth, in the fourth revenues remained flat.

Earnings before interest and taxes (EBIT) from the petrochemicals segment actually fell 24 per cent during the quarter to Rs 1,137 crore compared with the same period last year even as that from refining grew 31 per cent to Rs 2,277 crore. On a sequential basis, the petrochemical EBIT was lower by 19 per cent compared with the third quarter of 2006-07.

Strong Performance

The contribution of petrochemicals to the total EBIT fell to 30 per cent in the fourth quarter; down from 41 per cent in the same period last year and 38 and 49 per cent during the third and second quarters respectively.

These numbers clearly reflect the pressure on margins in the petrochemicals business mainly on products such as polyvinyl chloride and polyester fibre and yarn.

Interestingly, polyester production fell 6 per cent in the fourth quarter on a sequential basis and this was despite new capacity of 5.50 lakh tonnes being commissioned in this period. But for a strong performance from polypropylene and polyethylene, the picture in the petrochemicals business would have been worse.

Higher Prices

Margins have also been under pressure due to higher raw material prices especially in the case of polyester. The refining business, despite the problems in domestic marketing, has done exceptionally well thanks to the capacity of the Jamnagar refinery to process heavy crude oil, which trades at a discount to premium grades. This has done wonders to the refining margins of the company.

More Stories on : Performance | Petrochemicals | Reliance Industries Ltd | Microscope

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