Reliance 2010 Q1 results Ril Result

Ril Q1 Results | Ril Result | Reliance 2010 Q1 results

Mukesh Ambani group’s flagship company Reliance Industries (RIL) has announced its results for the quarter ended June 2010. It has reported net profit at Rs 4851 crore as against Rs 3636 crore, a growth of 33.42% on year-on-year basis.

Gross refining margin (GRM) came in at USD 7.3 a barrel. Petchem margins came in at 14.8% and refining margins at 4%. Operating margins stood at 16%.

Q: Does the Petchem and the refining segment play along expected lines or is there any kind of outperformance or underperformance?

Excerpts from Reporter’s Diary on CNBC-TV18 Watch the full show »
A: That is what I have been analysing. If you see on the Petchem, refining and oil & gas I think on all three segments the EBIT has come largely on expected lines except for Petchem where we have seen some drop in the topline because it was estimated by me at about Rs 15,300 crore while it has come at about Rs 13,900 crore.
If you analyze the profitability statement, there has been a reduction or the less provision on account of deferred tax which is a non cash item, which is just a book entry, that has been reduced from Rs 300 crore to Rs 200 crore because if you have been seeing the provision having made by the company in the past they have been providing that between Rs 300 to Rs 310 crore consistently for the last 6 to 8 quarters. But in this quarter that has been provided at Rs 200 crore.
So you can say that there has been less outgo on account of that. Secondly the other income has been quite high at about Rs 722 crore. With the production going up and the capital expenditure going up, it was thought that company will be able to make use of this surplus tax lying with them and that can eventually reduce the other income of the company and may increase the interest burden. But we have not seen that happening. In fact the other income has been at its highest point at Rs 722 crore.
If you look at the interest burden also that is at Rs 541 crore and so you have a saving there also. I think these three items are largely helping the company to post this PAT of about Rs 4,851 crore which is slightly higher by about Rs 100 to Rs 115 crore.
Q: You had estimated that the PetChem EBIT would be largely flat sequentially, what do you think led to this decline in performance?
A: I don’t see that. I wouldn’t be calling it as a decline in performance because there has been a drop in the topline but I don’t think that there are any concerns for the EBIT margin. If I analyze all three segments practically except for the variation in the topline of PetChem segment, which have largely compensated or pro rata we have seen a drop or there has been a flat performance.
As I analyze it, if you see the difference between March and June quarter there has been an increase of Rs 204 crore in the profit before tax in the June quarter over the corresponding March 2010 quarter. I attribute that Rs 204 crore increase largely to the increase in the other income by Rs 107 crore and a decrease by the deffered tax and all that by that amount. But overall I don’t think that there are any concerns on account of the performance of any of the segments.
Commenting on the results, SP Tulsian, sptulsian.com told CNBC-TV18 that RILs Q1 performance is likely to be a non-event for the market or for the stock to contribute for the overall market to move up. He expects the September quarter results to be more or less muted.

Below is a verbatim transcript. Also watch the accompanying video.

Q: Haven’t got in details as yet but from the face of it the profit figure of Rs 4851 crores, how do the numbers look?

Tulsian: Definitely looks better because I have expecting it to be at Rs 4735 crore. As you have been summarizing it I have seen that GRM at USD 7.3 per barrel. So obviously they are bit lower than the March quarter if I analyze the sequential, they are bit lower by about 20 cents per barrel for March quarter. In spite of that the bottom line is higher than March quarter.

Obviously PetChem must have contributed to this because you have not seen much ramp up in the production from D6 Basin in gas but may be some oil production must have increased. There has been additional discovery in Panna oil block where Reliance Industries is holding 30% stake. So that must have contributed something to the bottom line as well because oil and gas has the highest EBIT margin of close to 40% plus.

So this segment must have contributed to this ramp-up in the bottomline which is in fact expected or which are more than what has been largely projected by analysts. So I am at least happy with the bottom line having projected by the company.

Q: This times performance 7.3 is approximately about 3.6 over the Singapore complex, Singapore complex is about USD 3.7 per barrel this time. So the differential between Singapore complex and Reliance’s reported GRM has improved quarter on quarter. What is your outlook going forward? Do you think they can better this GRM performance in Q2 or Q3?

Excerpts from Reporter’s Diary on CNBC-TV18 Watch the full show »
A: If you see the decline on Singapore GRM between these two quarters, it is about 1.4 dollar while the drop in case of Reliance Industries is not much. But I do not think that from hereon they will really be able to improve upon this because it has to go in tandem with Singapore GRM and the differential of maybe about USD 3 is the maximum which can accrue ultimately to Reliance Industries.
I do not think that for the coming quarters, maybe for September, I do not think that there will be much help happening or accruing to the company on account of the improvement in refining margin. Whatever has to come, the company will try to maintain these kind of performance for September quarter because I do not think much of a ramp-up is happening on KG D-6 gas production also. There have been some concerns.
Either the company is not capable to make a production beyond 60 mmscmd, the kind of refusal they have been making for the allotment of the gas or reframing from signing the GSPA with companies like Essar Oil and NTPC. So unless and until you have the clarity from the company on the capacity of Reliance Industries to ramp it up to 80 mmscmd atleast, which they have been claiming whether that can happen from the quarter beginning October or it is likely to get postponed or pushed in the next calendar year has to be seen.
But I do not think that there is much scope for Reliance Industries to enlarge this differential of more than USD 3 or USD 3.2 over Singapore benchmark.
Q: We have seen a few of the Nifty stocks now report inline results perhaps some disappointments, no great performances by anyone. So how do you think the market is going to take this. Do you think there could be some kind of nervousness that earnings are not falling as per what had been estimated or do you think the market will wait for a betterment in performance in the next quarters?
Tusian: I don’t think that market will really get disappointed with this kind of results and I don’t know how much it will be able to contribute for the market movement or the upmove of the market because this may be seen as more or less neutral or very much on expected lines.
But honestly if you ask me I can’t see Reliance Industries Q1 result as a trigger for the market to move up. This can be a little positive for the stock to move it to Rs 1080. Honestly I was expecting that probably post results the Reliance Industries share can move to Rs 1120 to Rs 1140. But I won’t be taking that call at least for the August series.
If I take a call for the next month and we are seeing expiry day after tomorrow, but atleast for the August series I won’t be expecting the share to move past Rs 1100 which earlier I was expecting it to be Rs 1120 to Rs 1140. The EPS posted by the company of Rs 14.8 by the company and my estimate was for FY11 EPS at Rs 62 and may be the cash EPS at Rs 107 which are again largely on expected lines because the earlier expectation was going at about Rs 63 EPS on a reasonable estimate basis.
But this time if I take a call because I am expecting the September quarter results likely to be muted or more or less on these lines. So may be this will be a non event for the market or at least even for the stock to contribute for the overall market to move up.