Reliance Industries Q4 profit lower than expected

Reliance Industries (RIL) missed forecasts by posting a profit growth of 30% in the fourth quarter to March 31, 2010, dragged by lower-than-expected refining margins.

Revenues more than doubled primarily because RIL started booking sales of subsidiary Reliance Petroleum after it was merged with effect from September 11, 2009.

At $7.5 per barrel of crude refined, refining margins were better than $5.9 per barrel in the December quarter, but far below $9.9 per barrel seen in the year-ago quarter.

Most analysts had expected refining margins to be over $8-8.5 per barrel.

“They expected too much in terms of refining margins," RIL’s chief financial officer, Alok Agarwal, said.

Net profit rose to Rs 4,710 crore, much lower than consensus estimates of around Rs 5,000 crore. Net profit in the year-ago quarter was Rs 3,627 crore (excluding an exceptional gain of Rs 328 crore).

Refining revenues, at Rs 51,250 crore (compared with just around Rs 20,000 crore during the year-ago quarter), accounted for nearly 80% of its Rs 60,267 crore revenues.

“Refineries processed 60.9 million tonnes of crude oil compared with 32.0 million tonnes in the previous year reflecting the first full year production of the new refinery in the special economic zone (formerly owned by RPL),” the company said.

The KG D6 gas fields, which completed a full year of production this month, helped boost oil & gas revenues from Rs 736 crore a year ago to Rs 4,318 crore.

The field produced around 193 million metric British thermal unit of gas during the quarter. At around $3.9 per unit, the fuel fetched about 3,530 crore to RIL and operating profits (or netbacks) of around 3,315 crore, according to the formula suggested by RIL’s partner Niko Resources.

However, the profits failed to reflect in the pre-tax earnings of the oil & gas division. The division, which had a pre-tax, pre-interest profit of Rs 471 crore in the March 2009 quarter, when D6 did not produce any gas, saw this increase by just Rs 1,231 crore during the latest quarter.

An RIL spokesperson said the difference (around Rs 2,100 crore) was accounted for by depreciation and lower production and the 5% royalty payment to the government. The company did not give details.

The biggest profit boost came from RIL’s petrochemicals business, which increased its pretax, pre-interest profit (ebit) by 30% to Rs 2,222 crore. “The year ended 31st March

2010 was one of the best periods for petrochemicals segment with EBIT of Rs 8,581 crore on a revenue of Rs 55,251 crore,” it said.

For the full year, turnover was Rs 2 lakh crore, an increase of 37% over the previous year. Increase in volume accounted for 50% growth in revenue, which was partly offset by lower prices accounting to a 13% reduction in revenue.

Exports were higher by 24% at Rs 1.1 lakh crore against Rs 0.89 lakh crore the previous year. Profit after tax was Rs 16,236 crore against Rs 15,309 crore for the previous year.