Reliance Industries announces 14% increase in Net Profits

New York / April 26, 2011 / Rani Chopra - 

Reliance Industries announced its fourth quarter results for the period ending 31 March 2011 – The company reported a 14% increase in net profits at Rs 5,376 crore.

For the Financial Year 2010-11 Net Profit was Rs 20,286 crore which is a 25% increase as compared to the Net Profit of Rs 16,236 crore for FY 2009-2010.

Revenues for the year has grown by 29% to Rs 258,651 crore, resulting in a market capitalization of Rs. 340375.64 crores($75.8 billion). The company also announced a dividend payout of 80% for Rs.2,772 crores.

Reliance Industries operates the world’s biggest refining complex in India. With a healthy cash balance of Rs.42,393 crores ($9.5 billion) and debt of Rs.67,397 crores ($15.1 billion), the company has very strong fundamentals.

Even though the quarterly results were below analysts’ estimates, Reliance Industries chairman and managing director Mukesh Ambani is very optimistic. Against the backdrop of global oil prices, the ever increasing demand in emerging markets and the company’s decline in natural gas production, Reliance faced tighter margins.

In spite of revenue growth across all segments from 2009-10 to 2010-11, EBIT(Earnings Before Interest and Tax) margins for the fourth quarter were lower in two of the main segments when compared to the third quarter.

Refining & Marketing Business:In the refining sector the EBIT Margin for the fourth quarter of 4% was 60 basis points lower than that of the third quarter of 4.6%. A reason for this was that increase in prices accounted for more growth than increase in volume. Also the FCC Unit shutdown in the DTA refinery in Jamnagar, Gujarat impacted the bottom line but was necessary to improve overall performance and reliability of the unit.

Petrochemical Business: In the petrochemical sector the EBIT Margin for the fourth quarter of 14.4% was 80 basis points lower than that of the third quarter of 15.2%. In spite of this the petrochemical segment recorded its highest ever EBIT for the year.

Reliance has entered into a strategic alliance with BP and is also looking to explore shale gas. Shale gas is poised to be a very important source of energy in the coming years and by positioning itself in this sector early on Reliance is making a very strategic move. Also on Thursday the company reported “a major oil and gas find”, which in the long run will be a steady stream of revenues for Reliance.

I am very bullish on Reliance and several rating agencies like Moody’s, S&P and Fitch have changed their outlook on RIL from “stable” to “positive“.