Higher refining margins help Reliance post 24% rise in Q4 net

Reliance Industries Ltd’s fourth quarter net profit grew 24% on the back of higher refining margins. The company’s quarterly net profit was Rs 3,912 crore as against Rs 3,156 crore in the corresponding year-ago quarter. The net turnover was up 36 per cent, at Rs 37,286 crore as against Rs 27,448 crore. The Gross Refining Margin (GSM) for the quarter was $15.5 a barrel against $13 a year ago, and much higher than several global benchmarks.

Revenues from refining and marketing, its largest segment, rose 36 per cent, to Rs 28,686 crore, while the segment Earnings before Interest and Taxation (EBIT) rose 25 per cent, to Rs 2,839 crore. The EBIT margin for the quarter however, fell to Rs 9.9 per cent, from 10.3 per cent a year ago. It was lower because though the refining margin was a high $15.5 per barrel, the cost of crude per barrel was going up making the refining margin lower in proportion.

The petrochemicals segment continued to be dragged down by high feedstock prices, with polyester margins remaining flat primarily due to lower paraxylene margins. Petrochemical revenues were up 12 per cent (Rs 14,119 crore) and EBIT up 6 per cent (Rs 1,466 crore). The EBIT margin fell to 10.4 per cent from 11 per cent.

For fiscal 2007-08, RIL’s net profit rose 63% to Rs 19,458 crore as against Rs 11,943 crore in FY07. However excluding income from exceptional items of Rs 4,733 crore resulting from a stake sale in subsidiary RPL during the year, the net profit has risen by 28 per cent. Its turnover grew 18% at Rs 139,269 crore as against Rs 118,354 crore. The net operating margin, however, dropped to 17.5 per cent from 17.9 per cent. EPS for the full year excluding exceptional income stands at Rs 105. At CMP of Rs 2,642, the stock is trading at a PE of 25x its FY08 earnings.