INDIA’S largest private sector company Reliance Industries (RIL) is likely to report dismal numbers when it publishes its third quarter results on Thursday. The steep crash in petroleum product prices and subsequent fall in demand for petrochemicals are sure to take their toll on RIL’s numbers.
However, despite the dip in profits expected in December 2008 quarter, most analysts are gungho about the company’s future due to the commissioning of its mega-projects.
If the Q3 results announced by two refining companies — Mangalore Refinery (MRPL) and Bongaigaon Refinery (BRPL) — are any indication, RIL is likely to have a tough time this quarter. Both the companies have posted unprecedented losses with negative refining margins. The crude oil prices crashed nearly 55% during the December 2008 quarter to $40 per barrel.
In such a scenario, the refineries have to sell their products at prices below their cost due to the time gap between purchase of crude and sale of refined products. Besides, the inventory available with the company at the end of the period has to be marked down to market price, which is lower than its cost.
According to ETIG’s estimates, RIL is likely to report a gross refining margin (GRM) of $10 per barrel and would report net profit of Rs 2,739 crore. During the quarter ended December 2007, the company had reported a net profit of Rs 8,079 crore, which included Rs 4,733 crore of extraordinary profit on sale of stake in Reliance Petroleum.
Sanjeev Prasad of Kotak Securities expects the company to post a GRM of $8.2 per barrel for the December 2008 quarter. “With the crude oil and petro-product prices crashing, the company will incur heavy inventory losses. Also, the demand for its polymers and petrochemicals has been lower impacting its margins. We expect the company to post net profit of around Rs 2,300 crore,” he added.
Almost all the leading brokerage houses expect a fall in RIL’s profits. Macquarie Research, in its recent research report on the company, has projected a net profit of Rs 3,590 crore in Q3. Motilal Oswal forecasts a net profit of Rs 3,395 crore; ICICI Securities expects Q3 net profits at Rs 3,329 crore, while Khandwala Securities has pegged RIL’s net at Rs 2,950 crore.
However, despite the dip in profits expected in December 2008 quarter, most analysts are gungho about the company’s future due to the commissioning of its mega-projects.
If the Q3 results announced by two refining companies — Mangalore Refinery (MRPL) and Bongaigaon Refinery (BRPL) — are any indication, RIL is likely to have a tough time this quarter. Both the companies have posted unprecedented losses with negative refining margins. The crude oil prices crashed nearly 55% during the December 2008 quarter to $40 per barrel.
In such a scenario, the refineries have to sell their products at prices below their cost due to the time gap between purchase of crude and sale of refined products. Besides, the inventory available with the company at the end of the period has to be marked down to market price, which is lower than its cost.
According to ETIG’s estimates, RIL is likely to report a gross refining margin (GRM) of $10 per barrel and would report net profit of Rs 2,739 crore. During the quarter ended December 2007, the company had reported a net profit of Rs 8,079 crore, which included Rs 4,733 crore of extraordinary profit on sale of stake in Reliance Petroleum.
Sanjeev Prasad of Kotak Securities expects the company to post a GRM of $8.2 per barrel for the December 2008 quarter. “With the crude oil and petro-product prices crashing, the company will incur heavy inventory losses. Also, the demand for its polymers and petrochemicals has been lower impacting its margins. We expect the company to post net profit of around Rs 2,300 crore,” he added.
Almost all the leading brokerage houses expect a fall in RIL’s profits. Macquarie Research, in its recent research report on the company, has projected a net profit of Rs 3,590 crore in Q3. Motilal Oswal forecasts a net profit of Rs 3,395 crore; ICICI Securities expects Q3 net profits at Rs 3,329 crore, while Khandwala Securities has pegged RIL’s net at Rs 2,950 crore.
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