Though y-o-y numbers may look good, sequential growth will be hard to come by
The timing of Reliance Industries’ (RIL’s) quarterly results this time may appear a bit surprising. First, they are scheduled for a Saturday — October 15. Besides the results are being unveiled in the first fortnight of the quarter end, which is relatively early in the season for the company. In fact, this will be just the third time in the past decade that RIL’s results are being announced on a Saturday and only the second time that is being done within the first fortnight of the end of the quarter.
However, investors need not read too much into the timing of the results. For, on the previous two occasions when RIL chose to announce results on a Saturday — for quarters ending June 2007 and September 2010 — the numbers were indeed robust.
Its June ’07 profits had surged 42.5% y-o-y, while in the September ’10 quarter it was up 27.8%. And when its December ’05 quarter numbers were announced on January 10, 2006 — the only other instance of an early result — it was subdued with net profit falling 15%. Going by estimates of various brokerage houses, the company is expected to post a 15% net profit growth year-on-year. However, falling gas output and margin pressure in the petrochemicals business means it will be barely able to maintain its performance over the June ’11 quarter. The company is likely to benefit from a stronger refinery margin and a weak rupee.
RIL, which had reported a gross refining margin (GRM) of $10.3 per barrel in the June ’11 quarter, is expected to post a GRM between $10 and $11 in the September ’11 quarter, according to various estimates. The average gas production is estimated between 44.5 and 46.2 mmscmd, against 48.6 for the June’ 11 quarter. Similarly, the pre-interest-and-tax profit from the petrochemical business is likely to have taken a hit of 5-15% from the previous quarter. In effect, the quarter will show a flatto-negative performance compared to the June ’11 quarter. However, considering the low base of last September quarter, there will be some y-o-y growth.
Important developments that could significantly impact the numbers include the consummation of the RIL-BP deal. Although the government approved it in the last quarter, these estimates do not include its impact. While RIL is set to recognise a one-time revenue on sale of 30% stake in 21 oil fields, its share of production from the KG basin will drop proportionately. Treatment of depreciation hitherto provided by RIL on the KG-basin asset on the principle of reserve depletion is something that remains to be seen. It had undertaken a partial shutdown at its SEZ refinery in the second half of September month for maintenance and inspection. It is not known if this will have any material impact on the company’s earnings for the quarter.
RIIL could face a growth challenge with gas output dwindling and its share of output going down following the stake sale. Similarly, a faltering economic growth globally is bound to impact margins in the petrochemicals and refining businesses. Most brokerage houses have trimmed their earningss forecast for the company before reiterating their ‘Buy’ calls.
However, investors need not read too much into the timing of the results. For, on the previous two occasions when RIL chose to announce results on a Saturday — for quarters ending June 2007 and September 2010 — the numbers were indeed robust.
Its June ’07 profits had surged 42.5% y-o-y, while in the September ’10 quarter it was up 27.8%. And when its December ’05 quarter numbers were announced on January 10, 2006 — the only other instance of an early result — it was subdued with net profit falling 15%. Going by estimates of various brokerage houses, the company is expected to post a 15% net profit growth year-on-year. However, falling gas output and margin pressure in the petrochemicals business means it will be barely able to maintain its performance over the June ’11 quarter. The company is likely to benefit from a stronger refinery margin and a weak rupee.
RIL, which had reported a gross refining margin (GRM) of $10.3 per barrel in the June ’11 quarter, is expected to post a GRM between $10 and $11 in the September ’11 quarter, according to various estimates. The average gas production is estimated between 44.5 and 46.2 mmscmd, against 48.6 for the June’ 11 quarter. Similarly, the pre-interest-and-tax profit from the petrochemical business is likely to have taken a hit of 5-15% from the previous quarter. In effect, the quarter will show a flatto-negative performance compared to the June ’11 quarter. However, considering the low base of last September quarter, there will be some y-o-y growth.
Important developments that could significantly impact the numbers include the consummation of the RIL-BP deal. Although the government approved it in the last quarter, these estimates do not include its impact. While RIL is set to recognise a one-time revenue on sale of 30% stake in 21 oil fields, its share of production from the KG basin will drop proportionately. Treatment of depreciation hitherto provided by RIL on the KG-basin asset on the principle of reserve depletion is something that remains to be seen. It had undertaken a partial shutdown at its SEZ refinery in the second half of September month for maintenance and inspection. It is not known if this will have any material impact on the company’s earnings for the quarter.
RIIL could face a growth challenge with gas output dwindling and its share of output going down following the stake sale. Similarly, a faltering economic growth globally is bound to impact margins in the petrochemicals and refining businesses. Most brokerage houses have trimmed their earningss forecast for the company before reiterating their ‘Buy’ calls.
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