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Reliance delivers a scorcher

Mumbai, Jan. 18: A stunning performance by the refining business and a massive jump in exports helped Reliance Industries (RIL) dish out numbers that beat even the estimates of die-hard optimists.

For the third quarter ended December 31, 2006, RIL posted a 58 per cent jump in net profit at Rs 2,799 crore compared with Rs 1,776 crore in the corresponding previous period.

These numbers were way ahead of Street estimates that had projected RIL’s net profit to rise by 25 per cent.

Refining rewards

At the heart of this performance was refining, which compensated for the relatively poor show put up by its petrochemicals business.

For analysts, it was RIL’s gross refining margins (GRMs) which turned out to be an eye opener. GRMs are used to measure the performance of the refining business and it is the difference between the total value of petroleum products produced and the price of crude. During the period, the GRM of Reliance stood at $11.7 per barrel, sharply higher than $8-9 per barrel that observers were expecting.

Sources close to the company said in terms of margins posted for the period, RIL has the world’s best refinery. During the second quarter, GRMs at Reliance were at $9.1 per barrel.

If the bottomline surprised many, the topline too beat many estimates. RIL’s turnover jumped to Rs 27,771 crore, a 40 per cent rise over Rs 19,899 crore in the same quarter last year. Net turnover stood at Rs 26,472 crore against Rs 18,168 crore in the same period last year.

High exports

A major surprise here was that while turnover for the nine months of the current fiscal was at Rs 83,487 crore, reflecting a growth of 33 per cent over the corresponding quarter in the previous year, aggregate exports were higher by 123 per cent at Rs 48,696 crore.

Exports, therefore, accounted for nearly 58 per cent of RIL’s topline. This increase in revenues reflected the impact of 17 per cent higher product prices and 16 per cent higher volumes. RIL said exports of refined products touched $8.3 billion accounting for 76 per cent of the total exports. During the nine-month period, export of refined products were 13.51 million tonnes compared with 7.64 million tonnes during the corresponding period of the previous year.

Looking back

Chairman Mukesh Ambani said: “It has been an excellent quarter for RIL. Our integrated and globally competitive business portfolio continues to help RIL de-risk its business model and deliver a superior operating performance.

“I am pleased with the launch of Reliance Fresh, Reliance’s initiative in the organised retail sector that shall create a unique value proposition for the Indian consumer. RIL remains committed to deploying its cash flows in growing its existing and new businesses.”

A source close to the company added that a factor that helped GRMs and exports rise was RIL’s stress on middle distillates (petrol, diesel) for which demand was high in the global markets.

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