Over the past several years, the company has always witnessed the street building expectations ahead of RIL earnings announcements. It has always been a market mover. There was a time when the company’s earnings announcement was a marquee event.
Hence, the announcement of results on a Saturday by the company is a peculiar development.
First the key numbers.
For the September quarter 2011, RIL net sales rose 36.7% at Rs. 78,569 crore while the net profit rose 15.8 percent to Rs. 5,703 crore.
Ahead of September 2011 quarterly results, RIL shares rose 8% over one week. The 30-share BSE Sensex gained 5% during the same period. This clearly shows that there was and perhaps is an air of expectations.
Reliance Industries shares have underperformed the BSE Sensex over the past one year.
A quick read of RIL September quarter 2011 numbers shows that the company has met with expectations from the street on revenue and profitability growth. Yet, it appears that it is unlikely enthuse the street like it used to in the past.
Here are some reasons:
* The company reported lower-than-expected gross refining margins (GRM) of $ 10.1 per barrel in the September quarter 2011. The street expected $ 10.5 per barrel, according to Jagannadham Thunuguntla of SMC Global, a Mumbai-based securities firm. GRM is a key factor for RIL as it determines the profitability of the refining business which accounts for two-thirds of the company’s net sales and 40 per cent of the company’s profit before interest and tax (PBIT).
* The petrochemical business has also witnessed a pressure on profitability. The profit margin on this business is lower that 11.5 percent against 14.5 percent in the September 2010 quarter. Petrochemicals is the second biggest business accounting for 27 percent of the net sales and 34.4 per cent of the profit before interest and tax.
* This clearly means two flagship businesses are witnessing a pressure on profitability. Shareholders would need to know about the company’s outlook on profitability on other businesses.
* The company said in its statement that the production from KG-D6 gas fields in the Bay of Bengal was 2.7 million barrels of crude oil, and 303.4 billion cubic feet of natural gas, a
reduction of 42.1 per cent and 20.3 respectively on a year-on-year basis. “The reduction in production was mainly due to the reservoir complexity,” the company said. Investors would want to know more about how the company plans to tackle this complexity. If getting BP as strategic partner is a solution, how long would it take for the company to boost output.
* When the company announced results in June 2011 quarter, the street was expecting some insight from the company on the financial progress of new businesses like retail and 4G wireless broadband. The company did not say much then and has refrained from making any material statements even in the September quarter.
* The other income of the company rose sharply and helped the surge in the overall profitability. For the September quarter 2011, the company reported other income of Rs. 2,180 crore against Rs. 1,394 crore due to higher average liquid investments. Jagannadham Thunuguntla of SMC Global, a securities firm in Mumbai, points that the other income accounts for 15% of the company’s profit before tax. “This is a significant percentage,” he says.* The company has yet again not given any indication on how it plans to utilise $ 12.6bn or Rs. 61,490 crore worth of cash. This has made analysts cut expectations from the company and that perhaps explains the underperformance of RIL shares over the past one year.Read more at: http://profit.ndtv.com/news/show/profit-take-ril-makes-more-money-out-of-money-183474?cp
Hence, the announcement of results on a Saturday by the company is a peculiar development.
First the key numbers.
For the September quarter 2011, RIL net sales rose 36.7% at Rs. 78,569 crore while the net profit rose 15.8 percent to Rs. 5,703 crore.
Ahead of September 2011 quarterly results, RIL shares rose 8% over one week. The 30-share BSE Sensex gained 5% during the same period. This clearly shows that there was and perhaps is an air of expectations.
Reliance Industries shares have underperformed the BSE Sensex over the past one year.
A quick read of RIL September quarter 2011 numbers shows that the company has met with expectations from the street on revenue and profitability growth. Yet, it appears that it is unlikely enthuse the street like it used to in the past.
Here are some reasons:
* The company reported lower-than-expected gross refining margins (GRM) of $ 10.1 per barrel in the September quarter 2011. The street expected $ 10.5 per barrel, according to Jagannadham Thunuguntla of SMC Global, a Mumbai-based securities firm. GRM is a key factor for RIL as it determines the profitability of the refining business which accounts for two-thirds of the company’s net sales and 40 per cent of the company’s profit before interest and tax (PBIT).
* The petrochemical business has also witnessed a pressure on profitability. The profit margin on this business is lower that 11.5 percent against 14.5 percent in the September 2010 quarter. Petrochemicals is the second biggest business accounting for 27 percent of the net sales and 34.4 per cent of the profit before interest and tax.
* This clearly means two flagship businesses are witnessing a pressure on profitability. Shareholders would need to know about the company’s outlook on profitability on other businesses.
* The company said in its statement that the production from KG-D6 gas fields in the Bay of Bengal was 2.7 million barrels of crude oil, and 303.4 billion cubic feet of natural gas, a
reduction of 42.1 per cent and 20.3 respectively on a year-on-year basis. “The reduction in production was mainly due to the reservoir complexity,” the company said. Investors would want to know more about how the company plans to tackle this complexity. If getting BP as strategic partner is a solution, how long would it take for the company to boost output.
* When the company announced results in June 2011 quarter, the street was expecting some insight from the company on the financial progress of new businesses like retail and 4G wireless broadband. The company did not say much then and has refrained from making any material statements even in the September quarter.
* The other income of the company rose sharply and helped the surge in the overall profitability. For the September quarter 2011, the company reported other income of Rs. 2,180 crore against Rs. 1,394 crore due to higher average liquid investments. Jagannadham Thunuguntla of SMC Global, a securities firm in Mumbai, points that the other income accounts for 15% of the company’s profit before tax. “This is a significant percentage,” he says.* The company has yet again not given any indication on how it plans to utilise $ 12.6bn or Rs. 61,490 crore worth of cash. This has made analysts cut expectations from the company and that perhaps explains the underperformance of RIL shares over the past one year.Read more at: http://profit.ndtv.com/news/show/profit-take-ril-makes-more-money-out-of-money-183474?cp
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