Reliance Industries Ltd (RIL) announced the fourth quarter results of financial year 2011-2012 (4QFY12). The company has reported a 17.2% YoY (year on year) growth in sales and 21.2% YoY decline in the net profits respectively. Here is our analysis of the results.
Performance summary
- Net sales increase by 17.2% YoY during the quarter. For FY12, the sales were up 32.9% YoY.
- Operating profits registered a sharp fall of 33.3% YoY during the quarter with operating margins at 7.7% versus 13.5% last year. For FY12, operating profits were down 11.8% YoY and margins came at 10.2% versus 15.4% last year.
- Net profits during the quarter registered a decline of 21.2% YoY with net profit margins at 4.8% (versus 7.3% last year).For FY12, the net profits were down by 1.2% YoY with net profit margins at 6% (versus 8.1% last year).
Standalone financial snapshot
(Rsm) |
4QFY11 |
4QFY12 |
Change |
FY11 |
FY12 |
Change |
Net sales |
726,740 |
851,820 |
17.2% |
2,481,700 |
3,299,040 |
32.9% |
Expenditure |
628,310 |
786,190 |
25.1% |
2,100,440 |
2,962,850 |
41.1% |
Operating profit (EBDITA) |
98,430 |
65,630 |
-33.3% |
381,260 |
336,190 |
-11.8% |
EBDITA margin (%) |
13.5% |
7.7% |
|
15.4% |
10.2% |
|
Other income |
9,170 |
22,950 |
150.3% |
30,520 |
61,920 |
102.9% |
Total Revenues |
735,910 |
874,770 |
18.9% |
2,512,220 |
3,360,960 |
33.8% |
Interest |
6,960 |
7,680 |
10.3% |
23,280 |
26,670 |
14.6% |
Depreciation |
33,870 |
26,590 |
-21.5% |
136,080 |
113,940 |
-16.3% |
Ordinary Profit before tax |
66,770 |
54,310 |
-18.7% |
252,420 |
257,500 |
2.0% |
Ordinary Profit before tax margin (%) |
9.1% |
6.2% |
|
10.2% |
7.8% |
|
Exceptional items |
|
|
|
- |
- |
|
Reported Profit Before Tax |
66,770 |
54,310 |
-18.7% |
252,420 |
257,500 |
2.0% |
Reported Profit Before Tax Margin (%) |
9.1% |
6.2% |
|
10.2% |
7.8% |
|
Tax |
13,010 |
11,950 |
-8.1% |
49,560 |
57,100 |
15.2% |
Profit after tax/(loss) |
53,760 |
42,360 |
-21.2% |
202,860 |
200,400 |
-1.2% |
Net profit margin (%) |
7.3% |
4.8% |
|
8.1% |
6.0% |
|
No. of shares (m) |
|
|
|
|
3,267 |
|
Diluted earnings per share (Rs)* |
|
|
|
|
61.3 |
|
Price to earnings ratio (x)* |
|
|
|
|
12.0 |
|
*On a trailing 12 months basis
What has driven performance in FY12?
- During FY12, segment wise sales from Refining (73% of revenues) and Petrochemicals (22.3% of revenues) booked an increase of 36.8% and 27.7% YoY respectively, both on account of better volumes and higher realizations. Despite higher realizations, Oil and Gas segment’s (4% of revenues) revenues were down by 25.2% due to fall in volumes and transfer of participatory interests in KG D6 basin which was to some extent compensated by higher oil and gas production from Panna Mukta fields. Average crude oil price realization improved to US$ 112/barrel for KG-D6 and US$ 115/barrel for Panna Mukta Tapti (US$ 86/barrel and US$ 86/barrel respectively in FY11). Similarly, gas price realization for the year came at US$ 5.73/ MMBTU (million metric British Thermal units) from Panna-Mukta, US$ 5.57/MMBTU from Tapti and US$ 4.20/MMBTU from KG-D6.
- On margins front, the EBIT margins for Refining, Petrochemicals and Oil and Gas came at 3.3%(4.3% last year), 11.1% (14.7% last year) and 40.7%(38.8% last year).Despite higher gross refining margins (GRMs) at US$ 8.6 per barrel, the refining and Petrochemicals margins were down due to base effect. The Refining, Petrochemicals and Oil and Gas accounted for 40%, 38% and 22% of EBIT respectively.
- The other income for FY12 more than doubled thus offsetting the decline at operating profit level to some extent. Despite a gain at pretax profit level, the net profits for the year declined due to higher effective tax rate in FY12.The net profits were down 1.2% YoY during FY12 with margins at 6.0% versus 8.1% last year.
Segmental performance (Rs m)
Refining (Rs m) |
4QFY11 |
4QFY12 |
Change |
FY11 |
FY12 |
Change |
Revenues |
627,040 |
762,110 |
21.5% |
2,154,310 |
2,947,340 |
36.8% |
EBIT |
25,090 |
16,960 |
-32.4% |
91,720 |
96,540 |
5.3% |
EBIT Margins (%) |
4.0% |
2.2% |
|
4.3% |
3.3% |
|
Petrochemicals (Rs m) |
Revenues |
181,940 |
214,120 |
17.7% |
631,550 |
806,250 |
27.7% |
EBIT |
26,260 |
21,740 |
-17.2% |
93,050 |
89,670 |
-3.6% |
EBIT Margins (%) |
14.4% |
10.2% |
|
14.7% |
11.1% |
|
Oil and Gas (Rs m) |
Revenues |
41,040 |
26,090 |
-36.4% |
172,500 |
128,980 |
-25.2% |
EBIT |
15,690 |
9,510 |
-39.4% |
67,000 |
52,500 |
-21.6% |
EBIT Margins (%) |
38.2% |
36.5% |
|
38.8% |
40.7% |
|
Cost breakup
(Rsm) |
4QFY11 |
4QFY12 |
Change |
FY11 |
FY12 |
Change |
Raw material costs |
577,740 |
730,880 |
26.5% |
1,914,550 |
2,753,830 |
43.8% |
as a% of sales |
79.5% |
85.8% |
|
77.1% |
83.5% |
|
Staff costs |
6,860 |
5,970 |
-13.0% |
26,240 |
28,620 |
9.1% |
as a% of sales |
0.9% |
0.7% |
|
1.1% |
0.9% |
|
Other expenses |
43,710 |
49,340 |
12.9% |
159,650 |
180,400 |
13.0% |
as a% of sales |
6.0% |
5.8% |
|
6.4% |
5.5% |
|
Total expenses |
628,310 |
786,190 |
|
2,100,440 |
2,962,850 |
|
What to expect?
At a price of Rs 736, the stock is trading 11.1 times its trailing 12 months earnings per share (consolidated EPS). The company at net debt level has become debt free. For refining business, major chunk of the business, rising crude prices are a concern as they will put refining margins under pressure. Also, falling gas production and huge cash surplus remains an overhang.