Reliance Industries Ltd,Indias largest private sector firm,reported a 9.8 per cent fall in net profit at Rs 3,882 crore for the third quarter ended December 31,2008 amidst volatility in prices and margins. This is its first profit drop in three years,but beat forecasts as refining margins did not fall as much as expected.
However,if the exeptional gains of the third quarter of 2007-08 are included,the fall would be much higher at 56.6 per cent. Exceptional item during the corresponding previous quarter and nine months ended December 31,2007 represents gains primarily arising out of transactions concerning Reliance Petroleum shares, the company said.
Indicating a tough business environment,the total turnover also dipped 8.75 per cent to Rs 31,563 crore during the quarter under review from Rs 34,590 crore in the year-ago period.
RIL chairman Mukesh Ambani said,This was one of the most challenging quarters for Reliance with volatility in prices and margins. Producers and consumers are coming to terms with slower global trade and economic outlook. Reliance performed commendably in this environment,with high operating rates. We also reached an important milestone in start up of the RPL refinery.
RIL shares moved up by 1.21 per cent to Rs 1132.95 on the BSE as the results came out after the market hours.
RIL disclosed that it has cash and cash equivalents in excess of Rs 28,500 crore ($5.9 billion). Over 95 per cent of these are in fixed deposits and certificate of deposits with banks. RILs net debt is equivalent to approximately one years trailing PBDIT.
RIL managed to sustain its margins primarily on the back of efficient sourcing of crude oil,ability to produce globally accepted products and flexibility in its crude bucket,product slate and evacuation infrastructure, it said. During the quarter ended December 2008,RILs gross refining margin decreased on a year-on-year basis from $15.4 per barrel to $10.0 per barrel. It may be recalled that crude oil prices plunged more than $100 from its peak of $147 barrel in July,to $44.60 at the end of December.
In a significant move,RIL also restated its results for the previous quarters,saying its net profit would have been lower by Rs 1,177 crore in the first nine months of the current fiscal if it had followed a separate accounting method. The company has reported a net profit after tax of Rs 11,733 crore for the nine-month period ended December 2008,down from Rs 15,546 crore in the year-ago period.
It has continued to adjust the foreign currency exchange differences on amounts borrowed for acquisition of fixed assets,to the carrying cost of fixed assets in compliance with Schedule VI of the Companies Act,1956 as per legal advice received,which is at variance to the treatment prescribed in Accounting Standard (AS1) on Effects of Change in Foreign Exchange Rates notified in the Companies (Accounting Standards) Rules 2006, it said. Had the treatment as per the AS1 been followed,the net profit after tax for the nine-month period ended December 2008 would have been lower by Rs 1,177 crore.