 "Refining margins may be saving grace for RIL's Q4 earnings")
Reliance Industries, the country’s largest private sector refiner, is likely to have witnessed an on-year improvement in margins in refining and petrochemicals sectors which is likely to offset the negative impact of lower volumes in the exploration and production vertical during January-March.
According to a Bloomberg estimate quoted in a Mint report the company’s net profit is likely to be Rs Rs.5,652.80 crore and turnover Rs 93,522.50 crore. The corresponding figures a year ago are Rs 4,236 crore and Rs 85,182 crore. Other income, mainly earned from the huge cash pile (at Rs 80,962 crore as of December end), is likely to support the net profit this quarter too.
[caption id=“attachment_701576” align=“alignleft” width=“380”] However, a month-long refinery shutdown is likely to have impacted the volumes in the refining business. Reuters[/caption]
One of the most important number to watch out for in the earnings is the gross refining margin, which is the difference between the cost of refining crude oil and the price at which the end product is sold. In Jan-March, this is largely seen around $10 per barrel, better than $9.6 recorded in the previous quarter and significantly higher than the year-ago figure of $7.6 per barrel.
“While Q4FY13 started strongly with GRMs above $10, the end of the quarter has seen GRMs of $5 per barrel; averaging $8.5 per barrel overall for Q4FY13. RIL should benefit from the QoQ stronger GRMs,” Elara Securities was quoted as saying in a report in The Economic Times.
However, a month-long refinery shutdown is likely to have impacted the volumes in the refining business, which contributes about 80 percent to the company’s revenue.
The company’s other two verticals are petrochemicals and exploration and production. Of this, petrochemicals and textiles business-its traditional sector-is likely ot have witnessed an improvement in volumes as well as margins.
Impact Shorts
More ShortsMorgan Stanley sees the company’s weighted average petrochemicals margins rising 6 percent on quarter during Jan-Mar. “This was driven by strong margins across products in both the olefin and polyester chains,” it said.
“Asian chemical spreads have surged on account of maintenance shutdown at some units. Polymer cracks have expanded, too - polypropylene cracks lead with a 29 percent QoQ expansion, followed by polyethylene cracks at a 15 percent QoQ increase,” ICICI Securities was quoted as saying in the ET report.
Another key announcement the market is keenly watching is the gas production in KG-D6 block. In Oct-Dec, the gas output from the basin was about 24 mscmd. This likely to have declined further and some estimates see the output at 20 mscmd.
According to the report in Mint, RIL shares have risen 5.22 percent over the last one year compared with a 7.81 percent rise in the benchmark Sensex.
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