Reliance Industries, the largest Indian company by market value, reported a net profit of Rs 5,661 crore for the quarter ended June 2011

Reliance Industries, the largest Indian company by market value, reported a net profit of Rs 5,661 crore for the quarter ended June 2011. This is the highest ever net profit the company reported in a single quarter.

While the refining business contributed to a surge in absolute revenue and profits, the company’s high cash hoard (about $ 10bn) helped to generate a quarterly “other income” of Rs 1,078 crore, accounting for 15 percent of the company’s profit before tax. This helped compensate for the drop in oil and gas output from the Krishna-Godavari offshore fields.

Net sales of the company rose 39 percent to Rs 81,018 crore from Rs 58,228 crore on a year-on-year basis.

RIL has reported the highest ever net profit reported in a single quarter. Reuters

The street may give a lukewarm response to the earnings announcement. The June quarter results just about met street expectations. A CNBC-TV18 poll expected a net profit of Rs 5,625 crore. The company has topped that expectation. A Reuters poll of brokerages had estimated a higher net profit at Rs 5,720 crore. It just about matched the brokerage poll carried out by Bloomberg, another news agency.

Here are some key points to note in the company’s results:

• Refining revenue moved up 21.7 percent (YoY) to Rs 73,689 crore from Rs 60,531 crore. Refining earnings before interest and taxation (EBIT) rose 57.2 percent (YoY) to Rs 3,199 crore against Rs 2,035 crore in the same quarter the previous year.

• The operating profit margin was 12.25 percent in April-June quarter – less as compared to 16 percent in the first quarter of 2010-11. This is a cause of concern for investors. The net profit of the company was boosted by over Rs 1,000 crore of “other income”.

• Krishna-Godavari (KG-D6) gas production declined 18 percent in the first quarter of 2011-12 (FY12) compared to the corresponding period of the previous fiscal. For the quarter ended June 2011, production from KG-D6 was 1.41 million barrels of crude oil and 156.2 BCF (billion cubic feet) of natural gas, a reduction of 41 percent and 18 percent respectively as compared to the first quarter of 2010-11.

• For the quarter, gas production from the Panna-Mukta onshore fields declined marginally by 1 percent to 17.5 BCF. Crude oil production from this block was 2.7 million barrels, a decline of 14 percent on a year-on-year basis. The reduction in production is mainly due to natural decline.

• RIL’s gross refining margin (GRM) for the quarter was at $ 10.3 /bbl as against $ 7.3 /bbl in the corresponding period of the previous year. Reliance refineries in Jamnagar can process a combined 1.24 million barrels a day of crude into products like petrol and diesel.

• The revenue for the petrochemical segment rose 32.1 percent to Rs 18,366 crore from Rs 13,903 crore in the year ago period. However, the segment profit margin before interest and tax fell to 12.1 percent against 14.8 percent in the year ago period.

• RIL has cash and cash equivalents of Rs 45,775 crore ($ 10.2 billion) which are invested mainly in bank deposits, mutual funds and government securities/bonds. This has resulted in the other income of Rs 1,078 crore.

The company has not said much about two new businesses like retail and 4G broadband services. The street would like to know the growth strategy in these businesses.