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RIL posts Rs 5 billion profit in single quarter

Notwithstanding the endeavour to maintain stable operating margins, the current momentum in earnings growth of Reliance Industries Limited is unlikely to be sustained over the rest of the financial year because of signs of weakness in product selling prices, managing director Anil D Ambani said in Bombay today.

Addressing a press conference to announce the first quarter results, Ambani said RIL is the only company to record a net profit of more than Rs 5 billion in a single quarter, mainly because of strong volume growth, recovery in product selling prices, improved productivity and focus on cost cutting.

As a result, the operating margin remained stable at 19.6 per cent.

The company has refinanced Rs 20 billion of its borrowed funds, which includes pre-payment of debentures worth Rs 3.50 billion maturing in 2001.

Besides rationalising the cost of borrowings and operations, Ambani said future funds allocation for expansion and modernisation of existing projects would be made mainly from internal accruals and low-cost borrowed funds.

Capital expenditure for the current year will be around Rs 10 billion as RIL is aiming to have a production capacity of 1 million tonnes of polyester in the next three years.

In the first quarter ended June 30, the operating profit went up 12 per cent to Rs 9 billion on a higher sales turnover of Rs 38.37 billion (5 per cent growth). With a net profit of Rs 5.1 billion, the company's contribution to the national exchequer went up 21 per cent to Rs 8.54 billion.

The company's production increased from 1.7 million tonnes to 1.9 million tonnes during the quarter, and with the phase-wise commissioning of the Jamnagar project, the production volume for the full year will go up considerably. Export revenues, including deemed exports, were Rs 1.56 billion as against Rs 1.7 billion for the corresponding previous quarter.

According to the unaudited results, RIL revalued its plant and machinery located at Patalganga and Naroda and made an additional depreciation charge of Rs 960 million in the quarter from its general reserve.

During the quarter, facilities to produce 400,000 tonnes per annum of polypropylene were commissioned at the multi-million-rupee Jamnagar complex.

Full commissioning of the complex that will have a production capacity of 1.4 million tonnes of paraxylene and 600,000 tonnes of polypropylene will enhance RIL's market leadership with a total production capacity of more than 9 million tonnes per annum, Ambani said.

The demand for polyester in the domestic market grew 27 per cent in the first quarter while production volumes increased 10 per cent to 157,000 tonnes.

RIL also acquired control over two polyester manufacturing facilities -- Orissa Synthetics (43,000 tonnes) and India Polyfibres (22,000 tonnes) and the full impact of production will be felt during the year, he said.

The polymer business reported a 13 per cent increase in production volumes to 293,000 tonnes, mainly owing to the commissioning of the polypropylene facility at Jamnagar.

The demand for polymers grew by 19 per cent. About 75,000 tonnes of the demand were met by imports of the product.

RIL will be maintaining its investment focus on core areas like telecom, gas, oil and petroleum, Ambani said. From its operation in the Panna-Mukta-Tapti fields, oil production increased 31 per cent to 85,000 tonnes while gas production rose 36 per cent to 7.6 million cubic metres a day.

UNI

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