Reliance Inds Q1 net profit 41.1 bln rupees; in-line with street view UPDATE

(Recasts, adds details, chairman, analysts' quotes) MUMBAI (Thomson Financial) - India's Reliance Industries Ltd. (RIL) posted a first-quarter net profit of 41.1 billion rupees, in line with the street view, but its most-watched refining margins fell short of market expectations.

The Mukesh Ambani-led energy and petrochemicals company -- India's largest private sector group -- said net sales in the three months to June amounted to 415.79 billion rupees.

RIL was expected to report a net profit of 40.36 billion rupees for the quarter, according to a mean estimate from a Thomson Financial News poll of nine analysts from eight brokerages and a mutual fund.

Analysts had differed on the company's net sales figures with estimates ranging from 375 billion to 467 billion rupees. The figures are not comparable with those of the previous year because the those numbers do not include the financial impact of a merger with Indian Petrochemicals Corp. Ltd. (IPCL).

Between April and June 2007 RIL posted net profit of 32.64 billion rupees on net sales of 280.56 billion rupees, while IPCL posted net profit of 3.36 billion rupees and net sales of 27.73 billion rupees.

Chairman and managing director Mukesh Ambani said, "We are confident that the new growth drivers oil and gas, organized retailing and agro-retail will take Reliance to a higher growth trajectory in the medium term." The company said its exports in the period climbed 112 percent to 283.57 billion rupees. The company's refining margins for the quarter were surprisingly lower than market estimates at $15.70 per barrel, albeit higher than $15.40 a year earlier.

RIL said it managed to sustain its margins, mainly on efficient sourcing of crude oil, ability to produce globally accepted products and flexibility in its crude bucket, product slate and evacuation infrastructure.

In its refining and marketing segment, revenue increased 46 percent to 325.87 billion rupees, mainly on high product prices driven by high crude prices.

The Jamnagar refinery processed 8.13 million tonnes of crude against 8.01 million tonnes of crude oil a year earlier.

Commenting on GRM (the difference between the value of petroleum products coming out of an oil refinery and the price of raw material going into it), Prayesh Jain, a research analyst with India Infoline, said: "RIL's numbers were broadly in line. However refining segment performance was disappointing with lower-than-expected GRMs, whereas its petrochemical segment performance was surprisingly better than expectations," "RIL's GRM fell short of market expectations as the company could have restricted itself to declare a lower inventory gain to save itself in the event of an introduction of a windfall tax," Sudeep Anand, a research analyst with Religare Securities said.

Chennai Petroleum Corp. Ltd. recently reported GRMs of $15.89 per barrel.

Anand pointed Chennai Petroleum's robust GRMs were due to its high inventory gains.

Jain of India Infoline pointed out RIL's petrochemical margins of 10.6 percent for the quarter, beat market expectations of 9.5 to 9.6 percent.

RIL said its petrochemical products' production increased four percent to five million tonnes.

The company said its polymer business witnessed sustained production growth and its polyester production volume rose five percent to 410 kilotonnes. RIL said its polyester intermediates production grew 3 percent to 1,184 kilotonnes in the quarter.

"The stock may open in the red tomorrow as it has already gained quite a bit on investor hopes of better-than-expected results," Anand said.

However, Anand added the stock has good prospects, as it awaits commencement of production from the KG-Basin and the commissioning of Reliance Petroleum Ltd.'s refinery soon. [e-mail] ami/ndi/alo/ms1/ami/alo/ajb COPYRIGHT Copyright Thomson Financial News Limited 2008. All rights reserved.

The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.