Even though revenues were up 10.5%, Reliance Industries net profit remained flat due to high oil prices and a disappointing output from its biggest gas field KG-D6
Reliance Industries Ltd (RIL), the country’s largest company from the private sector, on Friday reported a flat third quarter net profit on higher oil prices and poor volumes from its refining segment.
For the quarter to end-December, RIL said its net profit increased marginally to Rs5,511 crore, while total revenues, including sales, rose 10.5% to Rs1.06 lakh crore from same period last year. During the quarter, RIL’s gross refining margin (GRM) stood at $7.6 per barrel for the December 2013 quarter compared with $7.7 per barrel in September quarter.
In a statement, Mukesh D Ambani, chairman and managing director, RIL said, “Reliance’s robust refining configuration enabled it to deliver stable refining profits in 3Q FY14, against the backdrop of declining regional benchmark margins. Even as we invest to further strengthen our energy businesses, this quarter demonstrates the outstanding quality of our refining and petrochemical business resources and their ability to deliver creditable performance in a period marked by cyclicality and uncertainties. We are happy to announce the commissioning of our new polyester facility in Silvassa, the first amongst a series of projects that underpin RIL’s industry-leading competitive position. Our retail business continues on its rapid growth trajectory with 38% revenue growth during the quarter.”
RIL’s outstanding debt as on 31 December 2013 was Rs81,330 crore ($13.2 billion) compared to Rs72,427 crore as on 31 March 2013. However, RIL had cash and cash equivalents of Rs88,705 crore ($14.4 billion) at the end of the third quarter, in bank deposits, mutual funds, CDs and government securities/ bonds.
Refining and marketing
During the quarter, RIL said its revenues from refining and marketing segment increased 10.1% to Rs95,432 crore from Rs86,641 crore in 3Q FY13. Growth in revenue was accounted by 1% higher volume and 9.1% increase in prices.
During 3Q FY14, RIL Jamnagar refineries processed 17.0 MMT of crude, an operating rate of 110%, sequentially lower due to maintenance turnaround. With turnarounds, post the driving season, the third quarter utilizations in North America, Europe and Asia were 83.5%, 74.3% and 85.8% respectively.
KG-D6 field produced 1.45 million barrels of crude oil, 0.2 million barrels of condensate and 135 billion cubic feet of natural gas for the nine month ended December 2013, a reduction of 38%, 44% and 51%respectively on a year-on-year basis. Fall in production is mainly attributed to geological complexity and natural decline in the fields.
RIL 3QFY14 Petrochemical EBIT declined 15.2% Q-o-Q to Rs2,124 crore impacted by poor domestic demand for polymers and polyester, sequential decline in regional deltas for key products–PP, PVC and fibre intermediates.
During the quarter, domestic demand for polymer products was lower by 5% on year-on-year basis. This was primarily due to lower demand in key end-use sectors like infrastructure, fertilizer, automobile, pipes etc.
Overall, PP demand was moderately higher as there was growth in some of the end-use packaging applications. However, PP demand was negatively affected by poor demand from cement packaging and automobile sector.
During the quarter, the polymer business saw a mixed-trend in terms of product margins in polyolefin products. PP deltas were lower on Q-o-Q and Y-o-Y basis as propylene prices rose sharply on account of lower supplies from Middle East region.
Reliance Retail registered a growth of 38% in turnover over the same quarter last year. Gross revenues grew to Rs3,927 crore in the third quarter compared to Rs 2,839 crore during the same period in the previous year. Retail business achieved PBDIT of Rs106 crore for 3Q FY14. As on 31 December 2013, Reliance Retail operated 1,577 stores across 141 cities.
Some of the highlights of the quarter were:
RIL closed Friday flat at Rs884 on the BSE, while the 30-share benchmark ended 0.95% down at 21,063.
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December quarter net profit of Wipro grew by a healthy 27% on back of rationalisation in cost structure, a weak rupee and standardisation of its core. However, its revenues from its marquee business, IT services, in dollar terms were weak
Wipro Ltd, India's third largest IT company, on Friday reported a 27% increase in its December quarter net profit on 18% growth in its revenues.
For the quarter to end-December, the IT company said its net profit rose to Rs2,014.7 crore from Rs1,589.5 crore while total revenues, including sales, grew 18% to Rs1330 crore, from same period last year.
However, the company’s overall profit was marginally affected by a one-time expense related to cessation of manufacturing Wipro branded desktop, laptops and servers.
Wipro’s IT products segment delivered revenue of Rs1,020 crore ($164 million) for the December 2013 quarter, an increase of just 2%.
Azim Premji, chairman of Wipro, said, “As the global economy is progressing towards stability, we see optimism amongst clients, especially in the West. Corporations are leveraging technology to reduce operational costs and investing resources in differentiating themselves in the marketplace.”
Wipro’s revenues from its marquee business—IT services—in dollar terms, stood at $1,678.4 million, an increase of 6.4%. On the other hand, its IT services revenues in rupee terms is pegged at Rs10,330 crore, an increase of 20%.
Suresh Senapaty, executive director and chief financial officer of Wipro, said, “Our strategy of ‘standardization at the core’ is yielding results. Our investments in automation and productivity tools have driven efficiencies and helped us expand margins of IT Services by 54 basis points to 23%.”
Wipro expects revenues from IT services business to be in the range of $1,712 million to $1,745 million, including the revenues from our acquisition, for the March 2014 quarter.
Wipro’s IT services segment had 1.46 lakh employees as of 31 December 2013 and added 42 new customers for the quarter.
Some of the highlights during the quarter were:
Wipro closed Friday 3.2% down at Rs552.45 on the BSE, while the benchmark Sensex ended marginally down at 21,063.
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Volumes across most UV brands fell in December as a sharp sales drop was seen for urban SUVs – Ertiga, Duster, Ecosport, Terrano, while sales held up for XUV500. In power bikes, Yamaha’s FZ gained share smartly while Bajaj Pulsar witnessed the sharpest decline in volumes
Auto sales in December are typically low as this is a lean month and most companies go for inventory adjustments during this period. Even then, in December new launches in utility vehicle (UV) segment failed to maintain their average monthly sales.
"In passenger cars, most of Hyundai brands reported sales declines (unlike Maruti Suzuki India Ltd-MSIL), while in UVs, new launches clocked lower volumes. In bikes, (Honda) Dream lost share in the executive segment as (Hero) Passion gained, while (Bajaj) Pulsar lost share in the premium segment to Yamaha’s FZ and TVS’s Apache," said Religare Capital Markets in a research note.
Volumes for Hyundai brands fall in December
Overall, car volumes declined 4.5% in December, partly affected by the inventory adjustment in a seasonally lean month. Most Hyundai brands saw lower volumes, Grand i10 at 9,100 units against an average of about 10,300 for the past three months, i20 at 3,500 units vs. 5,600 in April-November, (Honda) Eon 5,400 units vs 7,400 units, and (Honda) Amaze 4,500 units vs 6,600 units. MSIL’s volumes however remained in line with the monthly sales trend (Swift, Dzire, Alto and WagonR at 16,800, 15,400, 23,800 and 12,100 units, respectively) as the company gained market share.
According to the report, (Maruti) Alto gained share in the ‘mini’ segment by 250 basis points (bps) on month-on-month (MoM) (still down 240bps year-to-date (YTD)) as its share inched up to 50%; Honda’s Eon is consistently losing share in the past four months—now at 11.4% vs an average of 16% during April to November.
"Hyundai’s Grand i10 and i20 lost share MoM in their respective segments as MSIL’s Swift and Dzire gained. Ford’s Figo is consistently losing share in segment. Amaze’s volumes have also dropped in the past two months to 4,500 against a run-rate of 6000 to 7000 units per month," Religare Capital said.
New launch sales in UVs moderate
During December, net UV segment volumes declined by a sharp 10% with the MoM drop more reflective of the newer launches that lost market share during the month. (Renault) Duster at 2,600 units versus an average of 4,200 units during April to November, (Ford) Ecosport at 3,900 units versus an average of 5,000 units since launch, and (Nissan) Terrano at 1,400 units versus 3,000 units in October and November 2013.
"Ecosport seems to be losing sheen with volumes plunging from 6,200 units in September to 3,900 units in December, thus leading to market share gains for other incumbent brands like Mahindra & Mahindra (M&M) Bolero and Scorpio and (Toyota) Innova, which gained by 180bps, 35bps and 222bps MoM, respectively," the research note said.
A sharp sales drop was seen for urban SUVs—(Maruti) Ertiga, Duster, Ecosport, Terrano, while sales held up for (M&M) XUV500. Among other rural and semi-urban brands, Innova volumes improved MoM, while the drop for other incumbents like Bolero and Scorpio was also milder.
Passion, FZ, Apache gain share in bikes
Volumes for Honda’s Dream spiralled down in December to about 45,000 units as its share in the 75-110cc segment dropped to 8.3% (versus the August 2013 peak of 12%) as Passion gained while (Bajaj) Discover maintained its share MoM. In 110-125cc segment, (Hero) Glamour gained by 270bps at the expense of (Honda) CB Shine, while Discover remained steady. In the premium segment, volumes for Pulsar products fell sharply MoM as Bajaj lost share to Yamaha’s FZ and TVS’s Apache.
Activa gains further share in scooters
Honda Activa’s share in scooters continued to grow– to over 50% in December compared with 48% in November 2013 and 38% in December 2012. The share of Hero brands—Maestro and Pleasure—also improved MoM by 170bps/70bps. (TVS) Jupiter volumes continued to inch up since launch, now at 13,400 units with a 4.4% share – the fifth highest in the segment.
The launch of the Jupiter by TVS has resulted in cannibalization of the other products like Streak, Pep+ and Wego, Religare Capital said in the report.