Reliances' petrochem business lags as profits surge

Reliance Industries' petrochemicals business was an underperformer in the quarter ended December 2007, even as profits surged on strong performance by oil refining business in the quarter. Performance of petrochem sector has been hit on both on volumes as well realizations. Production of petrochemicals was down 1.51% during the quarter with polymer production remaining stagnant at 8.52 lakh tons. Sustained high price of naphtha, a basic feedstock for the production of petrochemicals, affected margins. Revenues from petrochemicals dipped by 3.3% to Rs 12,706 crore while earnings (before interest and tax) at Rs 1,778 crore, was almost at similar levels as the same quarter last year. Earnings before interest and tax from petrochemicals was down by 12.19% in the third quarter compared to the second ended September 2007. Revenues were also down almost 2%cent over the same period. The underperformance of the petrochemicals business was counterbalanced by an extremely strong performance in the refining segment where revenues grew by a good 25.31 per cent to Rs 26,154 crore while earnings surged by 35.79 per cent to Rs 2,614 crore. The exceptionally high refining margin of $15.4 per barrel that Reliance enjoyed during the quarter was responsible for driving the performance of the refining business. Overall performance of the company was propped by appreciation in the rupee value which helped drive down interest costs on its dollar denominated debt. Interest and finance costs dipped by 17.32% to Rs 253 crore during the quarter. The trend of a strong performance in refining and an average one in petrochemicals is likely to continue in the fourth quarter.
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