Reliance Industries Limited · NSE:RELIANCE
Reliance Industries — Q1 FY2015 Earnings Presentation
71 slides from Reliance Industries's earnings presentation, Jul 19, 2014
Slide 1: 1Q FY 2014-15 Financial Results
1Q FY 2014-15 Financial Results 19 July 2014
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements which may be identified by their use of words like “plans,” “expects,” “will,” “anticipates,” “believes,” “intends,” “projects,” “estimates” or other words of similar meaning. All statements that address expectations or
Slide 3: Financial Results
Financial Results 3 www.ril.com
Slide 4: Consolidated Financial Results: 1Q FY15
Consolidated Financial Results : 1Q FY15 % Change % Change 4Q FY14 (in ` Crore) 1Q FY15 1Q FY14 Y-o-Y Q-o-Q 106,208 T urnover 107,905 100,615 7.2% 1.6% 7,211 EBIT 6,916 5,378 28.6% -4.1% 5,881 Net Profit 5,957 5,237 13.7% 1.3% Record net profit ($ 1 billion) Y-o-Y EBIT growth of 29% Strong ope
Slide 5: Operational Highlights – 1Q FY 2014-15
Operational Highlights – 1Q FY 2014-15 Refining Crude throughput of 16.7 MMT, operating rate of 108% (lower throughput due to planned turnaround) GRM at $ 8.7/bbl as compared to $8.4/bbl last year ($ 9.3/bbl in 4Q FY14) GRM weaker on Q-o-Q due to weaker middle distillate cracks Light-heavy d
Slide 6: Consolidated Segment Revenue: 1Q FY15
Consolidated Segment Revenue : 1Q FY15 % Change % Change 4Q FY14 (in ` Crore) 1Q FY15 1Q FY14 Y-o-Y Q-o-Q 96,668 Refining 98,081 91,463 7.2% 1.5% 26,541 Petrochemicals 25,398 23,228 9.3% -4.3% 2,798 Oil & Gas 3,178 2,496 27.3% 13.6% 3,653 Organised Retail 3,999 3,492 14.5% 9.5% 1,804 Others 1,772 1,
Slide 7: Consolidated Segment EBIT: 1Q FY15
Consolidated Segment EBIT : 1Q FY15 % Change % Change 4Q FY14 (in ` Crore) 1Q FY15 1Q FY14 Y-o-Y Q-o-Q 3,962 Refining 3,814 2,947 29% -4% 2,150 Petrochemicals 1,863 1,757 6% -13% 762 Oil & Gas 1,042 486 114% 37% 24 Organised Retail 81 (14) NA 238% 313 Others 116 202 -43% -63% Refining EBIT increas
Slide 8: Consolidated Earnings - 1Q FY15
Consolidated Earnings - 1Q FY15 % Change % Change 4Q FY14 (in ` crore) 1Q FY15 1Q FY14 Y-o-Y Q-o-Q 7,211 Segment EBIT 6,916 5,378 28.6% -4.1% (978) Interest Expense (505) (938) 46.2% 48.4% 1,250 Interest Income 1,187 1,533 -22.6% -5.0% Other Unallocable Income 165 131 644 -79.7% -20.6% (Net of Expen
Slide 9: Refining & Marketing
Refining & Marketing 9 www.ril.com
Slide 10: Business Environment
Business Environment Steady macroeconomic recovery underway US indicators continue to remain supportive Economic environment in EU stabilizing China showing signs of a cautious recovery 2014 oil demand expected to grow at moderately robust rate of 1.3 mbd to 92.8 mbd On going Arab spring
Slide 11: Global Refining Margins
Global Refining Margins Global Refinery Margins Refining margins decline across all key regions 20 US refiners continue to witness high margins and 15 operating rates 10 6.7 Rising shale oil supply 6.2 5 5.2 5.4 5.8 Low cost of energy 0 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 European refiners
Slide 12: Light Distillates Cracks
Light Distillates Cracks Source : Platts Source : Platts Significant strength in naphtha cracks Gasoline cracks improved across regions Asia - cracks improved on the back of Asian cracks – supported by strong petchem Ramadan demand from Indonesia, heavy demand and lack of cheap LPG feedstock
Slide 13: Middle Distillates Cracks
Middle Distillates Cracks Source : Platts Source : Platts Gasoil cracks weakened in all regions Jet-kero cracks weakened further during 1Q Asia - Demand weakness in Asia weighed on Demand in major Asian and other emerging cracks despite heavy maintenance in Apr-May markets remained muted E
Slide 14: Fuel Oil Cracks
Fuel Oil Cracks Asian Fuel Oil cracks witnessed a weak period during the quarter Efficiency improvement and slow demand growth impacting bunker fuels demand Low LNG prices incentivized switching from FO in Japanese market Source : Platts L-H differential remained high in 1Q FY15 at $ 4.9/bbl
Slide 15: Business Performance
Business Performance R&M segment sustained superior Asian Product 1Q 4Q Q-o-Q 1Q Y-o-Y Cracks ($/bbl) FY15 FY14 Change FY14 Change performance despite weak margin environment Naphtha -1.0 -1.5 0.5 -7.1 6.1 Weaker middle distillate cracks offset Gasoline 16.1 14.6 1.5 11.4 4.6 uptick in gasoline/
Slide 16: Performance Highlights: 1Q FY15
Performance Highlights : 1Q FY15 Crude processing of 16.7 MMT, operating rate : 108% GRM : $ 8.7/bbl ($ 9.3/bbl in 4Q FY14) Continuous stress on advantaged feedstock acquisition 4 new crudes processed during the quarter Total crude grades processed till date 136 Awards: SEZ refinery ha
Slide 17: Gasification Project - Steam Super-heater
Gasification Project - Steam Super-heater 1 17 www.ril.com
Slide 18: Gasification Project - Gasifier Structure Module
Gasification Project - Gasifier Structure Module 1 18 www.ril.com
Slide 19: Gasification Project - Gasifier Structure Module
Gasification Project - Gasifier Structure Module 2 19 www.ril.com
Slide 20: Gasification Project - Slurry Storage Tank Module
Gasification Project - Slurry Storage Tank Module 1 20 www.ril.com
Slide 21: Product Placement
Product Placement India Domestic Demand (KT) % Change Refinery Sales (KT) Product 1Q FY14 4Q FY14 1Q FY15 1Q - 1Q 1Q vs 4Q (Unit in KT) 1QFY 15 4QFY 14 % Change MS 4381 4251 4796 9.5 12.8 PSU Sales 1,836 1,538 19.3% HSD 18469 17087 18536 0.4 8.5 Exports 10,167 9,985 1.2% ATF 1351 1424 1390 2.9 (2.4)
Slide 22: R&M Business Outlook – 2014
R&M Business Outlook – 2014 Global macro-economic outlook improving Global oil demand set to grow at 1.3% p.a. over the next 5 years Asia and the Middle East are forecast to dominate growth Refinery capacity adds continue - but plans are getting scaled back in the face of rising over-capacit
Slide 23: Petrochemicals
Petrochemicals 23 www.ril.com
Slide 24: Business Environment
Business Environment Feedstock prices remained firm – supported by Polymer prices up by 5-10% on Q-o-Q basis supply concerns for crude oil due to cost push and strong China demand Global cracker operating rate at 86.5% Overall product margin environment remained US : 95% firm during the 1Q
Slide 25: Asia Leads Global Polymer Demand Growth
Asia Leads Global Polymer Demand Growth 65% PP % of global demand growth 60% PVC 55% 50% PE 45% 40% 35% 2009 2012 2015 2018 2021 2008 2010 2011 2013 2014 2016 2017 2019 2020 2022 2023 Asia's share in polymer demand growth is increasing 25 www.ril.com (Source: IHS)
Slide 26: SE Asia Price Movement - Polymers
SE Asia Price Movement - Polymers % Change % Change $/MT 1Q FY14 4Q FY14 1Q FY15 Q-o-Q Y-o-Y Oil - Dubai ($/bbl) 101 105 106 1% 5% Naphtha 823 903 917 2% 11% Ethylene 1263 1439 1447 1% 15% Propylene 1325 1338 1309 -2% -1% EDC 352 483 460 -5% 31% PE 1419 1508 1555 3% 10% PP 1439 1539 1541 0% 7% PVC 9
Slide 27: Polymer Deltas
Polymer Deltas PP-Propylene 5 Year Avg. HDPE-Naphtha 5 Year Avg. 250 232 700 200 581 608 200 600 575 500 150 114 $/MT 400 $/MT 100 300 200 50 100 0 0 1Q FY14 4Q FY14 1Q FY15 1Q FY14 4Q FY14 1Q FY15 On Q-o-Q basis: PVC-Nap-EDC 5 Year Avg. PP deltas improved with stable PP prices and decline 600 485
Slide 28: Operations and Domestic Demand
Operations and Domestic Demand RIL’s 1Q FY15 polymer production at 1.1 MMT RIL Production Overall RIL’s polymers production share was 60% in Production (KT) 1Q FY14 1Q FY15 1Q FY15 PE 251 266 PP 703 690 Domestic market share stood at ~37% PVC 167 126 RIL remained major player in PP segment w
Slide 29: New PP Application: Geosynthetics for Railway Tracks
New PP Application: Geosynthetics for Railway Tracks Railway tracks on black cotton soils can experience the following difficulty: Pumping of soil into ballast; Reduces strength & drainage capacity Penetration of ballast into soil ; Depletes upper layer of ballast Uneven settlement of the so
Slide 30: Outlook
Outlook Ethylene operating rates expected to firm up in SE Asia to over 89% in the near term SE Asia polymer demand growth estimated at 5-6% in 2014; global growth 4-5% SE Asian outlook remains positive with demand outpacing supply additions Per capita plastic consumption in India still well
Slide 31: Elastomers
0 Elastomers www. ril.com 31
Slide 32: Butadiene
Butadiene Although demand remained sluggish in Butadiene-LPG 5 Year Avg. Asia, prices improved during 1Q by 1200 ~$150/MT to the level of $1350/MT following 900 limited supplies (plant outages in US) 596 $/MT 600 424 426 Several downstream plants (especially 300 synthetic rubber sector) continue
Slide 33: Polybutadiene Rubber (PBR)
Polybutadiene Rubber (PBR) RIL commissioned 40 KTA PBR capacity PBR-Butadiene 5 Year Avg. 1000 Maintains No.1 position in elastomers 850 800 sector in Indian sub-continent 600 544 585 $/MT RIL is the only manufacturer of PBR in India 400 RIL capacity now at 120 KTA 200 0 With the new capac
Slide 34: Project Status
Project Status Installed Capacity Proposed Expansion Total Capacity (KTA) (KTA) (KTA) Styrene Butadiene Rubber - 150 150 Butyl Rubber - 120 120 Setting up world-scale SBR plant at Hazira – commissioning expected in FY15 Technology tie up with Versalis previously known as Polimeri Europa JV wit
Slide 35: Polyester & Fibre Intermediates
Polyester & Fibre Intermediates 35 www.ril.com
Slide 36: Business Environment
Business Environment Fibre Intermediates Polyester Challenging business environment - high volatility Polyester margins under pressure owing to the across the feedstock and intermediates markets uncertain feedstock markets and oversupply in PX prices declined 11% Y-o-Y and 2% Q-o-Q China Mar
Slide 37: Domestic Polyester Demand
Domestic Polyester Demand Expected firming of raw material costs pushed up demand during the quarter 1Q FY15 vs. 1Q FY14 Demand Growth (%) 8% 8% PSF demand declined Y-o-Y 6% 5% 5% Q-o-Q demand up 11% - producers have 4% shifted to cater to domestic markets reducing 2% exports 0% -2% -1% High
Slide 38: Price Movement
Price Movement % Change % Change $/MT 1Q FY14 4Q FY14 1Q FY15 Q-o-Q Y-o-Y Oil - Dubai ($/bbl) 101 105 106 1% 5% Naphtha 823 903 917 2% 11% PX 1427 1285 1264 -2% -11% PTA 1074 956 943 -1% -12% MEG 979 960 943 -2% -4% POY 1477 1388 1353 -3% -8% PSF 1448 1374 1324 -4% -9% PET 1418 1325 1293 -2% -9% Pri
Slide 39: Polyester Delta Scenario
Polyester Delta Scenario POY-PTA-MEG 5 Year Avg. PSF-PTA-MEG 5 Year Avg. 300 250 225 216 212 200 181 183 210 200 150 $/MT $/MT 100 100 50 0 0 1Q FY14 4Q FY14 1Q FY15 1Q FY14 4Q FY14 1Q FY15 PET-PTA-MEG 5 Year Avg. Fluctuating feedstock prices impacted polyester 200 162 177 162 margins Unfavourab
Slide 40: Intermediates Delta Scenario
Intermediates Delta Scenario PX-Naphtha 5 Year Avg. PTA-PX 5 Year Avg. 600 569 200 150 132 400 351 108 109 $/MT 313 $/MT 100 200 50 0 0 1Q FY14 4Q FY14 1Q FY15 1Q FY14 4Q FY14 1Q FY15 PTA overcapacity, uncertain PX markets impact margins MEG-Naphtha 5 Year Avg. 500 Operations outside China on hi
Slide 41: Benzene and LAB Delta Scenario
Benzene and LAB Delta Scenario Benzene-Naphtha 5 Year Avg. 500 428 Tight benzene markets favoured 400 363 341 margins above long-term averages 300 $/MT Strong demand from USA, Europe 200 100 and Middle East 0 Benzene prices steadily increased due 1Q FY14 4Q FY14 1Q FY15 to delayed expansions,
Slide 42: RIL Operational Highlights
RIL Operational Highlights Production (KT) 1Q FY14 1Q FY15 Production (KT) 1Q FY14 1Q FY15 PX 428 477 POY 167 220 PTA 499 519 PSF 157 148 MEG 159 160 PET 87 87 TOTAL 1086 1156 TOTAL 411 455 Polyester production improved with the commissioning of the Silvassa plant Polyester filament market share
Slide 43: New Product Developments
New Product Developments Apparel fibre and yarns Recron® Lite – Imparts better bounce, used for extra-light dress materials Recron® Lnlyk – Special textured yarn to give linen like look in the Shirting & Bottom weight fabrics Recron Certified Products Ergo Pillow – Unique pillow with combinati
Slide 44: Business Outlook
Business Outlook Indian polyester production growth estimated at 10% during 2014-16 But also strong recyclate growth takes up market share PX to witness significant capacity adds, outpacing demand in 2014 Likely rationalization of operations and further uncertainty to price directions PTA
Slide 45: Oil and Gas – Exploration and Production
Oil and Gas – Exploration and Production 45 www.ril.com
Slide 46: Business Environment
Business Environment As per IEA, India’s LNG imports to increase by over 50% from 47 MMSCMD in 2013 to 79 MMSCMD by 2019 - Indian Gas Demand and Projected Gas Imports - MMSCMD entailing higher forex outflow 250 214 Recent developments suggest LNG prices to remain high 200 Russia-China gas supp
Slide 47: Domestic E&P Production Update
Domestic E&P Production Update 4Q FY 14 (JV Production) 1Q FY14 1Q FY15 % Chg. Panna-Mukta 1.7 Oil (MMBBL) 1.8 2.0 16% 14.5 Gas (BC F) 16.9 18.2 7% T apti 0.1 Oil (MMBBL) 0.1 0.1 -15% 5.9 Gas (BC F) 7.8 4.5 -42% KG-D6 0.6 Oil (MMBBL) 0.5 0.5 -1% 43.4 Gas (BC F) 49.2 42.0 -15% 0.1 C ondensate (MMBBL)
Slide 48: KG-D6 Block Update
KG-D6 Block Update Two Rigs are in operation Work Program and budget for the FY15 approved by Management Committee Appraisal of D55 Discovery Drilling of second appraisal well MJ-A2 completed and results are under evaluation Resource appraisal and conceptual engineering have commenced Ba
Slide 49: Other Updates
Other Updates Panna-Mukta Block 1 infill well in Panna-G put to production during the quarter Mukta-B development in progress - drilling of MB wells planned during monsoon-2015 with first oil in 1H FY16 Tapti Block Production is likely to continue up to end FY16 Abandonment plan is under
Slide 50: Coal Bed Methane (CBM)
Coal Bed Methane (CBM) Coal Bed Methane Current portfolio comprises of 2 blocks – Sohagpur East and West On track to achieve first gas by mid 2015, more than 50% of Phase -1 scope completed o Land acquisition is in advanced stage with ~ 70 % of Phase-1 scope completed o Currently 3 rigs in ope
Slide 51: Shale Gas Business
Shale Gas Business 51 www.ril.com
Slide 52: Price Environment
Price Environment Gas price: $4.60/MMBtu in 1Q FY15 vs. $4.94/MMBtu in 4Q FY14 US Natural Gas Inventory Levels (Bcf) Inventory in storage remains low, but has improved from 822 BCF at the end of 4QFY14 (lowest level since 2003) Quarter-end gas inventories at 1.9 Tcf, 26% below last year levels
Slide 53: Business Performance Highlights
Business Performance Highlights 1Q FY15 4Q FY14 1Q FY14 % Chg. from 4Q FY14 % Chg. from 1Q FY14 Production (BCFe) 48.6 44.2 37.7 10% 29% Revenues ($ MM) 270 266 214 2% 26% EBITDA ($ MM) 201 199 165 1% 22% Gross JV production now averaging above the 1 Bcfe/day mark; New production records at Pionee
Slide 54: RIL Share of Volumes (Bcfe)
Business Growth Trends Net Sales Volumes Wells Drilled and Put on Production 1000 (Reliance Share) 900 873 45.0 41.4 Wells Drilled 815 NGLs Condensate Gas 800 762 40.0 36.7 37.5 Wells put on Production 697 RIL Share of Volumes (Bcfe) 32.3 31.4 700 632 35.0 714 30.8 572 653 27.8 600 30.0 516 613 500
Slide 55: Shale Gas JVs: Development Progress Overview
Shale Gas JVs: Development Progress Overview Particulars Pioneer JV Carrizo JV Chevron JV TOTAL Average Rigs in operation 10 1 4 15 Wells Drilled (Inception to date) 472 98 303 873 Wells Drilled in 1Q FY15 35 0 23 58 Total on line wells 434 75 205 714 Wells put on line in 1Q FY15 31 11 19 61 Gross J
Slide 56: Reliance Retail
Reliance Retail 56 www.ril.com
Slide 57: Macro Environment
Macro Environment CPI High food inflation at 8% 10% 11% continues to dampen consumption Food Inflation – 8% 7% Consumption growth at lowest in last eight years Consumption Growth YoY 10% 9% High food inflation, slow 6% consumption growth combined with 5% low GDP growth and poor consumer confidence
Slide 58: Key Highlights - 1Q FY15
Key Highlights - 1Q FY15 Turnover at ` 3,999 crore, up 15% Y-o-Y LFL growth of up to 21% across formats CAGR of 32% over the last two years Record PBDIT of ` 171 crore in 1Q FY15 vs. ` 70 crore in the same period last year Y-o-Y growth of 144% Gross margin improvement across most sectors
Slide 59: Key Highlights - 1Q FY15
Key Highlights - 1Q FY15 Reliance fresh store portfolio Reorganization within and across cities for optimized profitability Overall portfolio being augmented Impact of regulatory conditions continues to impact the Jewels business adversely Challenging macro economic environment continued i
Slide 60: 1Q FY15 Turnover & Mix
1Q FY15 Turnover & Mix Revenue (` crore) 1Q FY15 turnover for Retail business at 3,999 ` 3,999 crore Growth of 15% Y-o-Y 3,492 PBDIT of ` 171 crore Growth of 144% Y-o-Y Q1 FY 2014 Q1 FY 2015 Revenue Mix – 1Q FY14 Revenue Mix – 1Q FY15 1% 2% Value & Others 6% 12% Digital 14% 12% Fashion & Lif
Slide 61: Turnover Growth by Sector
Turnover Growth by Sector Value & Others 18% Fashion & Lifestyle 31% Digital 32% Brands 50% -46% Jewellery Overall turnover growth of 15% Continued strong growth in Digital, Lifestyle and Brands business Regulatory environment affecting Jewellery segment Value sector reflects reorganization
Slide 62: Store Network
Store Network Store Count by Format Sector Mar 31, 2014 Jun 30, 2014 Jewellery 54 54 368 Brands 102 100 539 151 Digital 284 427 Fashion & Lifestyle 533 540 Value & Others 718 602 Store Count 665 Total 1,691 1,723 Presence across 148 cities in India 62 www.ril.com
Slide 63: Progress on Key Objectives
Progress on Key Objectives Sustained growth in Rapidly expanding revenues network Turnover (` crore) Store Count 3,999 1,723 3,492 1,511 1,311 32% CAGR 15% CAGR 2,274 1Q FY 2013 1Q FY 2014 1Q FY 2015 63 www.ril.com
Slide 64: Index
Index Sector Updates Value Format Digital Fashion & Lifestyle Brands 64 www.ril.com
Slide 65: Value Formats
Value Formats Consolidated store network for greater efficiencies and synergies Introduced own brands under new categories to better options for consumers Own brand contribution increased to 15% from 11% Y-o-Y Reliance Market continues to extend market leadership with new store launches Op
Slide 66: Digital
Digital Rapidly scaled up Digital Express Mini format with over 180 stores operating across the country Introduced co-planning with OEM’s to provide unique and customized solutions for customers Continue to enhance in-store experience and helping customers making better informed decisions St
Slide 67: Fashion & Lifestyle
Fashion & Lifestyle Reliance Trends as a ‘fashion destination’ Retailing over 100,000 items per day Own brand sales contribution at 65% of sales; an improvement of 100 bps Y-o-Y Launched new own brand to expand womenswear range inspired by Indian textile heritage Optimized sourcing operati
Slide 68: Brands
Brands Strong growth witnessed in the quarter Turnover increased by 50% Y-o-Y Long term partnership with BCBG MAX Azria Group for launching flagship brand Launched brands under Iconix Lifestyle India Candie’s Umbro Ed Hardy London Fog 68 www.ril.com
Slide 69: Summary
Summary 69 www.ril.com
Slide 70: Summary
Summary Steady operating quarter reflecting intrinsic strength of RIL’s energy businesses Petrochemicals – robust polymer contribution balancing weakness in polyester Refining – light-end cracks offset weakness in middle distillates; demand outlook encouraging Retail business continues profi
Slide 71: Thank You
0? Thank You
Reliance Industries — Q1 FY2015 Earnings Presentation on 6ix